How to Recover Debt From Relatives

Most people loan money to relatives without any type of contract, other than a handshake or a verbal agreement. If a relative defaults on a loan, collecting what is owed may be difficult and require a bit of tact. You probably don't want to use the same methods that a debt collector or credit card company would use. Your approach may have to be personalized as well as appealing to the relatives' sense of character.

Instructions

1

Use the correct technique. The technique used depends on the relative. If the relative is a sibling, the technique may differ from those used with cousins, aunts, parents or your children. The closer the person is in your immediate family, the more straightforward you can probably be. You may just get right to the point and ask, "hey, where is my money"? or "when are you going to have it?"

2

Make the relative feel guilty. Explain that you loaned him the money expecting to be paid back as per your agreement, which calls for a specific date. Let them know that, since he is not keeping their agreement, you will have to forego paying some of your debt obligations, which could affect your credit rating. Let them know that some of these things can remain on your credit report for seven years. This can hurt you for years to come.

3

Explain how credit and job markets work. Let the relative know that some companies will not hire you if your credit is bad. Let her know if she doesn't pay you, you cannot pay your bills. If you ever apply for a job in the future, this could have some impact. Also explain that if you don't have a job, she won't be able to borrow money from you.

4

Find out why he is having a problem repaying the loan. Sometimes a relative may be facing a temporary hurdle. See if there is anything you can do that will help him pay you. With a relative you want to show empathy. Offer any type of solutions that you possibly can. When he sees that you sincerely want to help solve his problem, he will be more likely to pay you. The relative may pay due to guilt.

5

Explain that you won't be able to loan the relative money in the future. If a relative thinks she is cutting off a future source of funds, she may do what she can to get the money to pay you, especially if you have the cash, assets and the means to help her in future. This is especially true for a relative that always seems to need help. If she never seems able to keep a job or money, she will definitely look you up in the future.

6

Hint at taking legal action. When you are dealing with relatives, threatening legal action is a very extreme measure and probably your last resort. You may want to let him know you would prefer to handle the matter between the two of you. Explain that you have been very patient and understanding, and that you would prefer to handle the matter without any outside influences. Tell them you would prefer not to take further action. If necessary, you can file a claim in small court.