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Way back in the late 16th century, Shakespeare warned his audience against borrowing from or lending to their friends. “Neither a borrower nor a lender be; / For loan oft loses both itself and friend.” In other words, money can break up relationships. This very definitely holds true in 2021 but sometimes you just have to deal with it. Here are some tips.

Decide if you really need the money back

People not paying back what they borrowed can be very frustrating, especially when you’re short of money yourself. On the other hand, trying to get money back from people can also be very frustrating. In a worst-case scenario, it can also spiral into broader repercussions within your family/social group.

These could end up backfiring on you. For example, if you owe money to someone else, you may find yourself put under extra pressure to pay it back. After all, if you’re chasing someone else for what they owe you then the other person may feel totally justified in chasing you for what you owe them. Another possibility is that it could impact any future inheritance.

For clarity, maybe none of these consequences will occur. Also, potentially, you might decide that you’ll deal with current challenges now and let the future take care of itself. You should, however, at least consider the potential consequences before you take any final decisions.

Decide how much effort you’re willing to invest

In principle, you can pursue a debt owed by a family member or friend in the same way as you can pursue any other. In practice, you have to ask yourself how much effort a debt is really worth to you. Be aware that even in the commercial world, companies will sometimes write off debts rather than go to the effort of chasing them.

One of the reasons for this is that going to court, even the small-claims court, takes time and money. What’s more, even if you win your case, you will not necessarily get your money back easily, if at all. In a worst-case scenario, the person could go bankrupt and you might end up getting back less than you paid to secure the judgement.

Also, per the first point, pursuing legal action against a family or friend can open up all sorts of cans of worms. It’s therefore advisable to start any action knowing what your limits are. Once you reach them, just cut your losses.

Decide how flexible you can be

In the real world, if someone isn’t paying you back, it’s probably for one of three reasons. One, they thought the money was a gift. Two, they genuinely forgot. Three, they’re short of funds and, bluntly, you’re at the tail end of their list of priorities.

If it’s the first case, then you need to think clearly about your communication. Can you honestly say that you made it clear that the money was a loan, not a gift? If not, then you might need to write off the money and put it down to experience. In future, if you make loans to family or friends, make sure that everything is clearly documented.

If they’ve genuinely forgotten, then a friendly nudge may be all it takes to resolve the matter. This is yet another good reason to open discussions gently, rather than going in all guns blazing.

If, however, they’re struggling for money themselves, then, ideally, you’ll do your best to show them as much flexibility as possible. After all, you’d appreciate them doing the same if the situation was reversed.

Perhaps you could agree to write off some of the money and have them pay the rest in manageable instalments? Alternatively, perhaps they could pay in time instead of money. Could they provide childcare or other services you need?

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