Recoverable loan??

[supernova78]

My mother lent a supposed friend a lot of money between 2003 and 2004, which the friend wanted to invest in his business idea. They verbally agreed he would pay it back with interest, but never fixed the interest amount or the repayment period. The friend subsequently blew some of the money, and lost the remainder through his failed business venture. He has maintained that he will repay my mother, but has not repaid any significant amount to date.

The only written record of this loan is a piece of paper on which the friend wrote and signed to say that he had borrowed the money as a loan.

Any idea whether it will be possible to claim repayment of this loan through court? Any help would be much appreciated.

[Buenchico]

Before considering court action it would be wise to remember the maxim that 'you can't get blood out of a stone'. If the guy doesn't have the money (or assets which he can convert to cash) your mother could have a hundred court orders and still not be one penny better off. So don't bother going down the route of court action unless you're reasonably confident that there's some chance of getting the money (or at least a part of it) back.

The absence of a specific settlement date, on the document which relates to the loan, might be regarded as a problem by the courts. However, it's more likely that a court would view the loan as similar to when a bank provides an overdraft. (i.e. the lender has the right to cancel the loan, and demand repayment in full, at any time).

No court would rule in your mother's favour unless she could show that she'd made a formal written approach to the borrower, demanding the return of her money. She should therefore start by sending the guy such a letter, in which she should indicate that she intends to take court action if the money is not repaid to her within, say, 28 days of the date of the letter. Your mother should obviously keep a copy of the letter. It should be sent by recorded delivery (even if the guy lives next door to her) so that she can show the court that the borrower has received, and failed to comply with, a written demand for repayment.

For information about the court procedures, see here:
http://www.hmcourts-service.gov.uk/infoabout/c laims/index.htm

Chris

[supernova78]

Wow, that was a quick response! I really appreciate your advice as it really helps me with what is a difficult situation.

I do have one more question, for anyone viewing this thread who might be able to answer it:

The person owing the money is currently in full-time paid employment, and has a home with a mortgage. However, the sum he owes my mother is so substantial that it would not be possible for him to repay it in a single lump sum any time this decade. Does a court have the power to order repayment of the loan by way of a series of instalments or monthly payments?

Many thanks in advance.

[Buenchico]

Thanks for the reply.

The vast majority of people who end up before the county courts because of debt (e.g. those with massive credit card debts) haven't got the money to repay the loans in full. Under such circumstances, a County Court Judgement (CCJ) will be given against the debtor, which will order him (or her) to repay the debt at a rate which the court believes to be affordable to the debtor. As long as the debtor complies with the terms of the CCJ, the lender is effectively barred from sending the bailiffs in but will eventually get their money back.

Given that the borrower is in full-time employment, a court might be able to rule that 'meaningful' payments should be paid to your mother each month. (Her position would seem to be far better than that of, say, a credit card company seeking to reclaim many thousands of pounds from someone who is living on basic state benefits. Under such circumstances, the courts might rule that the debt should be repaid at just a pound or two per month until the debtor's circumstances change).

Chris

[themas]

If your mother starts Court action the debtor will have the opportunity to put his Income & Expenditure statement, and an instalment payment offer, to the Court. Your mother should then be asked by the Court whether she agrees to accept the instalments offered. If she says she does not accept them and gives reasons (e.g. he has a house which she thinks has worthwhile equity; or the offer is much too low in view of the amount owed) the Court will use this to decide whether the CCJ should be for the instalments offered or some higher figure.

If he then defaults on the payments set out in the CCJ your mother can go back to Court and apply for a Charging Order, which secures the debt on his house. If he still went on defaulting, she could go back to Court asking for an Order for Sale, but Courts are quite reluctant to grant this.

[supernova78]

Buenchico and Themas - thank you very very much for your advice, it's appreciated.

[kent18]

If the person your mother lent money to owns a property she could put a second charge on the property,this means she can stop them selling thier home and if they do you can get your money back from any profit they make it will also stop them remortgaging.Talk to a solicitior,find one that gives first 30min free.