A Friend Or Relative Owes You Money. What Should You Do?

Every now and then, a family or friend might come to you and ask if they could borrow some money. Most people might oblige, especially if the one asking is someone who is close to you.

If its a close friend or family,  you may put your trust in them to return the money at a later date. However, every person is different. Your trusted friend might be the type of person to put off paying you back for some time.

Waiting for your friend to return the money that you loaned them can be frustrating. However, some might be hesitant to directly ask them for the money that you are owed. Lending money to someone is a kind gesture, but the hard part is knowing how to ask for money back, especially if the borrower is someone close to you.

Should you ask for your money back?

While some might be fine with lending some money to family or friends without expecting anything in return, it is generally a good idea to not make it a habit. You should ask for your money back because it is your money. Although the circumstances depend on each situation, the fact is you should ask for your money back simply because you are owed that money.

You may have agreed to give that person the money because they forgot their wallet, for convenience, or because they were genuinely struggling. Either way, the money was given to them, assuming it would be returned, especially if it is a fairly large amount.

Here are a few reasons why it is a good idea to ask for your money back:

• It can strain your relationship with the person borrowing the money. No matter how close you are, loaning money to someone can cause major problems if not handled with care.
• Friends should be able to rely on each other in times of need. However, you have to be assertive to avoid being taken advantage of.
• It shows that you are serious about avoiding debt and are conscious of your finances.
• It shows you will not allow yourself to be taken advantage of.
• When you make it clear that you want your money back, the borrower will be made fully aware that they are expected to repay their debts.
• You do not want the stress associated with debt to linger. Better to get the money you are owed back as soon as possible.

How to get money back owed by friends and family

If someone owes you some money, the hard part is understanding how to get it back. As mentioned previously, there are countless types of people and personalities, and even your close friends might have traits you are unaware of.

Suppose you are unsure of how to approach your friends to ask them to repay their debts. Here are some examples of how to get your money back from someone:

1. Avoid confrontation

‍Avoiding confrontation is a generally good rule of thumb in any situation, but it is especially helpful when something involves money. Trying to get back cash you are owed can be frustrating, but taking out your frustrations on the borrower will likely just make the situation worse. Getting overly confrontational can ruin friendships and help you lose the money you are owed altogether.

• Try to avoid passive-aggressive comments.
• Bring up the situation when the time is right and keep a neutral tone.
• Speak calmly and ask politely when reminding someone to pay you.
• If the situation does become confrontational, try to de-escalate it or walk away. Trying to pursue the issue in this state may make things worse.

2. A friendly reminder

Occasionally, people may forget that they owe you money, especially if it is not a large amount and the borrower is a close friend. That does not mean it should be overlooked. More often than not, they will apologise for forgetting and pay immediately. If not, you will have to send them a friendly reminder.

• Ask politely if they remember their debt and when they can pay it back. This way, you can avoid souring a friendship.
• Send a friendly text message to someone who owes you money as a reminder.
• Wait until you are alone with them in person to avoid embarrassment or confrontation.
• Give them a friendly reminder when you are out with them socially. They may offer to pay for your meal or drink to cover the amount.

3. Highlight your own financial situation

No matter how much money you lend to someone, it is still coming out of your pocket. This means that it affects your financial health. When it comes to how to remind someone to repay you, highlighting your own financial situation to them may nudge them to pay you back.

• Explaining that you have bills to pay and that you would appreciate it if the borrower could repay you as soon as possible can help smooth the process.
• Let them know that the loan was time sensitive and that you did it to help them out as a temporary measure. It was a loan, not a gift.
• Share other financial burdens you may have. This isn’t to make them feel guilty but to make them aware that you have financial commitments and goals as well.

4. Ask for your money back in writing

Ideally, you would have an agreement in writing before you loan the money, which details the amount you are lending and when it will be paid back. Realistically, this wouldn’t happen, especially between family and friends. You should try to ask for your money in writing to keep a record of your conversations.

• This can be done through text or email. Depending on your circumstances, you can keep it casual or make it more formal.
• You should write down everything, including how much money is owed, the date the money was loaned, and when it was/is agreed to be repaid. This avoids any confusion and ensures all parties understand the agreement.

5. Be flexible

It’s better to be flexible about how you ask for your money back. This can help to keep the agreement on track. While you may have to wait a little longer, you can at least ensure that you get your money back over time.

• Ensure that a reasonable amount of time has passed before asking for your money back.
• If you agreed on a timeframe, wait until this time has passed so you meet the terms of what was initially agreed upon.
• Let the borrower pay you back in instalments if they can’t do it in a lump sum.
• If they are in financial difficulty, try to work out a repayment schedule that works for both parties.

With this, you now have a general idea of how to approach someone in a cordial manner in order to try and get your money back from them. These tips should give you the best chances of receiving what is owed to you.

Legal ways to recover money owed to you in Malaysia

If it involves a close friend or relative, this option is not usually on the cards. This step will turn the situation hostile and there may never be a way back to a cordial relationship with the affected parties.

However, for discussion sake, there are legal avenues to recover money owed to you in Malaysia.

Small Claims Court

For amounts under RM5,000, Malaysians can turn to the Small Claims Court which will help you avoid the legal costs of hiring a lawyer. This involves Form 198 under Rules of Court 2012. You will still need to fill up the legal forms on your own and submit them accordingly. The process will require you to attend the court hearing on the appointed date and there may be some small fees involved.

Magistrate, Sessions and High Court

Beyond this, it will require hiring a lawyer to legally recover your debt under the Limitations Act 1953 and The Debtors Act 1957. The process will enter the civil court system. The Magistrate Court handles debts up to RM100,000. Debts between RM100,000 to RM1 million will be heard by the Sessions Court. Any amount over RM1 million will go to the High Court.

As you can see, unless the amount is in the 6-digit territory, pursuing this legal option is not advisable. Plus, it may take months or even years in some cases to get to the final judgement. Even if you get a favourable judgement, it still has to be enforced which is a whole other complicated legal process that may involve bankruptcy and winding up proceedings!

What to do BEFORE you agree to lend someone money

If you do find yourself in this situation again, perhaps you need to be prepared ahead.

There are steps you can take before you hand over the money again, especially if it’s a large sum.

1. Find out what the money you are lending is for

It is common sense that you should know what the purpose is otherwise it’s the same as giving money to someone collecting for charity without verifying the source. Ask yourself if you are ok with the reason they are borrowing the money for and this will help you assess the chances of you getting it back.

2. Lend only what you can afford to lose

If you can’t afford to not see the money again, then you can’t afford to lend it. The risk is there that you will never get the money back. Never lend more than you can afford to lose.

3. Confirm a date for the repayment

Taking this step will help both parties put the negotiation in perspective. Discussing this will bring into focus that the money is expected to be returned. This helps you formalise the agreed terms.

If you decide to lend someone money in the future, ensure that you set clear guidelines about when you expect the money back. It is better to be honest with them regarding your intentions to collect on their debts.