Expert: Chris Ebert - 4/19/2010

Question
I loaned a friend $2600, and they signed an unsecured promissory note agreeing to repay the full amount. The payment dead line has passed and they have not made any payments. I attempted to contact them via certified mail, e-mail, and phone to resolve this, but have received no response. The agreement was signed in California, but the friend has now moved out of state. What do I need to do next? Can I turn this over to a collections agency or do I need to go to small claims court?

Answer
Rick,

Loaning to friends is a tough situation. You can do either.

Collections -- It may be hard to find a collection agency that will collect just one account and if they do they will take 40-50% of collections.

Suing -- This is fairly inexpensive way to go. But the problem is that even if you get a default judgment, you still have to collect it. Collection could be done by a constable or sheriff if he has anything to collect from. But at least with this method, a judgment would appear on the credit report for 7-10 years. If he needs to finance a house he will most likely need to settle with you first.

Chris Ebert
http://www.henleycreditlaw.com