Gave a guy a personal loan, now he's not paying me back...

moxin · Post by **moxin** » Tue Jul 15, 2008 12:17 pm

I have a contract, that's notarized by a bank too.

Says the $ he owes me, the interest rate, etc.

He made 3 out of 36 payments, now hes 8 days late, and he blocked me on AOL instant messenger.

What kind of laywer do I need?

This is in New York.

What are my odds of recovering $?

moxin · Post by **moxin** » Tue Jul 15, 2008 12:19 pm

The contract also says if he doesnt pay...he has to pay my lawyer fees too if I have to take him to court.

gunn_show · Post by **gunn_show** » Tue Jul 15, 2008 12:33 pm

6 days late and your looking for a lawyer? a bit jumpy IMHO

moxin · Post by **moxin** » Tue Jul 15, 2008 12:40 pm

He removed me from his facebook friends....

He's definitely trying to scam.

Just had a conversation with him on aol instant messenger under a different screen name of mine, he fed me some line that's waiting for an out-of-state insurance check to clear, and it can be up to 30 days. Bullcrap right?

MossySF · Post by **MossySF** » Tue Jul 15, 2008 12:54 pm

Well you certainly are in your rights to see a lawyer to try to collect. But whether you'll ever collect ... scammers (whether inadvertent or premeditated) tend to have nothing you can collect from.

moxin · Post by **moxin** » Tue Jul 15, 2008 12:58 pm

Small claims court???

I loaned him $4500 @ 10% for 3 yrs. Supposed to pay me back $5,850, and he only made 2 payments. He still owes me $5,525.

SpringMan · Post by **SpringMan** » Tue Jul 15, 2008 1:00 pm

Since you have good documentation, in the worst case scenario, I beleive you can write off the loss on your income tax. That is not much consolation.
Good luck,

snowbound · Post by **snowbound** » Tue Jul 15, 2008 1:00 pm

Since the loan totals 36 payments I will make the assumption that the loan is for a decent amount of money. None of my buisness but I am curious on why you would give the guy such a loan? I can only also assume that he was not credit worthy? and would have a difficult time obtaining one through conventional methods.

Who knows if you will get your money back, or if you do at what cost to you.

Good luck

dm200 · Post by **dm200** » Tue Jul 15, 2008 1:02 pm

1. In this process, determine the probability of collecting vs the costs to try to collect.

2. Consult an attorney who specializes in collections. This is a specialized field of the law, and you should have an arrangement where the attorney gets a percentage of what is collected.

3. If you can't find the guy, consider a collection agency (also should work on %, but hugher than attorney).

Don'r count on getting anything back unless and until you have the money in hand.

moxin · Post by **moxin** » Tue Jul 15, 2008 3:12 pm

What are the costs of collecting? What do collection lawyers, or collection agencies, typically charge?

Should I just do small claims court? I have a name+address, but he might of moved away from the address. Will the mail get forwarded to him? Or how do I find out a new address for him?

Throwin' Darts · Post by **Throwin' Darts** » Tue Jul 15, 2008 3:25 pm

how do you know this person? have you ever met him or have you only spoken to him using the net?

if you know this person, i would call them or speak to them in person and find out why the payment is late and communicate that you are hiring a collections lawyer. also remind him of his obligation to pay lawyer fees.

if this is just an internet transaction then i would doubt that you ever see this money repaid. seems like 10% is a low rate for such a transaction.

moxin · Post by **moxin** » Tue Jul 15, 2008 3:41 pm

He lives in my city, I've met him a few times.

Not a good friend though and I definately regret giving him the loan so he could buy a car.

Figured I'd make a cool 10%/yr for 3 yrs, but not turning out to be that way.

I've told him I'll sue him, and reminded him of his obligation to pay my lawyer fees. He does't seem phased.

Grt2bOutdoors · Post by **Grt2bOutdoors** » Tue Jul 15, 2008 3:43 pm

moxin wrote:Small claims court???

I loaned him $4500 @ 10% for 3 yrs. Supposed to pay me back $5,850, and he only made 2 payments. He still owes me $5,525.

Given that you only charged in 10%, you must have thought that this transaction was relatively risk-free, especially since the loan is unsecured.
Although hindsight is 20/20 and not sure if you took these precautions prior to handing over the cash, a credit check may have proved to be a good indicator of his reliability to pay. Sounds like a subprime borrower - if he doesn't make payment within 60 days, I'd say chances of you recovering are 1 in 6. Good Luck!

On the flip side, if you go to court and get an a judgement against him, the credit reporting agencies might take proof of adverse judgement and add it to his credit file - not sure if you want to go through process of looking into that. I'm sure you're borrower wouldn't appreciate that.

moxin · Post by **moxin** » Tue Jul 15, 2008 3:46 pm

I'm going to go the small claims route.

Today is day #8 late (contract only gives 5 days grace period.)

Should I wait until he's 30-60 days late before filing small claims court? Or do it right now? I don't want to give him a chance to move away and avoid being served with the court papers.

"In case of default in the payment of any principal or interest of this Promissory Note, Borrower will pay to Lender such further amount as will be sufficient to cover the cost and expenses of collection, including, without limitation, reasonable attorney's fees, expenses, and disbursements. These costs will be added to the outstanding principal and become immediately due"

Grt2bOutdoors · Post by **Grt2bOutdoors** » Tue Jul 15, 2008 3:55 pm

If you think he's a flight risk...file now. The court will still take 2 - 3 weeks to process request, mail and set date for appearance. If he ignores the request to appear, and you appear, you will win judgement.
However, will be very very difficult to collect.

Sorry this happened to you.

moxin · Post by **moxin** » Tue Jul 15, 2008 4:09 pm

Ok so if (when) I win the judgement, how do I collect?

Will they automatically garnish his paycheck and pay me from that?

Or how does it work?

SteveB3005 · Post by **SteveB3005** » Tue Jul 15, 2008 4:10 pm

I'd say this was a low risk loan, but the low risk was from his perspective.

A good example of this all being a matter of perspective is the case of say your little brother borrowing money. If he borrows it from you it's a high risk loan, if he borrows it from the Gambino Family it's a low risk loan.

dm200 · Post by **dm200** » Tue Jul 15, 2008 4:45 pm

This (unsecured) loan was HIGH risk.

You could have lowered the risk by having a lien on the vehicle. Then you could have taken back the car. I actually did that a few years ago on a small loan I made to someone I knew.

For institutions, a common percentage is 1/3 of the amount collected for lawyers, and 40-50% for collections agencies. Some (or all) of the collection costs may be added to the amount due.

Just a guess, but the amount involved may be too large for small claims couts. Check with your locality.

dm200 · Post by **dm200** » Tue Jul 15, 2008 4:52 pm

I loaned him $4500 @ 10% for 3 yrs. Supposed to pay me back $5,850, and he only made 2 payments. He still owes me $5,525.

Let folks who know what they are doing make loans.

Your math is very bad, which might put trying to collect at risk.

A loan of $4,500 payable in 36 monthly installments, beginning one month from the issuance of the $4,500, at 10.00% interest has monthly payments of $145.24 per month. The interest is 786.26, for a total repayment of 5,228.26. However you got $5,850, it was not done accurately if the same payments were to be made over 36 months.

A $4,500 loan for 3 years at 17.9% for 36 months, with monthly payments of $162.52 has a total repayment of $5,850.55 and interest of 1,350.55

moxin · Post by **moxin** » Tue Jul 15, 2008 5:22 pm

I did simple interest I believe.

$4500 times 10% = $450
$450 * 3 = $1350 interest
+ Principal $4500 = $5850

Then I took $5850 / 36 months = $162.50 monthly

I charged him 10% per year, not 10% for all 3 years. That would be dumb.

rwwoods · Post by **rwwoods** » Tue Jul 15, 2008 5:29 pm

If you win in small claims court, you must identify an asset to the sheriff so it can be confiscated. For example, a bank account number or a car. If the person has no assets, you are out of luck until such time the person comes into possession of an asset that you can identitfy to the sheriff. You can get all of the process details from the clerk of court including the maximum amount that you can sue for.

SoonerSunDevil · Post by **SoonerSunDevil** » Tue Jul 15, 2008 5:40 pm

moxin wrote:I did simple interest I believe.

$4500 times 10% = $450
$450 * 3 = $1350 interest
+ Principal $4500 = $5850

Then I took $5850 / 36 months = $162.50 monthly

I charged him 10% per year, not 10% for all 3 years. That would be dumb.

With all due respect, trying to keep up with some guy you loaned money to via facebook and AOL Instant Messenger is dumb. I calculated the math, and I got the same numbers as dm200 within a few cents per month. You are charging this guy 10% per year on the initial principle, but the loan's principle balance will decrease over time so it's not fair to charge him 10% of the original principle balance every year.

Take him to court; small claims would be your best bet but the amount in question may be too large for small claims court in your state, and if that doesn't work you're going to have to get a lawyer.

You could always try to get this guy to sign up for a 0% interest credit card offer for 12 months and have him write you a check against the card, but it doesn't sound like his credit will allow him to do this.

I hope you get your money back, but this is one helluva headache.

TheEternalVortex · Post by **TheEternalVortex** » Tue Jul 15, 2008 6:25 pm

If you want to make risky loans to people who probably won't pay you back, next time try prosper.com. You'll get more than 10% at least!

DA · Post by DA » Tue Jul 15, 2008 6:53 pm

moxin wrote: What are my odds of recovering $?

Moxin,

With all due respect, I think you have been hosed. Write it off as tuition in the School of Hard Knocks.

Dan

danwalk · Post by **danwalk** » Tue Jul 15, 2008 7:05 pm

dm200 wrote: Your math is very bad, which might put trying to collect at risk.

We have seen in the past that Moxin's math can be a bit suspect...:

http://www.bogleheads.org/forum/viewtop ... highlight=

Moxin, I would respectfully suggest that you keep working hard in your finance class--it will no doubt help you in your loansharking career.

Opponent Process · Post by **Opponent Process** » Tue Jul 15, 2008 7:28 pm

TheEternalVortex wrote:If you want to make risky loans to people who probably won't pay you back, next time try prosper.com. You'll get more than 10% at least!

I've been lucky enough to get a little over 10% on Prosper, and you get to pick a collection agency for your account in case it's ever necessary to use one. But I've heard that collection agencies are not very effective at all. Of course even a single default on Prosper will wipe out your oversized interest returns. Similar to investing in junk bonds.

Rob5TCP · Post by **Rob5TCP** » Tue Jul 15, 2008 7:47 pm

I have used small claims court (NYC) to get money that was owed to me - he never showed up and I was looking to contact a sheriff about collecting. I found where his new job was and told him I would be filing at his new job to have his salary garnished (more a bluff at that point)
Within 2 weeks I received the money owed, but not court costs. I was going to bust his chops and go back for court costs, but I let it go.
He was not a friend, but friend of a friend. That friend is no longer his friend, because of this. As was stated live and learn.'
For a few dollars in court costs, it is worth a try.

gassert · Post by **gassert** » Tue Jul 15, 2008 8:14 pm

Theres no way youre getting a cent.

If you want to threaten and play tough and scare him and he folds, maybe.

But as far as collections go - no way, no chance. You can file a claim and the judgement will show on his records, but you aren't getting his wages or anything else you see in the movies.

As has been said - lesson learned.

turntablist100 · Post by **turntablist100** » Tue Jul 15, 2008 8:40 pm

my friend bruno can get the money back

actuaryinvestor · Post by **actuaryinvestor** » Tue Jul 15, 2008 8:42 pm

Good luck collecting on your loan.

In my opinion you have no right to claim $5,525. If he magically paid you that next month you would have implicitly been getting an almost 100% interest rate.

I agree with SoonerSunDevil and dm200 that the payments should have been $145.20 a month. Too late for that, however.

You mention simple interest, which would apply if you were treating it as a bond with full payment due at the end of the loan. This isn't very smart or common with personal loans, but his payments in this case would have been just $37.50 a month.

Anyway, at 10% interest his balance next month is $4,284.37. That's all I think you are entitled to claim. Every subsequent month he doesn't pay multiply by 1.008333 to get the new balance.

--
Brian

moxin · Post by **moxin** » Tue Jul 15, 2008 8:58 pm

$4,284.37? How?

He paid me $162.50 * 2 so far. So adding that to the above # = $4,609.37 which is only $109.37 over my loan amount to him.

That doesn't seem like 10%/yr for 3 years to me.

actuaryinvestor wrote:Good luck collecting on your loan.

In my opinion you have no right to claim $5,525. If he magically paid you that next month you would have implicitly been getting an almost 100% interest rate.

I agree with SoonerSunDevil and dm200 that the payments should have been $145.20 a month. Too late for that, however.

You mention simple interest, which would apply if you were treating it as a bond with full payment due at the end of the loan. This isn't very smart or common with personal loans, but his payments in this case would have been just $37.50 a month.

Anyway, at 10% interest his balance next month is $4,284.37. That's all I think you are entitled to claim. Every subsequent month he doesn't pay multiply by 1.008333 to get the new balance.

--
Brian

SoonerSunDevil · Post by **SoonerSunDevil** » Tue Jul 15, 2008 9:32 pm

moxin wrote:$4,284.37? How?

He paid me $162.50 * 2 so far. So adding that to the above # = $4,609.37 which is only $109.37 over my loan amount to him.

That doesn't seem like 10%/yr for 3 years to me.

actuaryinvestor wrote:Good luck collecting on your loan.

In my opinion you have no right to claim $5,525. If he magically paid you that next month you would have implicitly been getting an almost 100% interest rate.

I agree with SoonerSunDevil and dm200 that the payments should have been $145.20 a month. Too late for that, however.

You mention simple interest, which would apply if you were treating it as a bond with full payment due at the end of the loan. This isn't very smart or common with personal loans, but his payments in this case would have been just $37.50 a month.

Anyway, at 10% interest his balance next month is $4,284.37. That's all I think you are entitled to claim. Every subsequent month he doesn't pay multiply by 1.008333 to get the new balance.

--
Brian

If he were to make the minimum payments for 36 months, he would pay you a total of $5,227.28, or $145.20 a month. He has paid $325 ($162.50 * 2), and some of this should be applied to the principle balance. Assuming this isn't the case, he would owe you $5,227.28 less $325 = $4,902.28 / 34 months = $144.18

moxin · Post by **moxin** » Tue Jul 15, 2008 9:43 pm

Heres the exact wording in the contract.

Will this make the contract void by my mistake? Or just a lower amount?

It doesn't say the $4,500 amount I gave him anywhere, but it does say this:

"Borrower agrees to pay Lender the total amount of $5850, together with interest payable on the unpaid principal at the rate of 10% per annum."

"The amount owed under this Promissor Note will be repaid in equal installments of $162.50 made every month. All payments shall be first applied to interest and the blance to principal."

smcgrath12 · Post by **smcgrath12** » Tue Jul 15, 2008 9:44 pm

You can avail yourself of the services of Tony Soprano. Or, as he advises in one of the episodes to his good friend Artie Bucco, you gotta go over and "talk" to this guy.

On a serious note, I hope you can get your money back. I have gone through this myself and have learned to never lend to friends or family.

SoonerSunDevil · Post by **SoonerSunDevil** » Tue Jul 15, 2008 9:52 pm

Hey, aren't you the same guy who was dating an ex-"dancer" or something like that? If so, I'm sure your girlfriend is friends with or knows some bouncers at her club that would be willing to pay this guy a visit for a hundred or two hundred bucks. Just a thought...

P.S. This is my sarcastic response, my sincere response was up a few posts.

smcgrath12 · Post by **smcgrath12** » Tue Jul 15, 2008 10:10 pm

SoonerSunDevil wrote:Hey, aren't you the same guy who was dating an ex-"dancer" or something like that? If so, I'm sure your girlfriend is friends with or knows some bouncers at her club that would be willing to pay this guy a visit for a hundred or two hundred bucks. Just a thought...

Losing it early, boomer?

pepsidave14 · Post by **pepsidave14** » Tue Jul 15, 2008 10:31 pm

Opponent Process wrote:
TheEternalVortex wrote:If you want to make risky loans to people who probably won't pay you back, next time try prosper. You'll get more than 10% at least!
I've been lucky enough to get a little over 10% on Prosper, and you get to pick a collection agency for your account in case it's ever necessary to use one. But I've heard that collection agencies are not very effective at all. Of course even a single default on Prosper will wipe out your oversized interest returns. Similar to investing in junk bonds.

Not to get off topic, but I've also dived into Prosper to give it a try; I wouldn't recommend it. I only put $200 in, but one of my AA borrowers declared bankruptcy a few months into the loan, essentially crippling my returns (as you suggest). There are generally a lot of problems with Prosper in terms of collections, among other things (as you also suggest).

actuaryinvestor · Post by **actuaryinvestor** » Tue Jul 15, 2008 11:11 pm

moxin wrote:Heres the exact wording in the contract.
...
"Borrower agrees to pay Lender the total amount of $5850, together with interest payable on the unpaid principal at the rate of 10% per annum."

"The amount owed under this Promissor Note will be repaid in equal installments of $162.50 made every month. All payments shall be first applied to interest and the blance to principal."

I have no idea what this does to your case, but the contract is contradictory. Firstly the $5858 already includes interest on unpaid principal and secondly it's calculated incorrectly.

Regarding the balance due, think of it this way. 10% * (1/12) * 4500 is $37.50 in interest a month. Everything paid above that goes to principal, according to your contract. However you work the numbers, the two payments of $162.50 reduced his principal to some extent. If you default or prepay a $100k 6% mortgage, the mortgage company can't claim the extra $116k in interest they would have earned over 30 years. By the same token you can't just claim the extra interest you were hoping to get over the remaining 34 months.

--
Brian

Valuethinker · Post by **Valuethinker** » Wed Jul 16, 2008 4:15 am

SoonerSunDevil wrote:Hey, aren't you the same guy who was dating an ex-"dancer" or something like that? If so, I'm sure your girlfriend is friends with or knows some bouncers at her club that would be willing to pay this guy a visit for a hundred or two hundred bucks. Just a thought...

I am sure you are teasing, but even if you didn't plan to join the legal profession, this is the sort of 'advice' which some lawyer could construe in court as implicating you in a criminal offence.

It also is bad advice:

- you don't know what the other guy is capable of. He may have his own heavy mob, and they could be heavier than yours

- you are more than likely to get scammed by people one pays to 'enforce': they can spot a greenhorn a thousand miles off

- suppose it all goes wrong and someone winds up dead... OP is one whole heck of sh-te

gatorman · Post by **gatorman** » Wed Jul 16, 2008 5:17 am

dm200 wrote:
I loaned him $4500 @ 10% for 3 yrs. Supposed to pay me back $5,850, and he only made 2 payments. He still owes me $5,525.
Let folks who know what they are doing make loans.

Your math is very bad, which might put trying to collect at risk.

A loan of $4,500 payable in 36 monthly installments, beginning one month from the issuance of the $4,500, at 10.00% interest has monthly payments of $145.24 per month. The interest is 786.26, for a total repayment of 5,228.26. However you got $5,850, it was not done accurately if the same payments were to be made over 36 months.

A $4,500 loan for 3 years at 17.9% for 36 months, with monthly payments of $162.52 has a total repayment of $5,850.55 and interest of 1,350.55

DM's post indicates you are awfully close to 18% true interest. In some states charging more than 18% is usury and could subject you to a penalty such as loss of all interest or, if the rate is high enough, loss of principal and interest. You need to calculate the true rate of interest and then go and see a lawyer to get advice on your situation. Once you are sure where you stand you can decide whether or not to sue. Your case is probably a small claims case and is probably not one your attorney will feel it is economical for him to handle, but he will advise you on that and how to go about presenting a case if the attorney feels it wouldn't be cost effective for you to retain him.

Your only real option is to sue if the debtor won't pay. Hopefully he won't file for bankruptcy, as that would leave you as a general unsecured creditor.

gatorman

VictoriaF · Post by **VictoriaF** » Wed Jul 16, 2008 6:04 am

Valuethinker wrote:
SoonerSunDevil wrote:Hey, aren't you the same guy who was dating an ex-"dancer" or something like that?
I am sure you are teasing, but even if you didn't plan to join the legal profession, this is the sort of 'advice' which some lawyer could construe in court as implicating you in a criminal offence.

Considering that SoonerSunDevil's joke may backfire, what is his recourse? Delete his message and ask Alex to remove references to his message from everybody else who quoted it? (I removed the "offending" part from my quote above.)

victoria

bolt · Post by **bolt** » Wed Jul 16, 2008 7:54 am

Its a hard lesson to learn...........I'd estimate your chances as negative numbers. Sorry but Good Luck!

dm200 · Post by **dm200** » Wed Jul 16, 2008 8:01 am

a career unrelated to financial matters or lending.

Making a loan that you think is 10%, but is actually about 18% doesn't get you past the elementary level of lending. I don't know what laws/regulations apply to private lending like this, but if an institution did anything like your agreemeent, it would probably be thrown out and risk regulatory sanctions and/or civil litigation.

Don't waste your time and/or money on pursuing this in any court, or you might risk exposing this idiotic contract, that probably violates all sorts of lending laws and regulations.

Even loan sharks can do the math better.

Ans start that search for a new career field right away.

2stepsbehind · Post by **2stepsbehind** » Wed Jul 16, 2008 8:05 am

sign up to go on one of these court tv shows. If you win, I believe the People's Court, Judge Alex etc will pay the judgment.

SoonerSunDevil · Post by **SoonerSunDevil** » Wed Jul 16, 2008 8:25 am

Moxin,

If you'd like to see the easiest way to determine a monthly payment for a loan, use Microsoft Excel. There is a built-in template that is standard in Excel.

Go to File => New => Under the templates heading on the right side of the screen select On my computer => a new window will appear and you will want to select the Spreadsheet Solutions tab = > select Loan Amortization => Enter the data specific to your loan and view the results.

SSD

Judsen · Post by **Judsen** » Wed Jul 16, 2008 10:01 am

Moxin,
For future reference, the lenders defence against risk is collateral.
If you get sufficient collateral then the borrowers risk is greater than yours.
Don't value his promise, his word, his credit (it may not be his) or
any thing else you can't trade or sell for cash. Also, when putting a "value" on the colatteral consider it's value to you not it's alleged value to the borrower.
In other words, lend like a pawn shop.
Regards, Jud

modal · Post by **modal** » Wed Jul 16, 2008 10:06 am

What was the rationale in giving this loan? I would of been like "dude pay me over paypal using your credit card" or "dude get a loan at your bank".

moxin · Post by **moxin** » Wed Jul 16, 2008 1:16 pm

Thank you for all the replies guys.

I'm trying to track down his new address so I can have the small claim court papers served to him...

What are the best ways?

I messaged all of his friends on facebook:

"Hey this may seem weird, but I see we're both friends with Ryan ____.

I lost contact with him & trying to get back in touch with him but I'm having a hard time...Do you know where he moved to just in the past few weeks, or where he works? (Pizza delivery job? What place?) Or his phone #? I have his # as ^^^-^^^^ but it says # not in service now.

It's very important I find this info out, please contact me with any info you have at all. Thank you"

But no luck so far.

moxin · Post by **moxin** » Wed Jul 16, 2008 1:54 pm

Just google'ed his old phone #... he put the car for sale on craigslist the day after he made his 2nd payment.

That is ok because its an unsecured loan, but shady still...

Says he only paid $1800 for the car, and thats what hes selling it for.

Where did my other $2700 go?

giacolet · Post by **giacolet** » Wed Jul 16, 2008 2:04 pm

In your state, New York, is there a tax paid on the amount of the Note?

In my state, Florida, Notes are not enforceable if the documentary tax has not been paid.

Even if you gain a judgment in a court, it is unlikely that you will be able to collect from a citizen with few or no tangible assets. Wage garnishment has to be filed for separately and is not automatic. Collection attorneys usually won't work on accounts under 10K.

Bogleheads.org

Gave a guy a personal loan, now he's not paying me back...

Gave a guy a personal loan, now he's not paying me back...

Take these steps:

Comments

Another suggestion -

Re: Gave a guy a personal loan, now he's not paying me back.

Re: Another suggestion -

Loan Amounts Due

Re: Loan Amounts Due

Re: Loan Amounts Due

Re: Another suggestion -

Might I suggest

COLLECTING ON A PROMISSORY NOTE