What to Do When a Friend Owes You Money

April 7, 2021
What to Do When a Friend Owes You Money
People Clerk helps you with your small claims court lawsuit.

Did you loan money to a friend, family member, or co-worker but now they won't pay you back? It is a hard situation because you trusted them to repay you but now it has been months since you lent them the money. Your friend has put you in a difficult situation of playing "debt collector." In this article, we review out-of-court options to getting your money back and what to think about if you have to escalate the situation and sue your friend in small claims court to get your money back.

In this article, learn about:

  • Have them step into your shoes- using empathy as a way of getting paid back.
  • Offering a payment plan.
  • Brainstorm together other creative ways to get paid back.
  • Think about going to mediation.
  • Making the tough decision to sue them in small claims court for the money owed to you.

Using empathy as a way of getting paid back by a friend

As a first step of getting paid back by your friend, try to influence your friend to be more empathetic with what you are going through. You trusted them to pay you back after you lent them money. You may not have been doing so well yourself but knew they needed the money more than you did. Show them and explain to them how you feel.

Here are some examples:

  • You lent your friend money to buy a car so she could finally drive to work. You now are struggling to pay your bills because you were expecting her to pay you back by now. Show your friend your unpaid bills or any debt collector notices.
  • You lent your co-worker money to pay the bills for a baby he was having. You now are struggling to pay for your own kid's daycare. Show and explain to your friend that you are having trouble paying for daycare because they haven't paid you back.
  • You lent your friend money for gas so that they could go to work. Your job laid you off and now you are struggling to get off your feet. Tell your friend what you are going through as they have also been in the same situation.

If your friend is able to empathize with you, they will understand why you need to get paid back quickly.


Offering a payment plan

If you let your friend $1,000, and you told them to pay you the $1,000 back once they had the money it may be hard for them to come up with the $1,000 all at once. Let your friend know that they can pay you back $50 per week until the full $1,000 is paid for.


It is much easier for someone to pay in installments than a lump sum payment. It is also a good idea to ask them how much money they feel comfortable paying and when. If they say, I can pay you $100 every 15th of the month, then it was their idea how much they could pay you and when. It is easier to get "buy-in" from someone when it is their idea.


Brainstorm together other creative ways to get paid back

You have tried to talk to your friend about them paying you back but you are not making any progress. Now what? Ask them to sit down with you and brainstorm ways that you can be paid back the money you loaned them. As we mentioned in the previous section, it is easier to get "buy-in" from someone when it is their idea and a brainstorming session may stimulate some good ideas.


How to ask your friend to brainstorm ideas? Tell your friend, "Look I understand you can't pay me the money I loaned you, but I would love to brainstorm ideas on how we can cancel this debt."


Write down all the ideas. It is really important to write down all the ideas that you both come up with. As you are brainstorming, agree not to comment on any ideas until after you have exhausted all options. Commenting on ideas you are putting down on paper during the brainstorming session may discourage your friend from offering other ideas based on your comments from the first ideas.  


Review the ideas for repayment. Once you are done brainstorming the ideas for repayment, take a moment to read them out loud together. Go through each idea and tell each other what you think about each idea. You can go over any pros or cons of each idea.


Here are some examples of creative solutions on how to get your friend to repay the money they borrowed:

  • You know your friend makes the best BBQ and your birthday is coming up. Instead of having them repay you the money you lent them, have them cook your next birthday meal.
  • You know you really need your garage to be cleaned out and it is going to take you the whole weekend to clean it out. Ask your friend if they are willing to clean and organize your garage and in return, they don't have to pay you the money they borrowed.
  • You need to find someone to take care of your dog while you have to be out of town. You know your friend loves dogs and would take care of your dog as if they were their own. You know it is going to cost you a lot of money to have someone take care of your dog. Ask your friend if they can take care of your dog while you are out of town in exchange for the money you lent your friend.

Think about going to mediation

What is mediation?

Mediation is a meeting between you, the person you lent the money to, and a neutral 3rd party called the mediator. A mediator is not going to force you and your friend to come to an agreement and is not going to determine who is right and who is wrong (that is what judges do). A mediator is going to help you and your friend come to an agreement together on how to resolve the issue that your friend has not paid you back. They are going to help you talk to each other without interruptions.


Benefits of mediation:

  • The mediator will help you brainstorm solutions on how your friend will repay you for the money you lent them.  
  • The mediator will make sure you are not talking over each other and that the conversation remains respectful.
  • Sometimes having an outsider's perspective will help you see a situation differently.
  • It is less intimidating than taking your friend to small claims court for not paying you back.
  • You may be able to be repaid quicker than going to court especially if you and your friend come up with ideas on how they can repay you for the money you lent them.
  • Mediation tends to be very successful between people who have a longstanding relationship and a relationship that will likely continue for the foreseeable future.

How can I try to mediate the dispute with my friend?

In California, there are many organizations that provide free or low-cost mediation. Run a google search for "mediation near me" and you will find one of the many organizations providing mediation. Many times they are run by volunteer mediators.


Many California small claims courts also have free mediation available. Each county runs their small claims mediation a bit differently so reach out to us for more information on your court. You can either obtain free mediation on your hearing date or you may be able to request mediation before your hearing date.


When all else fails, consider going to small claims court

Really often we get the question, well can I sue someone I lent money to in small claims? The answer is yes, so long as you want to sue for $10,000 or less as that is the small claims limit in California.


Here are some examples of common small claims lawsuits when a friend owes you money:

  • You lent your ex-boyfriend money for bills, rent, food, and gas. They promised to repay you in a few months once they received their first paycheck. Months passed and they keep saying they will pay you back next month. You decide to sue them in small claims court for all the money you sent them via Venmo.
  • Your friend borrowed money for you to pay a security deposit on a new apartment they were renting. They promised to pay you back as soon as they got their security deposit back from the old unit they were renting. It has been 6 months and you have not heard back from your friend. You decide to sue them in small claims court for the money they borrowed from you.
  • You lent your co-worker money to buy a car. They promised to pay you back, but they show up to work every day and they are ignoring your requests to get repaid. You decide to sue them in small claims for the money you lent them for the car.

Going to small claims court can be a hard decision especially when it was a friend you lent the money to. You are choosing to sue them in court and this means that the issue has now escalated. You may never get that friend back, but maybe they weren't your friend already since they haven't repaid you when they promised to pay you back.


What to do before suing someone who owes you money in small claims court

After you have already tried to text them, call them, or even ask them in person for the money they owe you, here are some additional options before suing in small claims.

Save All Evidence

You want to make sure to save all evidence related to the money you let your friend borrow:

  • Venmo, Paypal, or Zelle screenshots of the money you have sent them.
  • If you and your friend wrote down the terms of repayment, include a copy of the letter or notes you wrote down or had them sign.
  • Any text messages, emails, or phone call logs between you and the friend you lent the money to.
  • Any proof you have of how much they owe you, when they were supposed to pay you, and any partial payments they have made.

Send a Demand Letter

A demand letter is a letter that outlines a set of requests. For example, you could write to your friend asking that they repay you the money they borrowed from you.

If you eventually decide to sue in California small claims court, you are required to first request your money or property back before you can file the lawsuit. While you can request your money or property back orally, it is suggested you do so in writing in the form of a demand letter.


Sometimes a formal demand letter can get your friend to repay you for money you lent them as they know you are serious about getting them to pay you back.

What to include in the demand letter?

Unsure of what to include in your demand letter? Here are a few suggestions:

  • How much money you are owed.
  • When you lent them the money.
  • Your contact information.
  • Where to send payment.
  • Option to pay using a payment plan.
  • Option to mediate.
  • Give them a few days to respond (usually about 7 to 14 days).
  • Let them know that if they don't respond, you intend to sue.

What is the maximum amount you can sue for?

If someone owes you $10,000 or less, then you can sue in a California small claims court. If you are owed more than $10,000, you can still sue in small claims, but you have to waive any additional amount you are owed. Here is an example: You are owed $11,000 for a loan you gave to your friend. You would like to sue in small claims but the limit is $10,000. You agree to sue them for $10,000.


Why would someone agree to waive any amount over $10,000 that they are owed:

  • Suing in regular court is more expensive, time-consuming, and complicated.
  • You cannot hire an attorney to represent you in small claims court making it cheaper.
  • Hearings in small claims court are scheduled 30-75 days after the lawsuit is filed.
  • You are trying to resolve your dispute without getting lawyers involved as you would like to ultimately fix the relationship between you and the friend you lent the money to. You also hope they pay you before the hearing date so that you can close the lawsuit.

How much does it cost to sue in small claims for repayment on a loan?

  • It costs between $30-$75 to file a small claims lawsuit.
  • Once the lawsuit is filed, the person you sued has to be notified that a lawsuit has been filed against them. This is called serving. You can serve for free if you have a friend or family member deliver the lawsuit to the person you have sued or you can pay between $40-$75 to have the lawsuit professionally served.
  • If you are on California public benefits like Medi-cal, Food Stamps, SSI, you pay $0 in court fees and serving costs.

Starting the small claims lawsuit against the person who owes you money

Step 1: Complete "Plaintiff's Claim and Order to Go to Small Claims Court" (Form SC-100)

When thinking about who to sue:

  • Make sure you have an address for them as this is where they are going to be "served" (see step 3).
  • If you don't have an address for them, spend some time trying to find their address before filing your small claims lawsuit. You can run a phone number search on google, ask them for their address, or hire a skip tracer.
  • You can also serve the person you sue at work.


Step 2: File "Plaintiff's Claim and Order to Go to Small Claims Court"

Each California Small Claims Court has a different procedure for filing. You have to check with your local small claims court whether they allow filing in-person, by mail, online, or by fax. Or we can file your case for you!

Step 3: Serve the Debtor

Once you file your California small claims court lawsuit, the next step is to notify the person you sued that they have been sued. This is called "service of process" (also known as "service"). You must serve the debtor at least 15-20 days before the small claims court hearing (sometimes you are required to serve at least 30 days before the hearing).  There are several ways you can serve the debtor including by having a friend serve, hiring a process server, hiring the sheriff, or through the court clerk. We can help you with serving the small claims lawsuit.

The Small Claims Court Hearing

Once you file your case, you will get a hearing date scheduled anywhere between 30-70 days later. During this time, your friend may call you and ask to repay you. If they repay you before the hearing date (or even on the hearing date), you can close the lawsuit.

To prepare for your small claims court hearing:  

  • Prepare your evidence. Text messages, Venmo/Zelle/CashApp/Paypal screenshots of the money you have lent them and any money they have repaid you. You want to have your evidence organized with titles, dates, and why that piece of evidence is important. All your evidence should be geared towards showing the judge how much you are owed, when they were supposed to pay, any money your friend has already paid you back.
  • Prepare what to say. During the hearing, the judge will ask you why you are suing.  For example, "Your Honor, I am suing my co-worker in small claims court because I lent them $1,000 and they have not paid me back. I lent this money on January 1, 2021, and they were supposed to pay me on March 1, 2021, and I still have not heard back from them. You can see our text messages on page 4 of my evidence that I have tried to request the money back, but they still have not paid me."
  • Get your receipts for costs ready. For example, your filing fees and any process server costs. Make sure to let the judge know that you would like to be reimbursed for these costs.
  • Print enough copies of all your evidence. You will need at least three copies (one for you, one for the judge, one for the person you are suing).

Are attorneys allowed in small claims court?

  • Attorneys are not allowed to represent you or the person you sued at the initial hearing. If the person you sued appeals (meaning they lost and want the judge to decide again) then attorneys are allowed to represent the parties at the appeal hearing.

People Clerk helps you with your small claims court lawsuit.

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