How do I get the Money I'm Owed?

Q.I helped a friend out by signing a loan as the second signature (using my house as collatoral). She did not make the payments on time and I ended up taking out money from my retirement to pay it off.

She agreed to send me £50 per month to pay it off. She agreed via an email and I'm having great difficulty getting the money. Do I have any rights and if so, how do I proceed?

A.

Co-Signing A Loan

Anyone who is considering co-signing a loan should be aware of the consequences that can occur. The co-signer will usually be acting as a guarantor on the loan, meaning that if the loan is not repaid they will be liable to pay the full amount. In a great number of cases the usual reason that someone will ask another person to co-sign a loan is because the person who wants the loan has a bad credit record. This should be a warning sign to the co-signer that the friend is not the most reliable person when it comes to paying debts back. Other consequences to the co-signer could include a detrimental impact to their own credit record and debt collectors coming directly to the co-signer for payment. However, as the loan amount seems to have been paid off in full, the next step would be to collect payment from the friend.

Collecting A Personal Debt

A legally binding agreement has been made through the offer of payment via email, and the acceptance of this offer. There were terms and conditions included in the email agreement including amounts and payment periods. If the friend has defaulted on this agreement then there are other avenues open to collecting this debt. Debt collection agencies can be used to collect the debt but there will be a charge for this service. The debt collection agency will send letters that may be the push needed to make the friend pay up. However, there is no guarantee that the debt will be recovered and the agency will still usually demand a fee. The other option is to take the matter to the small claims court if the amount owed is under £5,000. The fact that there was a legal agreement means that there would be a very good chance of winning the case. However, the debtor may try to prove that they cannot afford to pay this debt and it will be a matter for the courts to decide on. The debtor may be forced to pay back the money in instalments and if they default on this then the matter can be legally taken further.