Approximately two years ago, my spouse agreed to financially help one of his best friends. The best friend convinced my spouse to take over his student loan. The friend promised to reimburse my spouse monthly for the debt.
The debt is in bank draft form. Each month the payment comes out of our account. Unfortunately, the friend is several months behind with what seems to be no intention to pay. Any advice for a promise gone wrong?
Unfortunately, when your husband took over his best friend’s loan, he became legally responsible for that debt. That means he’s on the hook for payments. If your husband fails to make them, he’ll destroy his credit score and could even get sued.
My advice here depends on two factors: First, are your husband and his best friend still on good terms? Second, is his friend struggling to make ends meet? Or do you think his friend can afford to pay you back but is choosing not to?
Your husband could try some guilting if they’re still on good terms. He could say that money is tight because he’s paying his friend’s loan and ask him when he’ll be able to resume payments. Your husband could offer to accept lower payments and stretch the loan over a longer repayment period. If his friend agrees, that means some of that money would continue to come out of your pockets each month. But in this case, getting something is better than nothing.
If he still doesn’t get anywhere — or if they’re already not speaking — it’s time to up the ante. I’m not sure whether this friend promised in writing to pay back the loan or if your husband took him at his word. Ideally, your husband would have made his friend sign a promissory note so you’d have a legally enforceable document.
Regardless, your husband can apply some pressure. He can use a website like RocketLawyer or UpCounsel to find a free template for a demand letter. He should write that if his friend doesn’t resume payments as agreed by a certain date that he’ll be forced to take him to court. He should send it via certified mail.
Sending a demand letter doesn’t necessarily mean that your husband has to sue his best friend, of course. But sometimes people fail to repay friends and family members because they think there are no consequences. Your husband may get his friend’s attention by putting him on notice that he could face repercussions.
Even if your husband doesn’t have a signed promissory note, it may be worth speaking to an attorney about whether suing his friend is an option. If your husband has texts or emails from his friend agreeing to repay him, perhaps he could use those as evidence should he choose to sue. Of course, suing his best friend will end the friendship. But I certainly wouldn’t want to be friends with a person who would abuse such generosity.
The other question here is whether it would be worth it to sue. You don’t say how much money is involved or what your husband’s best friend’s financial situation is. If you know that he’s dead broke, getting a judgment may be meaningless. Remember the old saying about trying to squeeze blood from a turnip?
You and your husband may wind up having to eat the costs of this promise gone wrong. But there are definitely some lessons you can take moving forward.
I’m assuming your husband agreed to put the loan in his name because he could qualify for a lower interest rate. That may have seemed like an easy way to help out a friend, since your husband clearly trusted him to make payments. But in situations like these, you never want your name to be on the loan, whether it’s as the primary borrower or the co-signer. I’d much rather help someone out with high-interest payments by gifting them cash.
The other big lesson is that whenever you help out a friend or family member by signing for a loan, you should do so with the expectation that you’ll be making those payments. That can be difficult for some people to accept. You know you would never break a promise to repay someone you care about, but you can’t assume that the other person shares your values.
Regardless of how you and your husband proceed with this friend, the two of you need to make a pact. Never again will either of you assume legal responsibilities for someone else’s debt. Should you wish to help out a friend in the future, only do so with cash that you can afford to spare.
Robin Hartill is a certified financial planner and a senior writer at Codetic. Send your tricky money questions to [email protected] or chat with her in Codetic Community.