What should I do if someone refuses to repay money they owe me?
Being owed money can be awkward, especially when the borrower is a friend or family member. Whether it’s $200 you lent a mate or an unpaid invoice for work, the best first step is usually a calm conversation—not a threat of legal action.
Check what you agreed
Start by gathering anything that shows the money was a loan or payment owed, rather than a gift. This might include bank transfers, text messages, emails, an invoice or a written agreement. Note how much is outstanding, when repayment was due and whether any payments have already been made.
For example, a transfer marked “loan for car repairs” and a message saying “I’ll pay you back next month” may help show what you both intended. If the arrangement was only verbal, write down what you remember while it’s fresh.
Before asking for payment, check your figures. You generally shouldn’t add interest or extra fees just because repayment is late unless your agreement or the law allows it.
Ask for payment clearly
People sometimes avoid paying because they’re embarrassed or struggling financially. A polite message may resolve things without damaging the relationship. State the amount owed, refer to your agreement and ask when they can pay.
If they can’t pay in full, consider a payment plan. Put any new arrangement in writing, including the instalment amounts and dates. If you accept part payment, make clear whether the rest is still owed.
Keep copies of your messages and stay factual. Repeated calls, threats or public posts about the debt are unlikely to help and may create problems of their own.
Send a letter of demand
If informal requests don’t work, you can send a letter of demand: a written request for payment by a stated date. It should set out:
- who owes you money and why;
- the amount you say is outstanding and how you calculated it;
- a reasonable deadline for payment; and
- how they can pay or contact you to discuss the debt.
You can say you’ll consider legal action if the debt remains unpaid, but don’t threaten steps you don’t intend to take. Keep a copy and a record of when and how you sent it.
Consider mediation or a court claim
If the person disputes the debt, mediation may help. This is a process where an independent person helps you discuss a possible agreement; they don’t decide who wins. Community mediation services may be available in your state or territory.
You may also be able to bring a claim in a court, often through a simpler process for smaller amounts. Where you file, the amount you can claim and the fees involved depend on your state or territory. Check your local court’s website before starting.
There are time limits for bringing debt claims, and they vary with the type of debt and where you live. Don’t put the matter aside indefinitely. For a substantial debt or a disputed agreement, legal advice can help you decide whether a claim is worthwhile.
Think about whether you can recover the money
Winning a court case doesn’t automatically put money in your account. If the person still doesn’t pay, you may need to take separate enforcement steps to collect a court judgment. Those steps can cost more, and recovery may be difficult if the person has little income or few assets.
Before spending money on a claim, weigh the amount owed against the likely fees, your evidence and the borrower’s ability to pay. For a smaller debt, an affordable payment plan may be a better outcome than a lengthy dispute.
