I am owed with an uncollectable $4500
Posted by Frugal on July 31st, 2007
Any good ideas on how to collect an uncollectable personal debt?
I loaned $5000 to my friend back in 2001. It was meant to get him temporarily thru a job loss. So I never asked for any interest on my loan. Maybe he had a series of bad luck, or something. He found another job, and then got laid off again. It was during those high-tech recession. Later he managed to pay me back $500, which obviously wouldn’t cover any interest money that I would have lost. In any case, I counted it towards the principal.
As months and then years gone by, he is still unable to pay me back, and ran up his credit card debts. In fact, his credit scores were so poor that he couldn’t get any more credits nor even open a new bank account. Throughout these years, as a good friend to him, I have always being lenient to him by not giving him any pressure at all in repaying me. I only reminded him twice probably in 6 years that he should have a repayment plan. I also made it clear to him that requiring him to come up with a plan is really meant to get him in some financial order, rather than repaying me. Without a plan, an undisciplined person can’t go anywhere.
Then I sort of given up on him ever repaying me back. I simply asked him to help me document a personal loan loss with his social security number, plus signing/back-dating this loan document. This way I can properly deduct a long-term capital loss on my Schedule D, which would be allowed for this category, if such loan were not interest-free, and not meant to be a personal gift. I told him that he doesn’t need to pay me back, and that the worst consequence financially to him would be that he would have a personal and taxable gain of $4500, on which he most likely doesn’t need to pay any taxes (since it appeared that he didn’t have income that was taxable).
Throughout the entire process, I have never felt upset by him, but rather felt very sorry for him about his financial state. What was very unfortunate for him as a person was that he didn’t help me at all on documenting this. Rather, several months later, he simply disappeared. His phone number nor his address worked.
What a friend that I had! Despite this, I would still treat him as a friend if I see him again.
Of course, this unpaid loan hasn’t made my wife happy at all. Especially when my friend was buying the latest notebook computer, while I still had desktop, and that he has been using cell phones for years, when I had none. But given a choice of consuming my way to bankruptcy or saving my way to great wealth, I will always choose the latter option.
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July 31st, 2007 at 6:28 am
I think you’ll just have to count it as a gift.
July 31st, 2007 at 7:26 am
As much I hate to quote Dave Ramsey, he would call this stupid tax. Of course, you could have said something when he was buying the new computer. But it’s too late now. You need to just forget about it and learn your lesson.
July 31st, 2007 at 8:51 am
I have heard that we leave this world with nothing, so that the best we can do with this life now is to give it away. In that spirit, you have done a wise thing in your heart to hold no ill will for what has happened and to still regard this person as a friend.
Some argue that our peer groups pull us up or down. That might be true on average, but it says nothing about the particular person.
July 31st, 2007 at 8:28 pm
I think you did an amazing thing and it’s not something to stress about. You are a great friend.
Sometimes, people get caught up in the cost/value of things and forget that having someone who can lend a hand without asking for anything in return is an amazing gift. Its like having my mother or father ask me for a loan. I would gladly give them the money with out question or need for repayment.
August 1st, 2007 at 5:56 pm
Rule of Thumb, never loan money to friends ! never
As Moom said consider it a gift.
I give money to friends not loan. When you loan money it makes the friendship awkward.
August 3rd, 2007 at 2:24 pm
I agree with Moneymonk – I give money to friends. If I see it again, great, but I don’t care if I don’t. (Of course, I generally would care, so I don’t give large amounts.)
I think it’s amazing how generous in spirit you are, not to get angry that your friend obviously didn’t value or respect your friendship much. I’m guessing your wife is more upset about that than the loss of the money. I know I would be if someone treated my husband that way!
August 5th, 2007 at 12:51 am
You did the right thing.
You based you decision on heart, on kindness, on humanity.
You did right.
Your friend likely suffers from lack of something. Maybe even depression. Regardless, he doesn’t have what you have. Not yet. And can learn from you.
Hopefully he will see his flaws eventually in his future. And will realize his mistakes.
And, the greatest thing – it’ll be because of your kindness.
Again, you did it all right.
You’re alright.
August 6th, 2007 at 1:16 am
Thanks to everyone who has responded.
As I said that I was not too upset about the money loss to my friend. But the two things that upset me somewhat at the end was that my friend could have save me $1800 tax dollar (my marginal bracket) without any “financial loss” to him, but he simply didn’t help out. And also, I feel that one of his key personal problem with everything was that he simply doesn’t FACE the problem, but rather AVOID the problem.
Very unfortunately for him, at the end, he chose the same method of facing our friendship, which I doubt that he could find it elsewhere for more.
Obviously for my wife, she is not so thrilled about this friend. I personally don’t try to judge my friend. And I simply wish the best for my friend at this point. He would need lots of luck, but he kept forgetting that bad luck is not the excuse for going down, but just a test on the character.
October 10th, 2007 at 7:23 am
frugal:
i lost two friends this way, though i managed to get the nearly 2000 bucks that i had loaned them (in total) back. what was galling was that both of them were earning (and spending) more than me but did not care to repay my 0% interest loan. i’ve learned my lesson … and i trust you have too!
- s.b.
March 4th, 2008 at 9:36 am
small claims court if you have all documentation and signatures on a IOU.
March 4th, 2008 at 9:36 am
small claims court if you have all documentation and signatures on a IOU.
April 13th, 2009 at 11:10 am
I agree. You did the right thing. You helped out a friend in need. Your forgiveness and your generosity says a lot about your character.
Most likely your friend is experiencing dispair and hopelessness. This economy is enough to make many people lose faith in ever having a normal career. I am sure he is simply embarrassed and feeling so ashamed he can’t bring himself to talk to you. As far as buying a computer, you know it takes money to make money and without a computer he probably had no hope of ever developing an income to pay you back. Having a computer is critical in this day and age. It’s not like one can buy a reconditioned computer that wouldn’t break down quickly or become out of date within a year. Buying an old computer is just plain not smart if one has aspirations to make a living online.
Don’t allow your wife’s second guessing and her lack of forgiveness to affect you. All of that is called “materialism” and it is just as bad if not worse than your friend’s shortcomings.
Treat others as you would have them treat you! Someday the shoe may be on the other foot!
Your character was tested and you passed with flying colors. Your heart is pure and without guilt. Too bad one can’t say the same for your wife. Maybe you can explain to her that harboring resentment is harmful to one’s soul.