Spending down debt: Debts to friends or family

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This is part of our series on strategies you can adopt to free yourself from burdensome debt.

So you put the touch on your friends or relatives one too many times? Now they screen out your calls, write Moved, no forwarding address on your Christmas cards, turn off the lights when they see your car enter their driveway? How can you crawl out of the family doghouse before you become the pariah, the deadbeat no-one talks about?

Fear not; if the prodigal son can be greeted with feasts and celebration, you too can achieve redemption. Follow these three steps to regain you place in the family album.

1. Acknowledge your debt. So often, because Americans are uncomfortable talking about money, the terms of loans to friends and family aren't discussed. The result is the loaner and the loanee come away with different impressions of the repayment schedule. The loaner may expect it to be paid back loan-shark promptly, while the loanee may plan on paying it back when the loaner proves that he/she hasn't forgotten about it.

This can be solved with a letter. Write to the person to whom you owe the debt. Something like this:

"Dear Aunt Lucille;
I'm writing to express my continued appreciation for the loan of $5,000 you gave to me last year. Thanks to your generosity, I was able to buy those implants, which have made a huge difference in my dancing career. My plan is to pay you back $100 a month for the next four and a half years, beginning with the check enclosed. I hope this is agreeable to you.

Again, many many thanks,
Your niece, XXXXX"

2. Calculate a realistic monthly payment, and treat this debt like any other bill. Pay it religiously. A check each month over the long haul will go much further in repairing your reputation than a one-time lump sum, which could simply confirm to the more suspicious of your family that you're cooking meth for a living.

What if you're so strapped for cash you can't pay much of anything back now? If you're in such dire straits, you need a plan, dude. Consult one of the many free reliable debt counseling services for help with a debt recovery plan, and include your debt to family in that plan. Share that plan with the family member to whom you owe money. While this may be hard on your ego, you'll find that it will probably raise your esteem in their eyes.

3. Consdier using your knowledge of your family to pay interest not only in cash, but also in a meaningful gift. If you know your aunt loves roller coasters, buy her a season's pass to the local amusement park, and go with her. Collect old photos and have a family album printed for her. Buy her a case of her favorite wine (unless she's the family lush). This demonstrates gratitude and strengthens your family ties.

By following this process, you'll not only regain the trust of your friends or family, but also set an example for other members so obligated. And who knows --maybe you'll discover that you enjoy your family a lot more when you aren't ducking them.

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