Spending down debt: Debts to friends or family

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"