What are the benefits of small claims courts for loan repayment?

Recently on our legal forum a user asked, “I loaned a friend some money last year. We had a handwritten contract. He agreed to repay me after six months. I didn’t charge him any interest but did intend to get the money back. Now he’s hedging and refuses to repay me. I wouldn’t worry about it, but I just lost my job and money is really tight. What’s the best way to try to get the money back?”

Steps to get repayment for a loan

Generally, most financial experts suggest that it’s never a good idea to loan money to family members or friends unless you don’t expect to be repaid. The last thing you want is for a few thousands of dollars to ruin a relationship.

Since you’ve already loaned the money, however, and you need to be repaid there are some common sense steps you can take to encourage your friend to repay you. First, you need to talk to your friend. Take a copy of your agreement. Tell him you need the money because you have lost your job. Make it clear you do not want this to interfere with your relationship but if does not repay you, you will take additional steps to get payment. Set up a very specific date for repayment.

Benefits of small claims court

If your talk does not persuade your friend to repay you, you can begin the process to file a claim in small claims court. Every state has a small claims court where you can sue another person. The procedures for suing, the amount which can be collected, and the process for filing the suit will vary by court. There are also several benefits to filing your case in small claims court. Let’s take a look at some of those benefits.

  1. You can present your case with limited expense and ease.

One of the major benefits of filing your case in small claims court is that you can file the case yourself. You will need to review the procedures for filing the case in your state. You will also have to gather sufficient evidence to win your case. In your particular case, you will need the written contract and evidence that you gave the money to your friend. You should also bring evidence that he made previous payments- which shows that he knew there was a contract for repayment and the money was not given as a loan.

  1. You do not need to hire a lawyer.

Another benefit of small claims court is that you can present your case yourself. You do not need to hire a lawyer, which means that if you win your case you will not have to give a lawyer a percentage of the compensation.

  1. Your small claims decision is presented immediately.

Finally, the greatest benefit of small claims court is that your case might be heard within 2 to 3 months from the date the complaint is filed. You will also get your decision from the judge within minutes or within days at the very latest.

 Downsides of small claims courts

The benefits of filing a claim in small claims court far outweigh the negatives, but there are a few downsides. For example, while you will not need to hire a lawyer to file your case, this does mean that you will have to do all of the legal work yourself. For those who do not feel legally savvy or who do not like speaking in public this might be intimidating.

Additionally, small claims courts also have a maximum amount in which you can sue, referred to as the jurisdictional amount. This amount can vary substantially by state. It’s important to understand the laws and limits in your state.

Finally, the biggest issue, even if you are able to successfully win your case, is actually getting paid. Why do you think your friend has not repaid you? There’s a good chance that he doesn’t have the money. Many individuals who take their claim to small claims court leave court as the winner but never receive payment because the person they sued didn’t have any money to pay them, they lacked assets to repossess and sell, or they did not have a job with wages to garnish.

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