In 2007 and 2008 my husband and I loaned a friend money to help in emergencies resulting from a fire at her home in which she lost everything. She has made many promises to pay us back, but there is always an excuse for not doing so -- she is on medical disability and promised to pay when her daughter received her income tax return -- her son was to send us a certain amount per month from his paycheck. We received nothing. In 2010 she agreed to and signed a promissory note in which she was to make monthly payments, in an amount she said she could handle. To date we have received only one payment, which was less than the agreed to monthly amount. We are seniors on fixed income and don't have money for attorneys, court costs, etc. Please advise the best way to proceed.
I can't think of any way to collect other than voluntary payments by borrower without suing in court. You don't need a lawyer to use small claims court. In fact, it is designed for do it yourselfers. However, understand that if your borrower's only source of income is receiving social security then this income is exempt from creditor's reach. You won't be able to garnish this or take money in her bank accounts, if bank accounts contain nothing more than social security benefits.
On the other hand, after you sue and receive a judgment, you can record a lien against real estate property and other assets if they are non-exempted. If you get your judgment and the borrower's income changes to something different than social security, like wages or self employment, there would be income that you could seek. Also be aware that there is a statute of limitation in which you must file suit to preserve your right. If you sit on the right to sue for too long, you won't be able to sue at all.
As the old saying goes, "you can't get blood from a turnip." If this woman truly does not have the resources, obtaining a judgment against her in court will simply add court costs to the debt without significantly adding to the chance of collection. You already have a promissory note, good. You could go to a collection agency, but they will then take a cut of what is obtained for the effort of collection, so you will recover less total. I would go back to the person and impress upon her that you are considering more "legal" options and that she really needs to take this debt seriously. Finally, perhaps she has some skill that she could use to trade off her dept instead of money. Good luck.
I have been licensed to practice in the State of Oregon since 1990. I am not offering legal advice regarding your question, only general information regarding the law. You are not my client nor am I your attorney unless we sign a retainer agreement.
Debt Collection Attorney
I agree with the others. If this woman is refusing to pay you voluntarily, going to court is the only real option left. The filing fees in small claims court are small versus the filing fee in Superior court (~$60 vs. ~$450; check your county for the specific amount). You also have no attorneys in small claims court. I don't know your precise finances, but if you are on fixed income, it is possible you could qualify for a fee waiver and not have to pay any filing fees at all. Obviously, I haven't seen the promissory note you have, but the fact that you have one seems to me to be a potential point in your favor.
That said, if the debtor has no money or assets to pay you, your chance of actually collecting on any judgment you win in small claims court may be low. It is rare for a debtor to be completely exempt from collection , but it does happen. It is exceedingly rare, in my experience. Most debtors have something that can be taken.
However, even if you don't actually collect on any judgment, the shame/embarrassment of being sued in small claims court can be enough for some debtors to pay voluntarily. Also, even if you don't collect, a small claims court judgment in your favor can have adverse effects on the debtor's credit (assuming she cares about that sort of thing).
Hope that helps.
The answer provided above is based upon California and/or New York law and is based solely upon the limited information provided by the poster. No attorney-client relationship is created. A future in-person consultation may reveal additional facts that may change the answer provided.