Last year September I loaned a friend $10.000. The check was made out not to him personally, but to his business. We both signed a promissary note and so far he has paid me back $1000. Recently, I found out that he declared bankruptcy last year, before I made the loan (I didn't know about the BK, otherwise I would've never made the loan). By now he has missed two payments, and is not answering my emails, text messages and phone calls. I am getting anxious, and need some advice on what to do if he continues to avoid making payments.
Thank you for your advice.
You should try to settle this matter informally first. Write a demand letter and mail it via certified mail to his business address. The letter should include the summary of your facts supported by law and your total damages requesting the immediate repayment of the full debt (plus interest and other incidental damages) and include a deadline date for response. In your demand, you should also propose a different payment arrangement in lieu of request for full payment. If your "friend" has declared BK in the past, there is a likely chance he has poor money management skills and will not be able to repay the debt in one lump sum. If your "friend" does not respond by the deadline date, then proceed with court intervention. However, try to avoid filing suit in a Superior court because of the high costs associated with the ensuing discovery and potential trial. Besides, after filing suit, you will likely need to hire an attorney to help you with this matter and pay attorney fees. Good luck.
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If he continues to avoid making payments, you need to sue him. You may do so yourself in small claims court, with your recovery limited to $7,500 (i.e., less than he owes you), or you may do so in San Diego Superior Court. If you choose to sue in Superior Court for the full amount, and/or to seek recovery of attorney's fees, you will likely need a lawyer to assist you.
The issue of bankruptcy seems irrelevant for any other purposes than to allege that you were fraudulently induced to entering into the agreement. I do not practice in the area of bankruptcy but my understanding is that this debt would not be dischargeable.
The promissory note likely has an escalation clause or some other mechanism by which the entire amount would become due in the event of a default. There is also likely a procedure you need to follow in order to allow the borrower to remedy the default. There is also likely an attorney's fees clause allowing you to recover fees and costs should you be forced to sue to recover any of the monies loaned pursuant to the note. Without seeing the note, it is difficult to fully ascertain the next step and the actual route you should take with respect to recovering the monies loaned under the note.
Best of luck.
DISCLAIMER: Nothing herein is to be construed as legal advice, nor is anything herein to be construed as having created an attorney-client relationship.
I am entirely in favor of settlement, as the other attorneys suggest. Failing that, you can go to small claims court for claims of up to $7500. This means you would have to waive any claim above $7500, but you save the cost for attorneys' fees as well as the higher filing fees for the Superior Court.
To learn more about how to file in the small claims court in California, see the following website and its various links:
