After the love, challenges in collecting a debt remain
By Erica Sandberg
December 1, 2015
My ex-girlfriend owes me $1,000. I am in a money bind now, and she won't pay me back, claiming she has no money. But I know she is working and going out, and I also know she has credit cards. Am I wrong to tell her to do a cash advance to pay me now? This is ridiculous — it is going on a year since she promised to repay me. I have texts proving she knows it was not a gift but a real loan. Christmas is coming up, and I need money too. — Walter
You have every right to ask her to pay up. Can you suggest that she extract the funds from her credit line and be done with it on your end? Absolutely! But if she rejects the idea, you can't force her to visit an ATM and hand over the cash.
In general, I do warn people away from credit card cash advances. For the cardholder, it's an expensive way to pay for things. The average APR for these advances is just over 23 percent, and there is no grace period, so interest begins to kick in immediately. Additionally, there is almost always an upfront fee, often in the 5 percent range. To take out $1,000, your former girlfriend might be charged $50 upfront, a fee that would be added to any balance she is currently holding.
If your reaction is that the extra cost is none of your concern, again you'd be right. It's not. I'm appalled by people who do not honor their financial obligations when they have a way to scrape up the funds, particularly when the arrangement is made between friends or relatives. If she doesn't have savings but can turn to her credit card to repay you, she should do that. This way she can cover the debt in installments. But it's her choice.
Thankfully you also have a choice. Because you have texts showing that this was not a gift but a loan, you can choose to press the matter. Consider legal action. Since you are within the statute of limitations for both oral and written contracts, you can file a lawsuit against your ex in small claims court. Watch a few episodes of “Judge Judy” and you'll understand the process — the TV show is pretty similar to what happens in real life.
Calmly and clearly explain to your former girlfriend that if she does not repay you within a specific time frame, you will sue her for damages. Judgments can result in unpleasant repercussions, including wage garnishments, seizure of assets, credit damage and a far higher balance owed than what the debt is today. This conversation may begin verbally, but back everything up on paper (in a letter) or electronically via email. Be polite and leave all drama out of the correspondence. Strive for a totally businesslike approach, sticking to the facts.
When your former girlfriend knows that by not paying she'll be in deeper trouble later, the light bulb may click on and she'll find a way to get the money to you. If you want to be helpful and mention the cash advance option, go ahead. Other ways to come up with quick cash include selling unnecessary property, borrowing against a retirement plan, or even asking someone else for a loan.
Or you can let it go and chalk the experience up to a rotten lesson learned: Never lend money to a girlfriend — or anyone else — unless you're prepared to lose the cash for good.
Got a question for Erica? Send her an email.