I Loaned My Friend $500,000 … He Hasn’t Paid It Back

Hi Scott,

About four years ago I trusted a long-time friend enough to lend them over $500,000 to renovate and sell his house. After renovating, he and his partner had a contract signed to sell the house, but it fell through. They couldn’t afford to relist the house, and ended up signing over the house to his brother in return for having a bridging loan paid off. Since then I have had a negligible amount of the money paid back to me. At the time I loaned this money I was in a bad way emotionally and not thinking clearly, so the only evidence I have is my bank statements. I’m still in regular contact with this ‘friend’, and he says he’s intending to pay me back soon, but I’m not seeing any hard evidence. My psychologist suggested I write to you to see what you recommend – so do I try to get my money back?

Michael

Hi Michael,

What a horrible situation to be in!

You must feel a bit taken advantage of … and perhaps a bit powerless.

If I were in your shoes, I’d stop talking to your friend and start talking to a lawyer.

Your lawyer will want evidence of the money transfers (you sending money to him, and the small repayments you’ve received), together with any email or text conversations you’ve had regarding the loan. They may also want a supporting letter from your psychologist.

Then they’ll send them what’s known as a letter of demand, which is exactly what it sounds like: “Pay back the money by a certain date or we will commence legal proceedings.” Ideally, you’d hope to be able to settle this via mediation before going down the costly court route.

Either way, until the money is repaid in full, I’d strongly suggest you do not speak to this person.

Scott.