Demand Letter for Money Owed by a Friend, Relative or Ex

Was it a loan or a gift?

It was a loan if the other person agreed to pay the money back. California defines a loan of money as a contract in which one person delivers money and the other "agrees to return at a future time" an equivalent sum (Civil Code section 1912). A gift is a voluntary transfer "without consideration," meaning nothing is promised in return (section 1146).

With friends and family, nobody signs a note, so the question becomes what the evidence shows. Courts look at the whole picture.

Save everything now: screenshots with dates, bank and app statements, and any voicemails. Keep the original messages on your phone as well as the screenshots.

How long do you have to collect a personal loan in California?

Two years for an oral agreement and four years for a written one. Code of Civil Procedure section 339 sets two years for a contract "not founded upon an instrument of writing," and section 337 sets four years for a contract founded on a writing.

• The clock generally starts when the borrower fails to pay as agreed, not on the day you handed over the money. For a loan with no set repayment date, when the clock starts can be harder to pin down.
• Whether a chain of texts counts as a written contract is a fact question. Do not assume the four-year period applies because you have messages.
• A later acknowledgment or promise to pay can extend the deadline only if it is in a writing signed by the borrower (Code of Civil Procedure section 360). Whether a text counts as a signed writing is a question for a lawyer, so save every message where the borrower admits the debt.
• A signed promissory note may fall under different rules. Our guide to promissory note default letters covers those.

A demand letter does not pause any deadline. If the two-year mark is approaching, talk to a lawyer about filing before it passes.

Can you charge interest on money you lent a friend?

Sometimes, within limits. Civil Code section 1914 presumes a loan of money is made upon interest unless the parties expressly stated otherwise in writing at the time. Any rate you agreed on stays chargeable after the borrower stops paying (section 3289(a)).

With no agreed rate, the statute adds 10 percent a year from the breach for contracts made after January 1, 1986 (section 3289(b)). That is interest from the missed payment forward, not from the day you lent the money.

The California Constitution also caps what a private lender can charge (Article XV, section 1). For money lent primarily for personal, family or household use, the parties may agree in writing to a rate of up to 10 percent a year; otherwise the constitutional rate is 7 percent. A friend-to-friend rate above the cap is usury, which can undercut the lender's claim to interest, so talk to a lawyer before demanding it. For the math, see adding interest to a demand letter.

Example: working out the balance

Example (hypothetical): on February 1, you send your cousin $4,000 by bank transfer with the memo "loan, repay $500 a month from March." He pays $500 in March and $500 in April, then stops. Nothing was said about interest.

Your letter can ask for the $3,000 and state that you reserve interest. Whether the whole balance is due at once, or each $500 installment separately, depends on what you agreed, so keep the demand to what the evidence supports.

Steps to write a demand letter for money owed by a friend

1. List each transfer with the date, amount and method, and attach the records.
2. List each repayment the same way.
3. Quote or attach the messages that show the agreement to repay and any schedule.
4. State the balance and, if you are asking for it, how you calculated interest.
5. Give a clear payment date, such as 14 days out, and the ways you will accept payment.
6. Offer a payment plan if you are open to one, and say it must be confirmed in writing.
7. Say you may file in small claims court if the balance is not paid or a plan is not agreed.

Keep it about money and dates. Old arguments, mutual friends and personal history weaken a letter that a judge may later read.

Can you take a friend to small claims court for a loan?

Yes, if the balance is $12,500 or less, the cap for claims brought by a natural person (Code of Civil Procedure section 116.221). The claim form, SC-100, says you must ask the defendant to pay before you sue, and a dated letter shows you did.

• Filing fees run from $30 to $100, and you can ask the court for a fee waiver.
• Neither you nor your friend can bring a lawyer to argue at the hearing, though either of you may consult one before it.
• Bring the transfer records, the messages and a copy of your demand letter.
• Claims above $2,500 are limited to two per filer per calendar year statewide (section 116.231).

For the filing steps, see what to do before filing in small claims.

When the borrower is family or the amount is large

Money between relatives carries history that no letter can settle, so the letter's job is narrower: dates, amounts and the agreement to repay. You can write that yourself. Attorney drafting fits better when the borrower insists the money was a gift, when the balance exceeds the $12,500 small claims cap, when a former partner owes money from the relationship, or when the two-year deadline is close and the facts need to be pinned down in writing.

If you use Talk to My Lawyer, a licensed California attorney writes your letter from your facts and documents (your transfer records and messages) and sends it on your behalf. If you are deciding whether to sue a relative, get advice on your own situation first.