SCENARIO: I LENT MONEY TO MY PARTNER FOR THEIR BUSINESS, WE BROKE UP, AND NOW THEY REFUSE TO PAY ME BACK – WHAT CAN I DO?

INTRODUCTION

While lending money to a romantic partner for their business can be a gesture of trust and support, it may lead to thorny challenges if the relationship ends and they refuse to repay the debt. If you find yourself in this precarious predicament, it is important to understand your rights, gather evidence of the loan, and explore options for recovering your money –whether through communication, mediation, or legal enforcement. By taking a structured approach, you can work toward resolving the issue while protecting your financial interests.

SOME KEY CONSIDERATIONS

Before choosing the best course of action to take, the following should be taken into consideration:?

Documentation: Do you have evidence that you lent money to your former partner and they have not paid you back??

It is essential to have documentation when you lend money to a former romantic partners for two key reasons:?

Evidence – Documentation serves as evidence of the loan as it would provide a tangible record of the terms, amount, and purpose of the funds. Documentation may take several forms, including written agreements (such as contracts, IOUs or loan agreements), bank statements, e-mails, or texts messages that detail the loan arrangement. These documents serve as proof of the loan in order for courts to enforce repayment in situations where legal action is required.

Intent of the loan – Proper documentation helps establish the purpose of the loan by clarifying whether the money was a gift or a loan. In cases of ambiguity, your former partner may argue that the funds were lent to them as a gift, which may hamper your ability to reclaim the debt.?

Time limitations: When did you lend money to your former partner and how much time has passed since they were supposed to repay you??

Knowing when you lent money to your former partner and how long it has been since they were expected to pay you back is crucial because of the statute of limitations on debt, which sets a time limit on when creditors – or you, in this case – can sue for repayment. Once this period lapses, you lose the right to take legal action against your former partner to recover the debt.?

In Kenya, the Limitation of Actions Act (Chapter 22) is the legislation that prescribes timeframes within which legal actions must be brought. It aims to prevent delays and promote the expeditious resolution of disputes. According to Section 4 of the aforementioned Act, the statute of limitations for debt recovery is generally six years from the date the debt became due.?

Amount of the debt: How much is the debt vis-à-vis the costs of recovering the debt??

Assessing the amount of debt is crucial for making informed decisions about recovery strategies, ensuring that the efforts exerted to recover the debt are proportionate to the potential benefits. Here are some things to consider if you would like to get back the money you lent to your former partner:

The cost-benefit analysis: The potential recovery should be weighed against the costs involved in pursuing the debt. If the cost of collection efforts are greater than the debt itself, this might make recovery infeasible. In addition, if the debtor lacks sufficient assets, enforcing a judgment may be challenging.??

Legal considerations: The amount of the debt influences the court in which a claim for debt recovery will be filed. In Kenya, where the debt is:?

OPTIONS FOR DEBT RECOVERY?

If you lent money to your partner for their business, you break up, and they refuse to pay back, here is what you can do:

Attempt communication – Start by reaching out to your former partner to discuss the debt. Through effective communication, you can gain insights into your former partner’s specific circumstances that may be hindering their ability to repay the debt. This understanding allows for more tailored solutions, such as crafting manageable payment plans that can lead to successful debt resolution (e.g. the creation of a debt repayment plan). Throughout all communications, it is paramount to maintain a professional and respectful tone with your former partner regardless of how your relationship came to an end. Avoid using aggressive, condescending, or threatening language, as this can undermine rapport and hinder successful outcomes.?

Pursue alternative dispute resolution (ADR) – Where communication does not yield results, consider exploring alternative dispute resolution, such as negotiation, mediation or arbitration. ADR is designed to help parties resolve disputes quickly and efficiently. It avoids the formalities of litigation and can help maintain relationships by minimizing hostilities between parties.??

Issue a demand letter – If ADR attempts fail, follow up with a demand letter that outlines the amount owed, any previous attempts to collect the debt, a demand for action, a deadline for compliance, and the consequences of non-compliance. This gives your former partner a final chance to settle the debt before the matter is escalated further. A demand letter may also be used as evidence in court of good faith attempts to settle a matter.?

Enforce the remedies any written agreement – If your former partner neglects and/or refuses to comply with the terms of the demand letter, considering exercising your rights under the written agreement (if applicable). Most written agreements outline specific remedies for loan default, such as demands for immediate repayment, seizure of collateral, modification of loan terms, or institution of legal proceedings.?

Instituting legal proceedings – Instituting legal proceedings should be a last resort in debt recovery because it may be costly and time-consuming compared to the previous options of communication and ADR. It is important to file the correct pleadings at the appropriate court, taking into account factors such as the amount owed, the residence of the debtor, and where the cause of action arose. The outcome of legal proceedings for debt recovery is the obtainment of a legally enforceable judgment from the court. Therefore, if the judgment debtor (i.e. your former partner) still refuses to pay the judgment debt, then you (i.e. the judgment creditor or decree holder) may apply to court for enforcement of the decree. A court may execute a decree in different ways by issuing a writ of execution, making garnishee orders, or ordering the seizure and sale of the debtor’s assets.??

CONCLUSION

Navigating a breakup after lending money to your former partner's business, especially when repayment becomes an issue, requires a strategic approach that balances emotional considerations with practical steps. Begin by documenting all loan-related details and attempting open communication. If this fails, explore alternative dispute resolution methods like negotiation and mediation. Should these prove unsuccessful, consider legal options such as issuing a demand letter, enforcing the remedies under any written agreement, or instituting legal proceedings, depending on the circumstances of your case.