Legal advice from lawyer Leslyn Lewis

17 December 2010 One Comment

Dear Leslyn:

My best friend of 20 years was losing her house and asked me to co-sign a loan for her. She defaulted on the $25,000 loan and the bank was coming after me. I had no choice but to pay off the loan to save my credit.

My friend doesn’t seem to care and now asks me, “What do you want me to do? I just don’t have the money.” She has always had bad spending habits and I am very upset because I really sacrificed over the years to save this money while she took expensive trips and bought expensive clothing.

I felt I had no choice but to lend her the money because she was going to lose her house and was unable to get a loan because of her bad credit. Anyways, I don’t believe that I can afford a lawyer and was wondering how to go about getting my money back since our friendship is strained, at best.
Maria (Hamilton, Ont.)

Dear Maria,
I have always said that there are certain laws that apply to monetary relations. A good rule is to never lend money to a friend that you are not willing to lose.

It is always recommended that instead of lending money to a friend, you give a small gift. The fact that you recognized that your friend had bad spending habits was a red flag that your money would be at risk.

Moreover, you stated that she had bad credit and was unable to get a loan. Banks are professionals at hedging their risk. They assess whether a person is credit-worthy on a daily basis. If they are uncomfortable with lending, then most likely you should be too. A person’s credit rating is often telling of the level of respect that he or she has for money.

Even worse than lending money to a friend, is lending your name. By co-signing for your friend, you essentially lent your name to her, along with your financial credibility. It was very wise of you to pay off the loan. Since you were not the beneficiary of it, you could attempt to seek compensation from your friend.

Most lawyers do not handle claims under $25,000. However, you may wish to consult a paralegal who is licensed by the Law Society of Upper Canada to assist you in filing a claim in small claims court. In addition, the small claims court procedure is simplified so that the average person can complete the forms. The monetary jurisdiction of the court is $25,000 so you will be able to sue your friend for the full amount of your loss. It’s sad, but money has been the cause of many strained relations.

This article provides information about the law. The information in this article is not general legal advice. Each fact situation is unique and requires an individual application of the law to specific circumstances. Although great lengths are taken to verify the information herein, it is strongly recommended that you consult a lawyer. A lawyer will advise you on how your specific fact situation fits into the law and provide you with the professional assurance that you have properly interpreted the information contained in this article.

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