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I borrowed some money from a friend of mine for use in my business and I am not able to pay back to him now due to the bad business. Actually, he put the money into my business first and later decided to get out. We both agreed that I will pay back to him as my personal loan from him and no security is held against the loan.

I received a letter from his lawyer today requesting for the payment and says if I do not pay in three days he will take a legal action against me. My questions are:

  • What the worst could happen to me?
  • Can the judge order to take my house (I am married)?

Thanks!

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  • you lost a friend, can't get much worse than that. not sure about canada in the US he can put a lien on your house and depending on state maybe even force foreclosure
    – Vitalik
    Commented May 10, 2011 at 20:28
  • @Vitalik: Good point. Remember that you're not friends anymore, that's a line you can't think about crossing again until this is done.
    – duffbeer703
    Commented May 11, 2011 at 15:50
  • @ChrisWRea - Good title edit
    – Alex B
    Commented May 11, 2011 at 16:20
  • how was the company incorporated?
    – Andy
    Commented Jan 5, 2017 at 1:21

1 Answer 1

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Don't ignore it. If this is a non-trivial amount of money you need a lawyer.

You've acknowledged that a loan exists and have personally guaranteed it, so a court can and will ultimately order you to pay. In doing so, they can put liens on your assests. Depending on the state, how the property is titled and other factors, that can include your home.

If you don't have the money and are pretty much broke, try to negotiate a settlement. If they balk, you'll eventually need to start talking about bankruptcy -- that's the "nuclear option" and a motivator to settle. Otherwise, you need to either seriously explore bankruptcy or be prepared to lose your stuff to a judgement and having your dirty laundry aired in court.

If you're not broke, but don't have liquid capital, you need to figure out a way to raise the money somehow.

Again, you need to consult an attorney.

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