You loaned out a card, got stiffed? Go to small-claims court

To Her Credit columnist Sally Herigstad
Sally Herigstad is a certified public accountant and the author of "Help! I Can't Pay My Bills: Surviving a Financial Crisis" (St. Martin's Press, 2006). She writes "To Her Credit," a weekly reader Q&A column about issues involving women, credit and debt, for, and also wrote for MSN Money, and, and has guested on Martha Stewart Radio and other programs.

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Question Dear Sally,
My brother-in-law and I had an agreement that he would use my credit card to purchase a dryer and I would be paid back when he got his tax refund.

This was back in 2014. He hasn't made one payment. Now in 2017 I’m being sued by the credit card company. Can I legally make him responsible for these credit card payments? I have messages that have him saying he'll pay it and have it paid by specific times and still nothing has been done. I just want to know if that’s possible because he's had more children since then, multiple job promotions and has been on vacation out the country as well since then. – Janelle


Dear Janelle,
Oh, the old, “I’ll pay you back when I get my tax refund” line! You’ll never fall for that one again. If it makes you feel any better, I lent money against a coming tax refund almost 10 years ago, and I haven’t been paid back, either.

There are always reasons why a personal loan dependent on a tax refund can go awry. First, the person may not get the refund he was expecting. He may owe more tax this year, or have had less withheld. The Internal Revenue Service may withhold tax for other years’ taxes or other bills such as back child support. Or the person expecting a refund may have another “emergency” when he gets the refund and suddenly the money is gone.

Unfortunately, there’s no way to make him legally responsible for your credit card balance. He didn’t apply for the card and get approved. You did. Any deals made between you and your brother-in-law have nothing to do with the credit card company. I'm not surprised you're being sued as it sounds as if you did not keep up with payments on the debt, which you should have done whether or not your brother-in-law paid you back.

You still have recourse against your brother-in-law, however. Your best bet will be small claims court. Small claims court is intended for cases such as yours, where the amount is large enough to be worth pursuing, but not large enough to justify hiring a lawyer and going through the municipal court system.

Before you go to small claims court, you should gather all the evidence you can find, including messages between you and your brother-in-law, credit card statements, and notes about what was said, by whom, and when. Tally up the original purchase of the dryer, plus all interest and late fees since then.

You’ll then need to follow the rules for small claims court in your state. Generally, you fill out forms and pay a fee, and someone serves your brother-in-law with notice that he is being sued. If he responds, you’ll have to prove that he actually owes you the money. If he doesn’t respond, which is more likely, you win by default. You should be able to find the instructions for filing in small claims court in your state online.

Winning in small claims court is just the first battle in the war, however. It only means you have a judgment against someone. You still have to actually get the money. You may be able to garnish your brother-in-law’s income or assets, such as real estate. If you attach a lien to real estate, you have to wait until he sells it to collect.

In the meantime, you should respond to the lawsuit against you. If you have a court date, you must go to the appointment. If it hasn’t gone that far, contact the credit card company or collector and try to make arrangements for a payment schedule you can afford. If they are convinced that they can get paid without taking you to court, they are likely to do so.

If you need help responding to the lawsuit against you, consider talking to a representative at a nonprofit agency affiliated with the National Foundation for Credit Counseling or the Financial Counseling Association of America.

It may seem hard to actually sue your brother-in-law. It could certainly make family reunions awkward, at least for a while. However, you have to stand up for yourself. Perhaps knowing you are serious about getting paid will encourage him to pay up. Otherwise, he’ll have to learn the hard way how to treat other people’s finances with more respect.

See related: 8 ways to get friends to repay a loan, Think twice before lending your card -- or it will cost you big

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Updated: 02-15-2019