Dear Penny: My Brother Owes Me $6K. Should I Forgive the Debt or Sue Him?

Dear Irritated,

Let’s put aside the relationship for a second. Do you think your brother has $6,000 sitting around somewhere and is refusing to pay you? Or is it likelier that he’s flat broke and you’re just one of the many people he owes?

Many people believe the myth that successfully suing someone means you’ll actually get money. That’s simply not true. Even if you have solid proof your brother owes you (which often isn’t the case with family and friends) and you win a court judgment, that judgment is worthless when the person you’ve sued is broke.

You could ask for a court order to garnish his bank account, but that won’t do you any good if there’s no money in there. Plus, if he owes banks money for things like negative balances and overdraft fees, he might not even have a bank account.

Maybe you could get a wage garnishment order if your brother is employed. But federal law generally limits that amount to 25% of someone’s disposable income, so if your brother doesn’t make a lot, this may not yield much. Also keep in mind that some types of income, like Social Security, are off-limits from creditor claims.

In many states, $6,000 is within the threshold for small claims court, so you probably wouldn’t have to pay much in court costs. But also consider the value of your time. You could end up wasting many hours and still walk away with nothing — while still destroying the relationship with your brother in the process.

Think about how likely it is that your brother can afford to repay you. Does he spend money on vacations, hobbies and going out to eat? If so, go ahead and sue your brother. Give him a final warning or two first. Maybe try sending him a demand letter via certified mail stating your intent to sue if he doesn’t pay up. In this scenario, I wouldn’t be so worried about creating a rift.

Someone who deliberately stiffs you out of $6,000 clearly doesn’t value the relationship.

But if you think your brother is struggling, have a talk with him and ask him to be realistic. Does he ever see himself getting caught up enough to repay you? I’m sure you’ve probably had this conversation far too many times to count by now. But maybe if you offer some flexible solutions, you can recoup at least some of that money.

Could he afford payments of $50 or $100 a month? If he has a bank account and he agrees to this, ask him to set up automatic transfers.

You may also borrow a move from professional debt collectors and offer to forgive some of the debt he owes in exchange for a lump sum. Since he owes you $6,000, you could tell him that if he can pay $3,000, you’ll forgive the other half. When you’re talking about a debt that’s been lingering for several years, collecting anything is better than nothing.

I’d also let him know that suing him is something you’ve considered. Tell him that’s a route you really don’t want to go because you care about the relationship — but also that when you lent him the $6,000, you really believed he’d repay you.

The important thing here is to be realistic. If you don’t believe your brother will ever have the funds to repay you, I think forgiving this debt is the best option. This is as much for you as for your brother.

When you’re holding onto the hope that something will happen, you wind up frustrated every time it doesn’t. Sometimes the best thing you can do is move on. Plus, accepting the fact that you’re never getting that $6,000 back helps you plan your own finances better.

Of course, forgiving isn’t forgetting. Don’t ever lend your brother money again. And if you ever lend money to someone in the future, do it with the assumption that you won’t be repaid.

Robin Hartill is a certified financial planner and a senior writer at The Penny Hoarder. Send your tricky money questions to [email protected].