Loan from ex father-in-law

manfromuncles

Hi. I have a bit of a dilemma and I'm trying to work out where I stand legally. Perhaps someone can help?

My wife (now ex-wife) and I borrowed money in the form of an interest free loan from her Father to help towards buying a business. The loan was agreed between the 3 of us to be paid back by myself and wife at a rate of £1000 per month. This arrangement was fine until the business went into administration and was wound up 3 1/2 years ago. Since then my wife and I have separated and divorced.

I had been continuing to pay my half of the loan at a rate of £500 a month but during the divorce have been unable to sustain this payment arrangement as my finances have become stretched to breaking point. I have been paying smaller amounts as and when I could afford it. I agreed to pay him whatever was left of my overdraft facility each month.

In the meantime, my ex-wife is no longer paying her father and seems to have had her half of the loan cancelled off. My ex father-in-law is now demanding that I pay him more money each month than I can afford and is threatening legal action. My question is in 2 parts, firstly can he actually force me to pay more money than I can afford? and secondly is the loan even legally binding anymore as my ex is no longer paying?

Any advice would be very welcome.

Tixy

Hi

First off - what paperwork / paper trail exists for the loan?

Was there an original written loan agreement specifying the amount to be paid a month?

Was there a new agreement when you split up - was this documented in any way (letters etc)?

No one can force you to pay more than you can afford. If he successfully took court action against you and you asked to pay in installments then the court would look at what was affordable to you based on your income and basic living costs.

Sinhanada

Was there a loan agreement signed?

Legally your father in law cannot force you to pay more than you can afford.

I would suggest you write a formal letter outlining your current proposal and that this is the limit of what you can afford. It may help to attach a Statement of Earnings and a budget to show that you are unable to meet the higher payments - although this is entirely up to you. I believe it would help if this matter did then go to court as it would show you are making all reasonable endeavors

paddyrg

buying a business. The loan was agreed between the 3 of us to be paid back by myself and wife at a rate of £1000 per month. This arrangement was fine until the business went into administration and was wound up

So was the loan in your personal names, or the business?

If to you personally, and over £20k, I think he's fortunate you're being as reasonable as you are. I assume he isn't a registered/whateverthelegalprocessis moneylender so it is a private agreement. I can also see it being tricky for him to prove anything in court that'll make you pay more than you earn.

Whether or not he wrote off his daughter's 'bit' is between them

imoneyop

Sinhanada wrote: »

It may help to attach a Statement of Earnings and a budget to show that you are unable to meet the higher payments - although this is entirely up to you.

There is no need for the OP to provide details of his personal finances to someone who has no entitlement to see it. If it comes to court then he can provide an SOE to the court.

If the OP makes a reasonable offer of repayment then a judge will very likely take his side and allow the repayment to continue on that basis.

manfromuncles

Hi all. Thanks for your comments. The loan was originally for £120k. £60k each. There was a written agreement to pay a certain amount per month between us but since then circumstances have changed as per my OP. I do intend to pay this loan off. But, this has to be an affordable payment. I am still paying off legal costs from the divorce and have made it clear to him that once those are settled I would increase my payments to him.

manfromuncles

Tixy wrote: »

Hi


Was there a new agreement when you split up - was this documented in any way (letters etc)?


No there was no change to the original agreement when we divorced.

oldhand

manfromuncles wrote: »

Hi all. Thanks for your comments. The loan was originally for £120k. £60k each. There was a written agreement to pay a certain amount per month between us but since then circumstances have changed as per my OP. I do intend to pay this loan off. But, this has to be an affordable payment. I am still paying off legal costs from the divorce and have made it clear to him that once those are settled I would increase my payments to him.

In his shoes I would be thankful you are willing to make the effort to repay the loan,he may look at taking you to court but as others have said what benefit would it be to him?

Tixy

Did the original loan say you and wife were joint & severally liable for the loan? That is the usual wording on a joint loan agreement. Or did it make it clear that he had loaned you both half the amount and expected you both to pay £500 a month each?

If it was jointly and severally liable and he tries to take you to court then you would have a good case for asking why he wasn't also taking the other joint borrower to court as well.

Do you have anything from him in writing as to how much he believes you owe him currently? Is that half the loan less the repayments you have made? Are you certain he won't try to chase you for the whole of the loan amount less any repayments made to date (so in effect also for the remainder of your ex's 'share')?

Given this situation I would simply state to him that you are paying what you can afford and will increase payments once you are in a position to do so. I wouldn't provide him with any detailed budget or statement of affairs or anything along those lines.

iolanthe07

Did the original loan say you and wife were joint & severally liable for the loan?

Tixy has raised an incredibly important point. If you and your ex-wife were 'jointly and severally liable' then he has to persue her too. I don't think the court would be very impressed if he let her off her half.

Squirrel2000

You owe a creditor a loan. The creditor kindly stood you for start up funds where others may not have demonstrated such support. The backer is no longer your father- in- law but you still owe him a debt. In my view, you should make a payment plan and stick to it. As a former in law myself, I personally would take you to court if you do not pay. The arrangement with your former business partner, you ex- wife, is none of your business. You need to focus, in my view, on your own liabilities and deal with it formally and, dare I say, honourably.