Failure to pay back debts, especially substantial ones, can be an awkward topic even amongst the closest of friends. To reduce any eventual difficulties in claiming back what you lent out, you should always take note of who the borrower is and know where you can take any future claim.

What is the first step in recovering your Debt?

First, it is always best to try and approach the debtor on friendly terms and ask them to repay the money. If they do not respond to your repeated demand, you might want to seek the assistance of a lawyer who would assist you in sending them a Letter of Demand.

You can find out more about Letters of Demands in the following article:

Can I sue them and make them a Bankrupt?

If the person is an individual and not a company and he or she borrows S$15,000.00 or more, then you may be able to bring about a case of bankruptcy. However, this might be an extreme measure and should only be considered in extreme situation where the debtor is simply not willing to repay the debt but still has money and assets under his name.

How Can An IOU Help?

In the process of your case, evidence may be needed to determine the success of your claim. This may include proof that you lent a certain amount of money to your friend with the clear expectation of repayment. Such proof may be presented in written form, which is essentially an IOU or a promissory note. You may thus want to draft a promissory note or an IOU before you lend your money.

What is a Promissory Note?

A promissory note is a more formal document that specifies the details of the loan. It takes note of the amount lent out and the debtor’s identity like an IOU would, but also goes a step further. It would typically detail:

  • Action(s) required for the repayment of debt
  • Any liability facing the borrower
  • Any consequences should the borrower fail to repay

If you believe setting these details in advance would be better, it would be advisable to consult a lawyer on what is achievable and recommended when drafting a promissory note.

What is an IOU?

An IOU is an informal contract setting out the necessary details of a loan and may be used as evidence of a debt of money or other products lent.

If a large amount of money is involved, you may wish to seek security or collateral on the loan and include this explicitly in the IOU. For instance, you may wish to claim your friend’s assets as repayment should he be declared bankrupt. Please contact a lawyer if this is something you wish to set up, especially as securities can be particularly complicated.

In brief, it should contain:

  • Identities of all parties involved
  • Frequency of payment (if the debt is to be paid by installments)
  • Date of Payment
  • Method of payment
  • Any interest (explained below)
  • Any security/collateral

How Do I Write an IOU?

While informal, a simple scrawl on rough paper would not be enough. The following details should be written down on the document.

  • Your Name
  • The Debtor’s name
  • The amount of Money lent
  • The items loaned
  • When the Money or the Items should be returned
  • Is there any interest charged
  • Each party’s signature
  • Each witness’s signature.

While it may appear that an IOU is easy to draft, it is important to note that essential details can be easily left out and this may make recovering.

Can I Charge Interest on the Debt in Singapore?

It is possible to charge your friend interest, so long as you follow these guidelines.

You will need to prove that you do not run an unlicensed money lending business. Unlicensed money lending is prohibited under the Moneylenders Act (Cap 188), and section 3 of the Act states that “any person…who lends a sum of money in consideration of a larger sum being repaid, shall be presumed, until the contrary in proven, to be a moneylender.”

It is also vital that both of you, the lender and borrower, agree on the amount of interest to be paid. This should be included in the IOU to make it clear that the borrower was aware of the amount of interest to be paid. A template for such a declaration could be: “I agree to an interest rate of X% or the maximum allowed by law…”

As the Moneylenders Act and Moneylenders Rules 2009 only state the maximum chargeable interest for licensed moneylenders, such restrictions would not apply to you. As such, the amount of interest will be up to you and your borrower’s discretion.

How Long Can I Use An IOU as evidence of a debt in Singapore?

An IOU can only be used within six years of a cause of action, or a reason for you to bring your case. Essentially:

  • If there is a repayment date set and the debt goes unpaid past that date, you will have to file a claim within six years of the stated date
  • If there is no repayment date set, the six-year time limit will start from when there is a cause of action

In the second case, there can be ambiguity as to what can be considered a cause of action. Do consult a lawyer to determine when the six-year time limit begins if you are in doubt.

How We Can Help

There is always trust involved in loaning money, service or products to others, and it can be hard when that trust is broken. When claiming your money back, time is of the essence, and having a lawyer stand by you can ensure you stand a fair chance of being rightfully repaid.

That is where we come in. Our experienced and talented team of debt recovery lawyers at I.R.B. Law LLP will always give honest advice in guiding you through your legal proceedings. Contact us at [email protected] or call us at 6589 8913 to set up an appointment should you require our services.

The information contained in this article is provided for general information only and may not reflect current status about applicable law, cases, settlements or judgments. Nothing contained on this website or article is intended to constitute legal advice, nor should it be construed as I.R.B Law LLP agreeing to provide legal services to you. You acknowledge and agree that your use of this website shall not create a lawyer-client relationship with I.R.B Law LLP.

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One thought on “Debt Recovery in Singapore: IOU, You Owe Me but when are you getting paid back?

  1. Chua Eng Hwa 7 months ago

    A year ago in May 2016, I went to a money remittance company, to send money to our relative living overseas. After sending a total amount arount 200k, company did not remit the last 20K. The owner of the shop promised to remit 20K later and agreed to pay 5% per month until the 20k owe to us settled.

    Up to now, the shop owner have been breaking his promises. And the 20k is still outstanding. In October 2017, and agreement was reach and an agreement has been signed with added interest , a total agreed amount of $42,500 to be paid from Jan 2018 to Dec 2018. Now the shop owner is not picking up our phone.
    In this case, how can we recover our money $42,500. Can we have some advise from you?