6 months ago, I loaned a business friend $15000 to be repaid as $18,000 in a week. I have a complete contract which also includes the following section regarding lawyer fees for defaulting

“Borrower shall pay all costs incurred by Lender in collecting sums due under this Note after a default, including reasonable attorneys' fees. If Lender or Borrower sues to enforce this Note or obtain a declaration of its rights hereunder, the prevailing party in any such proceeding shall be entitled to recover its reasonable attorneys' fees and costs incurred in the proceeding (including those incurred in any bankruptcy proceeding or appeal) from the non-prevailing party.”

The contract also states that the loan should incur the maximum amount of interest allowed. Additionally, myself and the borrower are located in different states. Is my best bet to get a lawyer and sue? If so, approximately how much should I expect it to cost? How would it work with the requirement for him to pay the legal fees? Do I have the option to take this up via civil complaints? Or is that only for people who are in the same state?

Any advice is greatly appreciated. Thank you all in advance

  • I have edited the tags to reflect the United states even though this is not 100% clear from the question. Please advise if this assumption is incorrecct.
    – ohwilleke
    Jul 11, 2022 at 22:03
  • 3
    Are you certain you haven't run afoul of usury laws here? That's a loan shark interest rate.
    – Tiger Guy
    Jul 11, 2022 at 23:24
  • 4
    That's a cool 1040% APR. No sense having a lawyer look that over first.
    – bdb484
    Jul 12, 2022 at 0:09
  • 3
    Here in switzerland, that is called "Profiteering" ("Wucher") and a crime. If done commercially (as your "business friend" suggests) you could expect up to 10 years in prison...
    – PMF
    Jul 12, 2022 at 7:39
  • 1
    That's not how APR works.
    – bdb484
    Jul 12, 2022 at 20:43

2 Answers 2


Is my best bet to get a lawyer and sue? If so, approximately how much should I expect it to cost? How would it work with the requirement for him to pay the legal fees?

You would ordinarily either hire a lawyer or bring suit yourself in a limited jurisdiction court (the kind that handles misdemeanor criminal offenses and smaller dollar amounts owed, the exact name of the court differs from state to state). You can always bring suit in the county where the debtor resides. If the loan was not for consumer purposes, you could sue in the place where the loan "was made" or in a forum provided by the loan documents (which does not appear to be present), that might be different from the place where the debtor resides.

Usually, you would want to hire a lawyer with offices not too far from the place where you are bringing suit, as limited jurisdiction courts often require in person appearances.

Normally, a lawyer would ask to be paid up front, with you posting a retainer equal to a significant share of the estimated legal fees, called a retainer against which the lawyer would bill until it was exhausted, and would normally bill on an hourly basis. Fees on the order of $1,500-$5,000 wouldn't be unusual.

One factor that would increase the cost would be the fact that your loan is almost certainly at an illegally high rate of interest, and you and your lawyer would have to examine the relevant law to determine the effect of that on the enforceability of your loan, and the correct amount to claim. In some jurisdictions and circumstances, this might make your entitle loan or at least all interest on it and all fees incurred to collect the debt, uncollectible. In other jurisdictions it might just reduce the amount of interest you could recover.

Without this complication, it might have been a matter you could handle on your own. With this complication, you really need a lawyer.

You could probably not legitimately claim the full $18,000 plus attorney fees and costs.

Some lawyers would take a case like this on a contingent fee basis with you only advancing court costs and out of pocket expenses like process serving charged, but they'd typically do so only if they were confident that they would prevail at trial and if they were also confident that the debtor had the ability to pay. On a one-off basis, a contingent fee percentage of 40%-50% would be more common in this situation that the "usual" one-third contingency rate.

"Reasonable" legal fees would be added to the amount you are owed on the loan if the high rate of interest doesn't invalidate this provision. Amounts recovered for legal fees would be paid to you from which you could repay your lawyer whatever you owed your lawyer. In a contingent fee case, usually hourly based fees are awarded and included in the total amount recovered (once the debtor actually pays) and the lawyer would get a percentage of the total collected regardless of what the amount recovered is supposed to be for.

Another option would be to sell your debt to a debt collection firm which would charge you a small sign up fee and then collect a percentage of the debt recovered. The usurious interest rate involved, however, might discourage them from accepting you as a customer or buying the debt.

If the debtor is not collectible with a job and/or real estate with substantial equity, you probably won't be able to find someone to take the case on a contingent fee basis at all, and will probably have to pay an hourly rate.

Do I have the option to take this up via civil complaints? Or is that only for people who are in the same state?

It isn't clear what you mean in these questions. A lawsuit is commenced by filing a civil complaint, filed by you or your lawyer in a court, and this can be done even if you don't live in the same state as the debtor, although it may be necessary to file it in the state where the debtor lives.

But, the government won't supply a lawyer to help you collect your debt in the way that it would appoint a prosecutor to bring criminal charges against someone who committed a crime in which you were a victim.


You should hire a lawyer before you land yourself in jail.

Pretending to be a lawyer -- by drafting the loan agreement or by now representing yourself in court -- is a terrible idea.

Your case presents an excellent example of the danger of acting without knowing what you don't know, as you have overlooked a fact that should be obvious: the interest you're charging is almost certainly illegal.

You haven't specified what jurisdiction you're in, so it's hard to say exactly what the consequences of your mistake will be. In your best-case scenario, you are probably unable to collect any interest at all. It may be, however, that your inclusion of a 1040% APR voids the contract altogether, in which case you may have no recourse to recover any of the funds you loaned.

In your worst-case scenario, though, you are in one of the many states in which usury is a criminal offense. In Ohio, you'd be looking at as many as 18 months in prison. In New York, penalties for usury go as high as 15 years. In California, you could be looking at as much as five years in prison, and your "friend" would also be able to sue you for three times the interest paid on the loan.

So if you're looking for your "cheapest" option, you might consider calling your "friend" and forgiving the loan altogether. If you're looking for a smart option, you should hire a lawyer immediately and see what steps you can take to unscrew yourself.

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