Friend Borrowed $500 and Won’t Pay It Back? Here’s Exactly What to Do

You lent your friend money. Maybe it was $500 for rent. Maybe $2,000 for a car repair. Maybe $10,000 to help them through a rough patch. They said they would pay you back. That was months ago.

Now it is awkward. You have asked a few times. They change the subject, make excuses, or just stop replying. You feel stuck — you need the money but you do not want to blow up the friendship.

Here is the truth: a loan between friends is a legally enforceable debt. You do not need a written contract. You do not need a lawyer. And you do not need to have an ugly confrontation.

Is it actually a debt?

Yes. Under Australian law, if you gave someone money and they agreed to pay it back, that is a loan. It does not matter if it was your best mate, your cousin, or your partner’s brother. A verbal agreement is legally binding.

The only defence they have is to claim it was a gift. But if any of these are true, it was clearly a loan:

• They said “I’ll pay you back” (even in a text message)
• They made any repayment at all (even $50)
• You discussed when or how they would repay
• The amount was large enough that no reasonable person would consider it a gift

One text message saying “thanks, I’ll pay you back next week” is enough.

Step 1: Send a Letter of Demand ($49)

Do not keep texting them. Do not have another awkward conversation. Send a formal Letter of Demand.

This is a legal document that says: “You owe me $X. Pay it within 14 days. If you don’t, I will take it to the tribunal or court.”

It is one thing to ignore a text from a mate. It is another thing entirely to ignore a legal letter with a 14-day deadline and a warning that you will file a claim.

The letter does the hard part for you. No confrontation. No drama. Just a professional document that makes the debt real and payable.

Step 2: If they don’t pay — take it to the tribunal or court

If they ignore the letter, you file with your state’s tribunal or court. A loan is a debt claim, and you do not need a lawyer:

• New South Wales — Local Court: a personal loan is a debt claim for the Local Court, not NCAT. Small Claims Division up to $20,000; General Division over $20,000 up to $100,000. You start with a statement of claim through the NSW Online Registry.
• Victoria — VCAT: Civil Claims List. File at vcat.vic.gov.au.
• Queensland — QCAT: minor civil disputes up to $25,000. File at qcat.qld.gov.au.
• Western Australia — Magistrates Court: minor case claims up to $10,000; general procedure claims up to $75,000. File at magistratescourt.wa.gov.au.
• South Australia — Magistrates Court: minor civil actions up to $12,000; general claims up to $100,000.
• Tasmania — Magistrates Court (Civil Division): claims up to $50,000.
• Australian Capital Territory — ACAT: civil disputes up to $25,000.
• Northern Territory — NTCAT: small claims up to $25,000.

Filing fees change each 1 July; check the current fee on the tribunal’s or court’s website before you file.

You bring your bank transfer receipt, the text messages, and the Letter of Demand you sent. The tribunal member or magistrate reads the evidence and makes a decision.

What happens at the hearing

It is not a courtroom drama. Small claims hearings are less formal than other court proceedings. You will be asked about the loan, and so will your friend: “Did you borrow this money?” and “Why haven’t you paid it back?” Your friend either admits it or tries to argue it was a gift — your bank transfer and text messages are your evidence that it was a loan.

If the tribunal or court orders them to pay and they still do not, you can enforce the order through the court — garnishee their wages, freeze their bank account, or send the sheriff.

But what about the friendship?

Here is the thing: a real friend pays their debts. If someone borrowed your money and is ghosting you, the friendship is already damaged — by them, not by you.

A formal Letter of Demand actually makes it less personal. It turns “you owe me and I’m angry” into a professional process. Many friendships survive this because the letter gives them a face-saving way to pay without the emotional baggage.

How much can you claim?

There is no minimum. You can send a Letter of Demand for $200 or $200,000. If you need to file, the limit depends on your state and the forum (see the list above).

Do it now — $49

Claim Done drafts your Letter of Demand for $49. Tell us who owes you, how much, and when you lent the money. We draft a formal demand citing Australian contract law and send it to them. Done in about 5 minutes.

No confrontation. No lawyer. No drama. Just a professional letter that makes your debt real and payable.

If they do not pay after 14 days, we prepare your Tribunal Application ($97), with a witness statement outline, to start your claim in your state’s tribunal or court: a Local Court statement of claim for a New South Wales debt, or an application to VCAT, QCAT or your state’s forum.

You approve it before anything is sent.