Recovering Loaned Money from a Borrower
You lent money to a friend, a relative, a business partner, or a customer. The repayment date has passed and the borrower is not paying. New York law gives a lender several ways to recover that money, but each one has deadlines and proof requirements that can defeat a claim if you wait too long or start in the wrong court. This page explains how a loan recovery case works in New York, from the first demand letter through collection of a judgment.
Proving the Money Was a Loan, Not a Gift
The lender carries the burden of proving that a loan existed. A borrower who cannot repay will often say the money was a gift, an investment, or payment for something else. You need evidence that both sides understood the money had to be paid back. Useful evidence includes:
- A signed promissory note or loan agreement: the strongest proof, and the only kind that qualifies for the fast-track procedure described below.
- Texts, emails, and messages: a borrower who wrote "I'll pay you back next month" has admitted the debt.
- Bank records: the wire or check showing the transfer, and any partial repayments.
- Witnesses: anyone who heard the borrower promise to repay.
An oral loan is enforceable in New York if it could be repaid within one year. Under General Obligations Law § 5-701(a)(1), an agreement that by its terms cannot be performed within one year must be in writing. A loan payable on demand or within twelve months does not need a written contract. A loan with a repayment schedule that runs longer than a year does.
The Six-Year Deadline Under CPLR 213(2)
A claim to recover a loan is a breach of contract claim. CPLR 213(2) sets a six-year statute of limitations. The harder question is when the six years begin.
- Loan with a fixed due date: the clock starts the day after payment was due and not made.
- Loan payable in installments: each missed installment starts its own six-year period, unless the agreement contains an acceleration clause and you invoke it, which makes the whole balance due at once.
- Demand note: under UCC § 3-122(1)(b), the cause of action on a demand instrument accrues on the date of the note, or on the date of issue if the note is undated. The clock does not wait for you to make a demand.
Worked example: On March 1, 2019, you lend $30,000 under a signed note stating it is "payable on demand." You never ask for the money until 2025. The six-year period ran from March 1, 2019 and expired March 1, 2025. The claim on the note is time-barred even though you never demanded payment. A lender holding a demand note must sue within six years of its date.
Two events can restart the clock. Under General Obligations Law § 17-101, a written acknowledgment of the debt signed by the borrower starts a new six-year period from the date of the writing. A partial payment made under circumstances showing the borrower recognizes the debt has the same effect. A text message from the borrower saying "I know I still owe you the $30,000" can be enough. We review the borrower's communications for exactly this kind of statement before deciding whether a stale claim can still be brought.
Interest on the Unpaid Loan
If the note states an interest rate, that rate applies until the loan matures. After the borrower defaults, CPLR 5001(a) entitles you to prejudgment interest as a matter of right in a contract action, running from the date the money became due. CPLR 5004 sets that rate at 9% per year. The same 9% rate applies to the judgment after entry.
Worked example: A $20,000 loan was due January 1, 2023 and remains unpaid. Prejudgment interest at 9% accrues at $1,800 per year, or about $4.93 per day. If judgment is entered on January 1, 2026, the borrower owes $20,000 plus $5,400 in interest, plus costs and disbursements.
One exception applies. Since April 30, 2022, CPLR 5004 caps interest on judgments for consumer debt at 2% per year. Consumer debt means an obligation of an individual arising from a transaction primarily for personal, family, or household purposes. If you lent money to an individual who used it to pay personal bills, the borrower may argue the 2% rate governs. A loan to a business, or to an individual for a business purpose, stays at 9%.
Usury: A Warning for Lenders
Before suing, confirm that the interest you charged was lawful. General Obligations Law § 5-501 and Banking Law § 14-a cap interest on most loans at 16% per year. Charging more than 16% is civil usury, and under General Obligations Law § 5-511 the loan is void. The lender loses the interest and the principal. Charging 25% or more is criminal usury under Penal Law § 190.40. Loans of $250,000 or more are exempt from the civil usury cap, and loans of $2,500,000 or more are exempt from the criminal cap under General Obligations Law § 5-501(6). Late fees, points, and other charges count toward the rate. A lender who charged 20% on a $10,000 personal loan should not file suit without legal advice.
Choosing the Right New York Court
The amount owed determines where you file.
| Court | Maximum Claim | Notes |
|---|---|---|
| Small Claims Part, New York City Civil Court | $10,000 | No lawyer required; evening sessions; limited discovery |
| Small Claims, city courts outside New York City | $5,000 | Same informal procedure |
| Small Claims, town and village justice courts | $3,000 | Same informal procedure |
| New York City Civil Court (regular part) | $50,000 | Full procedure, discovery available |
| County Court | $25,000 | Available in counties outside New York City |
| Supreme Court | No limit | Required for large loans; CPLR 3213 motions commonly filed here |
Venue is proper in the county where either party resides under CPLR 503(a). A promissory note may also contain a venue clause that controls.
The Fast Track: CPLR 3213 Motion for Summary Judgment in Lieu of Complaint
If your loan is documented by a promissory note or another "instrument for the payment of money only," CPLR 3213 lets you skip the ordinary complaint and move directly for summary judgment. You serve a summons and a motion with the note attached and an affidavit stating the borrower did not pay. The borrower must appear and oppose the motion by the return date. If the borrower has no genuine defense, the court enters judgment without discovery or trial, often within a few months of filing.
The procedure applies only when the note itself proves the debt. A loan agreement with conditions, or a claim that requires evidence outside the document to establish the amount, does not qualify. A signed note stating "I promise to pay $50,000 on June 1, 2024, with interest at 8%" qualifies. An email chain arranging a loan does not, and that claim proceeds by ordinary complaint.
Collecting the Judgment
A judgment is a court order, not a payment. CPLR Article 52 supplies the collection tools:
- Information subpoena (CPLR 5224): forces the borrower, or the borrower's bank and employer, to disclose assets under penalty of contempt.
- Restraining notice (CPLR 5222): freezes the borrower's bank account up to twice the judgment amount, subject to the exemptions in CPLR 5205 and 5222(i).
- Property execution (CPLR 5230): directs the sheriff or a city marshal to seize bank funds, vehicles, or other property.
- Income execution (CPLR 5231): garnishes 10% of the borrower's gross wages, subject to federal and state minimums.
- Real property lien (CPLR 5203): docketing the judgment with the county clerk creates a ten-year lien on any real property the borrower owns in that county.
A New York money judgment is enforceable for twenty years under CPLR 211(b), and interest continues to accrue the entire time. A borrower who has nothing today may inherit property, buy a house, or get a better job in year eight.
Steps to Take Now
- Gather the note, the bank records showing the transfer, and every message about the loan.
- Calculate the accrual date and confirm you are inside the six-year window.
- Send a written demand stating the amount, the due date, and a deadline to pay. A written response from the borrower may restart the limitations period under GOL § 17-101.
- Check the interest rate you charged against the 16% cap.
- Decide between small claims, a CPLR 3213 motion, or a plenary action based on the amount and the documents.
The Borrower Stopped Answering and the Money Is Still Unpaid
We review your note, messages, and bank records, calculate the exact limitations and interest dates, and tell you which court and procedure will get a judgment fastest. Where the loan is documented by a promissory note, we file a CPLR 3213 motion and move to judgment without a trial. Once judgment is entered, we locate the borrower's bank accounts, wages, and real property and enforce under Article 52 until the debt is paid.
You can contact the Law Offices of Albert Goodwin by phone at 212-233-1233 or by email at [email protected].
About the Author
Albert Goodwin Esq. is a licensed New York attorney with over 18 years of courtroom experience helping creditors and businesses collect debts, enforce judgments, and recover money owed to them across New York City and its suburbs. He can be reached at 212-233-1233 or [email protected].
