Loans between individuals: what is the importance of an acknowledgment of debt?

To relieve a bad financial situation as to support a particular project, it is customary to count on the financial support of those close to you. However, the friendly or family framework of the debt should not overshadow the risks inherent in lending money.

It is therefore important to protect yourself legally against the risk of non-reimbursement of your debt. Drafting an acknowledgment of debt, in particular, avoids a lot of hassle.

To secure loans between individuals and prevent the risk of litigation, the service invites us to take stock of the importance of an acknowledgment of debt.

What is an IOU?

Acknowledgment of debt is a unilateral legal act by which one person (the debtor) acknowledges owing another (the creditor) a sum of money.

In general, it takes the form of a private deed, that is to say a deed drawn up and signed by the parties themselves. It is also possible to draw up an authentic deed at the notary.

In some cases, for questions of proof, the establishment of an acknowledgment of debt is mandatory. Are concerned the loans higher than 1,500 euros and not having been the subject of a loan contract.

The importance of an IOU: prevent non-repayment of the loan

It may seem incongruous to establish an acknowledgment of debt between individuals… a fortiori between relatives. However, it is risky to lend money without any legal document mentioning it.

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A real guarantee for the creditor, the existence of an acknowledgment of debt has a decisive impact in terms of proof.

Indeed, the acknowledgment of debt is sufficient to presume the remittance of the funds and, therefore, the existence of the debt. It is then up to the debtor who contests the reality of his debt to provide proof of the non-payment of the funds.

This is called rebuttable evidence: the existence of the remittance is established, until proven otherwise.

Furthermore, the debtor cannot attempt to claim that the loan was in fact a gift or a reimbursement.

The establishment of an acknowledgment of debt therefore gives the creditor decisive protection in the event of a subsequent dispute.

How to establish a conforming acknowledgment of debt during a loan between individuals?

The acknowledgment of debt will only deploy its legal effects if it has been established in accordance with the law.

If the use of a lawyer or a notary is not necessary to establish an acknowledgment of debt, rules of form must be respected.

The obligatory mentions of the acknowledgment of debt

The classic conditions for establishing a legal act apply. The document must be dated, and recall the identity of the parties.

To this, article 1376 of the Civil Code adds two specific rules of form.

Thus, for the conformity of the act, the signature of the person who undertakes to pay his debt (the debtor) is necessary.

In addition, the amount of the debt must be mentioned explicitly. Here, two cumulative requirements: the sum must be written by the debtor in figures and in words. This double condition is reminiscent of the rules governing the establishment of a check. This prevents the risk of unilateral modification.

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The acknowledgment of debt must also be established in duplicate: one for the debtor, the other for the creditor.

Finally, if the repayment date is not mandatory, it is strongly recommended to mention it. Indeed, the limitation period is 5 years from the term of the loan. This means that, after this period, the creditor will no longer be able to claim his rights. However, in the absence of a defined term, this period begins to run from the signing of the act!

Acknowledgment of non-compliant debt: what penalty?

An acknowledgment of debt that does not meet the formal requirements does not lose its validity. However, it may lose its effects.

The omission of the only sum in figures is of no consequence, since the law always makes prevail the mention in letters.

Conversely, the omission of the sum in words is problematic. The act retains its validity but then loses its probative force. This means that the obligation continues to exist, but that this act is no longer able by itself to establish the existence of the debt.

The burden of proof is then reversed.

In this case, the act acquires the value of “beginning of proof in writing”. In other words, it is no longer sufficient on its own to prove the debt. The creditor must then provide proof, in addition, of the actual payment of the sum in dispute.

Money loan : how to use the acknowledgment of debt in case of non-payment?

The whole issue of the acknowledgment of debt is revealed in the event of non-payment.

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A creditor provided with an acknowledgment of debt established in accordance with the law may seek justice to assert his rights.

Thus, after a formal notice has remained unsuccessful, the creditor can initiate proceedings for an order for payment before the judge. The competent court differs depending on the case:

• The District Court for a dispute of less than 10,000 euros.
• The Tribunal de Grande Instance for a dispute over 10,000 euros.

Find all the information and recourse in terms of loans between individuals and acknowledgment of debt on the website, or by telephone on 01 55 04 83 00 (non-surcharged number).

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