I want to thank you all again for your help and advice.
For those who said to treat it as a learning experience, it's been truly remarkable how I've been able to learn and grow through this whole experience.
For those who said it was insignificant amount of money, it actually is, and so is the cost of small claims process. Money itself is not that significant.
For those who said he'd never show up at court, you were right. But not for the reason you think.
We're now past the second repayment, all voluntarily and ahead of schedule.
We didn't have to go to court because he reached out upon receiving the lawsuit. Suddenly there was an explanation for every single time I'd tried to reach him. I actually didn't even realize he'd reached out because that's how pessimistic I was. But yes he was definitely very motivated to want me to call him and for us to get this debt settled.
He's repaying principal, court costs, and interest on everything at 8%, the maximum rate allowed in Kentucky. But more importantly than the money, we are on positive speaking terms, reconnected after years, and worked together through this. I have been able to let my feelings of worry and anxiousness over this go. I don't have any ill will anymore.
Here are some further notes on the process/challenges:
(1) For the registration address, I simply used the address of one of my other friends. That second friend was okay with me using their address and promised to forward me any mail received. I only had to use this in two places - the eFile registration and the billing information. For the small claim itself I used my Canadian address and just put the province and postal code in the second line of the address field. I never received any mail to his address, and the summary of the settlement was mailed to my Canadian address (which I used on the claim itself) without any issue.
(2) It's important to note that the court charged me (and ultimately my friend) extra fees which I would consider "hidden" and deceptive. In addition to the $30 USD "Civil Filing Fee", 10c/page for printing the document, and the cost of service by registered mail (under $20 as anticipated), there were extra charges including:
(a) "Access To Justice Fee" of $10 USD.
(b) "Court Facilities Fee" of $10 USD.
(c) "Library Fee" of $1 USD.
(d) "Court Tech. Fee" of $20 USD.
(e) A % fee from their payment processor.
Obviously, every court will be different in what fees they charge and they have a lot of expenses. My main issue is that these weren't upfront. I only managed to find these fees by uploading a test PDF file and proceeding all the way to the end. Most people without uploading the test PDF wouldn't find these fees until after notarization and going through putting together the full claim. The end cost was roughly $100 USD + the notarization below, which was more than double what I expected from research on publicly accessible information.
(3) In addition to the above, I had to get the small claim document notarized. (Signed under oath in the presence of a trustworthy person.) Because it was international, that had to be someone called a notary or notary public. In Canada we have a lesser rank of official called a commissioner of oaths, but there are not sufficient for an international document. You can find notary services for cheap on sites like Kijiji (Canadian site similar to Craigslist or Facebook Marketplace.) This can cost $30-$50 CAD plus your time to shop and visit the lawyer.
(4) I will also note that, had I opted for service by Sheriff, the actual cost would have been $70 USD, not the $40-$50 as advertised publicly on the websites. (This ended up not being necessary.)
(5) In terms of the court date, it was set up to happen roughly 30 days from when I filed. So, this was much faster than anticipated. This surprised me.
(6) Service on the defendant was very fast - in only a couple of days via registered mail. (Again, do remember to check for responses.)
(7) Settlement doesn't mean that the other party has to pay you the full amount right away. You can work out an alternative. In my case, my main reason to make the loan in the first place was to help him out and I don't have any rush to collect the money so I just let him set the payment amount that he could afford every 2 weeks to line up with his paycheque. I literally let him dictate the payment terms. A great strategy that helped is to put an amount greater than you expect to collect in the lawsuit complaint. Then in negotiations you can be generous and accommodating and still come out ahead with a fair arrangement.
(8) Usury law never came up at all because the defendant actually didn't have any copy of the contract and I never had to present it at all because we settled. But my understanding is that under Kentucky law, interest is forfeited only if the lender "knowingly" exceeds the rates in the statutes. Now, proving intent can be a tricky area of law, but I had no idea about what the statutes were at the time, and I believed the rate I was charging was less than the overage charges being charged by his bank, so I don't believe it could apply. My contract did also specify all debts as due to the maximum amount legally enforceable. I would have asked the court for the maximum legally enforceable rate of 8% which is the only legally valid interpretation of our original contract, and this is specifically the rate I put in the claim which I filed with the court. But, as I said, I didn't have a chance to test any of this in court. The interest is a pretty significant part of this case, and it's possible I could have lost the opportunity to get any interest at all if things had worked out differently.
(9) Another note is that there are some commercial lending rates which are higher under Kentucky statutes (up to 3% per month). However, these can't be enforced in small claims court in Kentucky, and it's my belief that you also have to be a commercial licensed business to charge them. In addition, these statues expressly state that all computations have to be done and presented upfront, which I didn't do. So these are only useful as comparisons against the 8%, making it look like a really good deal in negotiations (which it honestly is given how risky lending money is).
(10) I didn't have any trouble at all convincing the court to allow remote attendance given my location. You just have to ask and I believe most courts are equipped to do this since Covid. I eFiled everything and never had to visit Kentucky at all. We didn't even have to go to court because we settled, but this would have been a Zoom call on my end. However, the courthouse said that this was given rarely. The defendant asked and they were not granted a similar Zoom ability since it's their local courthouse.
(11) There are 15 years to collect on judgements. I built in allowance for missed payments into the repayment agreement, which could be important because unexpected things may come up in people's lives and we don't want to have to be heading back to court because of a missed payment or two when extenuating circumstances happen. What I did was state that he can miss up to the number of payments he made in a row previously, up to maximum of 5. So that means as long as he makes 5 payments in a row, he's good for up to 2.5 months if he needs that time. The amount due has the 8% interest built in so I don't actually care all that much when he pays. I'm sure others may not be as flexible but this works fine for me and he's been cooperative in the whole process so far - so the extreme flexibility is just another reward for him for settling with me. And so far, both payments have been ahead of schedule.
Overall, I'm extremely glad I went through with this. I really had no idea how much this was weighing on me until it was lifted and being resolved. And sure, maybe I could have just accepted not being paid back as an alternative - but I don't ever think I could have seen that any differently from giving up.
To be clear, I'm not saying this is the right path for everyone else by any means. The specifics of my circumstance involved someone who was more or less ignoring our agreement, and so happened to have been rebuilding their lives in the years since the debt was established. It totally occurred to me all kinds of scenarios like he was in jail, homeless, dodging service, etc... and I still think it makes sense to expect to lose and plan for the worst. I once again want to thank everyone here for your help in this ultimately successful outcome.
