Here is an update.
She called me and told me that she is getting a lawyer to collect and the lawyer has promised her 50 cents for every dollar I owe.
The thing is, I don't have any assets worth that money. I will be forced to file for bankruptcy if she files a suit. I don't want to do that because I will be unable to find a job, in case I need to, if there is a bankruptcy on my credit report.
I owe her the money and I really feel bad for not paying it back. I would love to if I could but I can't. I can go around and ask for a little bit of money here and there, doing a second job (which will kill my family life but I gotta do what I gotta do) and I can give her a better deal than 50 cents for a dollar, but then I will have no reserves left to pay the rest of the loan. I will have to ask her to settle the loan for a lesser amount that I owe her. So, here is the question: What do I ask her to write in a letter assuring me that she would settle for a lesser amount and will not come after me for the remaining amount?
First off I sincerely doubt an attorney promised her anything. That's a pretty big no-no as crazy judges do crazy things. Plus any attorney knows the risks of getting a judgement only to have the target of their attack go bankrupt and pay nothing. Furthermore, even if you had some assets, the courts can't randomly sieze assets to pay off a debt. In some cases a lien can be placed against houses/cars. In my experience that isn't terribly common. Your "friend" may be angry enough to do it.
Second, most jobs do not pull credit reports. And in the vast majority of cases, even if you have a bankruptcy it won't impact your candidacy for a job. There are exceptions like certain jobs in the accounting and financial services or even executive level positions. I'm not sure if that applies to you, but keep that in mind.
A bankruptcy is rarely the death sentence people make it out to be. I actually do work in the financial services industry. I have a judgement against me and for a while had very poor credit. (below 575). All I needed to do was explain what and why to HR. No problem. So don't stress yourself out over a bankruptcy unless you know for a fact that you will lose opportunities because of it.
Having to pay off a friend is a little different than some random bank. I don't envy you.