Legal Question in Civil Litigation in Tennessee

Re: A friend gave me money & now claims it was a loan at 5% compound interest.

What you are faced with is not a question which is easily answered by the law. As a matter of law, you are obligated to repay the debt. In Tennessee, you could be forced to repay the principal debt with prejudgment interest at a rate of 10% per annum. This is significantly less than the 5% per annum you are being charged. As a matter of law, I would think that working out a repayment plan and repaying the debt would be the wiser course.

Aside from the law, you borrowed a significant amount of money from this person. Even if he or she has vast resources, you still have an obligation to repay that debt as best you are able. Typically, individuals do not have the built in mechanisms to account for unrepaid debts like some lending companies do. Although the person who gave you the money shrugged it off initially, it seems clear now that he or she needs the funds for some reason. Based on these considerations, you should repay the debt on some type of a monthly plan as quickly as you are able.