Can my friend charge interest at the rate of 8-10% legally?

Charging an interest rate of 8-10% (yearly) is not an exorbitant rate of interest and it is an acceptable rate of interest. So yes, your friend can charge this rate legally. 

Now if you are unable to pay then the option available to you is to declare yourself as bankrupt / insolvent. You can either wait for your friend to initiate a civil suit and then declare bankruptcy or you can yourself file for bankruptcy.

The first step towards filing for personal bankruptcy would be to approach your local civil court and file a suit for personal bankruptcy. Once this is done, you would also need to submit a petition with the district court. On filing the petition, an officer would be charged with inspecting all the assets and collecting all of them except for the ones that are exempted by law.

Once collected, the court would then proceed to lock down all assets until they are sold, after which the creditors would be paid back the due amount from the proceedings.

 
Disadvantages of declaring yourself as insolvent are:

a. Social stigma to an insolvent.

b. Cannot become a partner of any firm or the director of a company.

c. Cannot enter into legal contracts.

d. The insolvent may not get credit until he is discharged.

e. Cannot contest elections or hold public offices.

Kindly contact us for any further details and action.