Your vs You’re

I can’t believe this. I’m having an adult (at least I think it’s an educated adult I’m talking to) conversation with my friend from high school. I’ll leave his name out to save him embarrassment.

My friend:

I’ll take it off your bill! Your in BYATCH!!!

Me:

And it’s “you’re” in.

My friend:

Nope, what country did you grow up in?

Me:

Are you retarded? When you say “your in”, that means my “in” is ???
When I say “you’re in”, I am saying “you are in”.
Where did you go to college? Oh right…. Geeeez.

My friend:

I believe you are the retarded one. You should learn to speak English like the rest of the country!