SI ATL01120.220 Informal Loans (RTN 22 – 02/2011)

A. Background

The purpose of these instructions is to provide updated information about informal loans based on a review of current law and regulations by the Office of General Counsel. The instructions provide guidelines for identifying a bona fide informal loan, oral or written, that is binding under State laws in the Atlanta Region.

B. Proceeds of an Informal Loan

A loan is a transaction whereby one party, the lender, advances money or goods to, or on behalf of, another party, the borrower. The borrower agrees to repay the debt in full. Contracts negotiated between individuals and commercial lending institutions are formal loans. An informal loan is one negotiated between individuals and the lender is not a commercial lender.

If a bona fide loan exists, the income received is not income for SSI purposes. (See SI 01120.220)


Oral Loans

Six of eight states in the Atlanta region require any contract to be in writing that cannot be performed within one year from the date of the contract, i.e. Alabama, Florida, Georgia, South Carolina, Tennessee and Kentucky.


North Carolina does not require a fixed time within which an oral loan must be performed; rather North Carolina specifies that money lent pursuant to a contract that fails to specify a time for repayment is “payable within a reasonable time.”

The State of Mississippi requires the contract to be in writing if not performed in fifteen months from the date of the contract.

 An oral contract that, by its terms, precludes the possibility of repayment within one year (fifteen months in Mississippi) must be in writing. 

In some cases, an oral contract that does not preclude the possibility of performance within the time specified by each State could be enforceable. In addition, full performance within the time is not required, but rather performance within the time specified must be possible. In other words, if a person must pay $1,000.00 back in twelve months but for unforeseen circumstances takes an additional 3 months to pay this does not negate the establishment of the cash loan. It is reasonable that the $1,000.00 owed is payable in twelve months and could have been paid back.


Written Loans – An oral agreement that specifically requires performance, which will exceed one year, or fifteen months for Mississippi, must be in writing.

Any informal written loan agreement is bona fide and legally binding in all states in the Atlanta Region if it includes the following components:

  1. 1. 

    Borrower’s acknowledgment of obligation to repay (with or without interest), and

  2. 2. 

    Timetable and plan for repayment (e.g., borrower plans to repay the loan when they receive future anticipated income), and

  3. 3. 

    The borrower’s express intent to repay by pledging either real or personal property or anticipated income.



For formal loans (i.e. commercial loans), follow the instructions in (SI 01120.220E).

If an SSI claimant alleges an oral loan agreement, obtain statements from all parties involved (SI 01120.220DSI 01120.220G). Use the SSA-2854 or SSA-2855 to document informal loans.


These forms do not establish a “written” loan. The forms document the parties' allegations about the loan.

The loan is not bona fide if the makers or parties knowledgeable of the loan do not provide statements; or if one or more of the components in SI ATL01120.220B.1, – SI ATL01120.220B.3 above are missing. A loan not considered bona fide is income and not a resource.

A valid loan can also exist where the lender advances money or goods directly to a third party on the borrower’s behalf. The borrower is still liable to the lender even though the funds did not actually change hands through them.

Two examples illustrate this concept:

Example 1 - The SSI recipient’s parent advances them $3,000 for an automobile and the recipient agrees to repay the parent at a rate of $100 a month. If the SSI recipients name is on the automobile title and the parent gives the money directly to the automobile dealer, it is still a bona fide loan.

Example 2 - The SSI recipient owes the electric company $100. The claimant must pay the bill immediately to avoid disconnection. Since the recipient does not currently have the funds, the recipient’s sibling pays the bill with the understanding the recipient will repay the sibling at a rate of $20 a month from the recipient's SSI check.

C. Informal Loans and Resources

When the SSI recipient loans money to someone else, the procedures in SI 01140.300 apply. An informal loan is negotiable, legally binding and a resource for SSI purposes under all states in the Atlanta Region, if the loan meets the conditions outlined in SI 01120.220.


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SI ATL01120.220 - Informal Loans (RTN 22 – 02/2011) - 05/29/2024
Batch run: 05/29/2024