Despite the general rule described in SI DEN01120.220D.3.a, in certain circumstances loan agreements must be in writing. These instances are:
In Colorado, Montana, North Dakota, Wyoming and Utah, a loan agreement that cannot
be repaid within one year must be in writing. This exception only applies if the terms
of the agreement prohibit the borrower from repaying the loan in less than a year.
If, for example, the lender and borrower agree that the borrower will repay the loan
over a period of two years, but the borrower is not prohibited from repayment in less
than a year, no writing is required. Informal loan agreements that cannot be performed
in one year are rare, and should be referred to OGC.
In North Dakota, a loan agreement for a loan of $25,000 or more must be in writing.
In Colorado, Montana, North Dakota, Utah, and Wyoming, an agreement in which an individual
agrees to pay the debt of another person must be in writing.
If these agreements are not in writing, they are unenforceable under state law and
not bona fide. If, however, an oral loan agreement is not in one of these categories
and there was a mutual agreement as to the terms, treat it as enforceable under state
law. Consider whether it also satisfies the remaining requirements in SI DEN01120.220C, to determine whether it is bona fide.