SI NY01120.220 C Policy- Informal Loans
POMS SI 01120.220C. says that an informal loan, oral or written, is bona fide if it is binding under Sate law and includes: the borrower's acknowledgement of his obligation to repay; a schedule and plan for repayment; e.g. borrower plans to repay when he receives anticipated income in the future. borrower's express intent to repay by pledging either real or personal property or anticipated income.
B. POLICY—STATE LAW
State law requires the following to determine whether the informal loan (either oral or written) is legally binding:
1. NEW JERSEY:
There must be agreement between both lender and borrower. The borrower must agree to repay the money (i.e., it cannot be a gift). Although a specific repayment schedule is not required, it should be clear how much money is owed and that the borrower will repay the money. It need not be in writing.
2. NEW YORK:
There must be an agreement between both lender and borrower. The borrower must agree to repay the money (i.e., it cannot be a gift). Although a specific repayment schedule is not required, it should be clear how much money is owed and that the borrower will repay the money. It need not be in writing, unless the agreement specifically provides for repayment to begin beyond one year from the date of the agreement. If the agreement will begin to be performed beyond one year, it must be in writing.
NOTE (the following applies to both New Jersey and New York):
Statements such as “when I return to work”, “when I receive SSI” are possibly performable within one year, even though there are no fixed terms and are therefore acceptable.
Statements, either oral or written such as “when I win the lotto” would not be enforceable since lottery winnings cannot be considered anticipated income per SI 01120.220C.
Ms. Smith filed for SSI in June 2002 and has an outstanding loan with an oral agreement to repay her father at Christmas 2003. This requires a written agreement to be enforceable in New York since by its terms it will not to be performed within one year from the date of the agreement. It is enforceable in New Jersey
Mr. Jones filed for SSI in June 2002 and alleges receiving $50 weekly in loans from his parents. The repayment agreement was oral, and he signed a 795 stating that he will begin to repay the loan from his SSI checks when his children graduate from college. The projected graduation dates of his children are in 2004. This requires a written agreement to be enforceable in New York, since by its terms, it will not be performed within one year. It is enforceable in New Jersey.
Ms. Williams has an outstanding loan of $5000 from her friend and has an oral loan by which she agrees to begin repayment when she begins receiving SSI. This oral agreement is binding in both New Jersey and New York because it is possible the person might receive SSI within one year. This is true even if it will take more than one year to repay the loan and there are no fixed terms.