A. This section provides resource policies
that primarily apply when the client or spouse is the creditor (lender or
seller) and is, therefore, the owner of a loan agreement, promissory note or a
property agreement. The principal amounts of these items are evaluated under
appropriate SSI or liberalized resource policy.
B. Definitions.
1. Bona Fide Agreement. An agreement which is
legally valid and made in good faith.
2. Negotiable Agreement. A type of agreement
where legal title or the amount of the agreement can be transferred (sold) to
another party.
a) Generally, promissory notes,
loan agreements and personal and real property agreements can be sold to a
third party.
b) An agreement may be
assumed to be non-negotiable if there is a legal bar to its sale.
3. Loan. A transaction in which
one party advances money to, or on behalf of another party, who promises to
repay the lender in full, with or without interest.
a) The loan agreement must be enforceable
under state law and be in writing.
b) A written loan agreement is a form of
promissory note.
4.
Informal Loan. With formal loans (e.g., commercial), there is rarely a question
about whether the loan agreement is bona fide. An informal loan is a loan
between individuals who are not in the business of lending money or providing
credit. An informal loan must be written and is bona fide if:
a) It is legally binding under state
law;
b) It was in effect at the
time of the transaction (money given with no obligation to repay cannot become
a loan at a later date);
c) There
is an acknowledgement of an obligation to repay, with or without interest, by
the lender and the borrower;
d)
There is a plan or schedule for repayment and the borrower's express intent to
repay by pledging real or anticipated future income; and
e) The repayment plan is feasible.
5. Promissory Note. Written,
unconditional agreement where one person promises to pay another party a
specific amount at a specific time (or on demand). It can be repayment for
goods, money loaned or services rendered.
6. Property Agreement. A piece of property is
used to secure payment of a debt or performance of services within a specified
period of time. Other names for property agreements include:
a) Mortgages;
b) Real estate or land contracts;
c) Contracts for deed;
d) Deeds of trust;
e) Personal property agreements, e.g.,
pledges of crops, fixtures, inventory, etc., are known as chattel
mortgages.
C.
Property Agreements Prior to Settlement. A person holding a contract for sale
of real estate (seller or creditor) owns two items until the settlement of the
sale is completed:
1. The real estate, which
is not a resource since it cannot be sold while encumbered by the contract,
and
2. The value of the contractual
agreement.
D.
Determining the Value of a Contract. The status and value of a contract, i.e.,
loan agreement, promissory note or property agreement, must be evaluated to
determine if it is a resource under appropriate SSI or liberalized resource
policy.
Social Security Act
§1902 (r) (2); 42 CFR §435.601(b) (Rev
1994).
