When a person loans money or other resources it is a transfer of that resource. Promissory notes, loan agreements and property agreements must be reviewed to see if the person received full value for the resource, or if the transfer was uncompensated. The date of the transfer is the date the note, loan or agreement was created or when it became non-negotiable, whichever is later.
How loan agreements are treated for transfer policy may depend on the type of loan and whether the person is the lender or the borrower.
See the following policy for more details:
Customer is the lender:
Promissory notes, loan agreements and property agreements that cannot be sold have no value as a resource, and the amount loaned is an uncompensated transfer.
Loans agreements may be in writing or oral. However, since they cannot be sold, oral loan agreements are all uncompensated transfers until the debt is paid back in full.
Customer is the borrower:
Under Arizona law, oral loans are only legally valid for a one year period. Any payments the customer makes after the one-year period is considered a transfer.
See example Oral loan payments made more than a year after the agreement.
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Term |
Definition |
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Negotiable |
Means the promissory note, loan, or property agreement can be sold. Generally an agreement of this type can be sold when it meets all of the following:
The value is the amount of the outstanding principal balance. |
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Non-negotiable |
Non-negotiable means that there is a legal barrier to the transfer of ownership. If the note, loan or property agreement is not negotiable, it has no value as a resource. |
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Marketable |
Means something that a reasonable purchaser would accept. |
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Outstanding principal balance |
Means the original amount of the note, loan or property agreement, minus any payments made on the principal. |
For more information about loans see MA705R.
Negotiable/Not negotiable
Proof may include, but it not limited to, any of the following:
Court order saying that the resource may or may not be sold; or
Language in the note, loan or agreement document that it cannot be sold, assigned or transferred to someone else.
Written statement from a knowledgeable source that the note, loan or agreement can or cannot be sold.
NOTE No proof is needed that an oral loan is not negotiable.
Terms of an Oral Loan Agreement
For proof of the terms of an oral loan agreement, the person who made the loan must complete a Request for Verification of Money Loaned (DE-231) form. The person who received the loan must complete a Request for Verification of Money Borrowed (DE-230) form.
Unpaid Principal Balance of the Loan
Proof of the unpaid principal balance of a promissory note, loan or property agreement includes proof of the original principal balance and proof of any payments made on the principal.
Proof of the original principal balance includes but is not limited to the following types of documents:
Bank notes;
Bills of sale;
Mortgage contracts;
Sales agreements;
Bank statements; or
Letter from a bank officer.
Proof of payments includes but is not limited to the following types of documents:
Payment books;
Bank or other financial account statements; and
Letter from bank officers that provide the unpaid principal balance or the original balance and all principal payments made.
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Program |
Legal Authorities |
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ALTCS |
42 USC 1396p(c)(1)(I) AAC R9-28-401 and 409 |