loan to his parents

[ilovesun]

Hi,

If we've lent his parents 50k before the sparation date, should this debt be calculated as both of our liabilities, or just his.


Thanks

[Mess]

did the money come out of his account or a joint account?

[ConfusedInAB]

Wouldn't that be an asset, not a liability? Because they owe you $50k, not the other way around. This is money you are hoping/expecting to get back in the future, right?

C

[dadtotheend]

That's what I thought.

I think what Mess was getting at is whose asset it is on the financial statement, either jointly or one spouse only.

[Rioe]

Well, I'd call it a liability, because odds are you aren't going to see any of it back. So do your best to put it in his column as one of HIS assets, and then he can worry about doing the collecting. I suppose it depends how well you get along with your soon to be ex-laws, but you may not want to ever have to deal with them again after things are signed.

[ConfusedInAB]

From a financial perspective though, I don't think it's a liability. Worse case scenario, I think it would be a $0.00 on the balance sheet, if you write it off as unrecoverable.

I would sure agree that if you can put it as an asset on HIS side of the list, you'll be much further ahead! Regardless of any interest that may be owed in the future.

C

[dadtotheend]

It's an asset, period.

And ConfusedAB is right, putting it on his financial statement as his sole asset is worth $50K x 50% = $25K to you on equaliztion.

[ilovesun]

Thanks everybody for the prompt reply.

We did not have any cash at that time, and the $50k was borrowed from our Line of Credit from the joint account, and send to his parents.

Now the 50k is being calculated as debt on both of us. so we both got 50% of it, which means I have to bear $25k debts for the money never got repaid by his parents.

For him, his parents money like his money, they are quite close, so repay him is not a issue, however, for me, I don't think his parents will ever pay my 50% portion back to me.

So, do I need to have the whole amount calculated as his asset since they are his parents, not mine? and if so, how should I proceed or it's a mutual consenses.

Thanks

[ilovesun]

and what if they refuse to pay back?

[ilovesun]

did the money come out of his account or a joint account?

it was from a joint Line of Credit account.

[ilovesun]

Wouldn't that be an asset, not a liability? Because they owe you $50k, not the other way around. This is money you are hoping/expecting to get back in the future, right?

C

I'd love to get it back, but I highly doubt my 50% will ever be paid back.

[ConfusedInAB]

In an ideal world, his parents would find some other source of money (other siblings?) and pay the $50,000 back to pay off the line of credit. Because you are owed $50k, and owe $50, it's a net balance of $0.

Plan B would be for him to take on the debt and loan for a net balance of $0. But as far as I know, he has no obligation to do that, as it's joint assets/liabilities. So unless you can get him to agree to it, there's no reason for him to do that.

I have no experience how a judge would look at it, if it came down to a court issue... I'm not sure how much common sense comes into play in these things.

Do you have any sort of legal document saying they owe the money back to the two of you? Because if you don't, it would likely become a nasty collections issue if they chose not to pay you back.

Basically, it's going to come down to the relationship you have him and his parents, I think... So suck up, prepare to compromise on other things if the $25k is important to you, and hope for the best.

C

[ilovesun]

In an ideal world, his parents would find some other source of money (other siblings?) and pay the $50,000 back to pay off the line of credit. Because you are owed $50k, and owe $50, it's a net balance of $0.

Plan B would be for him to take on the debt and loan for a net balance of $0. But as far as I know, he has no obligation to do that, as it's joint assets/liabilities. So unless you can get him to agree to it, there's no reason for him to do that.

I have no experience how a judge would look at it, if it came down to a court issue... I'm not sure how much common sense comes into play in these things.

Do you have any sort of legal document saying they owe the money back to the two of you? Because if you don't, it would likely become a nasty collections issue if they chose not to pay you back.

Basically, it's going to come down to the relationship you have him and his parents, I think... So suck up, prepare to compromise on other things if the $25k is important to you, and hope for the best.

C

Thanks for your reply ConfusedInAB.

My total debt(line of credit), after the devision and all calculations, will be 70k in debt. and $25k of it is the loan to his parents (50% of the total loan), my logic is that my real debt should be 70k - 25k = 45k.

It looks like I can either

1. try to have it counted as his assets
2. get his parents to pay back out of good will.

right?

Thanks

[ConfusedInAB]

I'm probably speaking of things I don't understand... But it seems to me that there's no "rules" about who gets what debt or what assets.

Because the $50,000 in debt and $50,000 owed to you (as a couple) balance out, it comes out as a net balance of $0 (in terms of accounting). It's like owing $500,000 on your mortgage, but because your house is worth $500,000, it ends up not being an asset or a liability. You could sell the house off, pay off the mortgage, and it wouldn't affect either of you financially.

As far as I know, all you can do is ask him to take responsiblity for the LOC and collecting the money from his parents. It shouldn't cost him anything, and he's much more likely to be able to collect than you are. But it may depend on your relationship with him, and if you have something else you can negotiate with.

But I still think the ideal situation is for his parents to somehow come up with the cash to pay back their debt, which can go directly to the LOC. This would be the equivalent of selling the house to pay off the mortgage. Unfortunately, I doubt anyone is going to buy the debt from your in-laws.

In your calculations, you indicate that your share of the debt, after division of assets, is $70k. This means that as a couple, you owe $140k more than you have equivalent assets, including the money his parents owe you. If that's correct, then your share of the debt is $70k, not $45k. If you're include the asset in the division calculations, you need to share the liability as well.

I should probably shut up and let the experts chip in...

C

[dadtotheend]

Consult with an accountant who is well versed in family law.