It sounds like you are unnecessarily sweating this guy! Maybe he has chosen to prioritize his spending needs in a way that does not include paying you back?

my only suggestion would be to try a "quid pro quo" argument with him - you helped him buy his house, now he needs to help you buy yours. if he thinks you're so awful, why did he come to you for help in the first place?

good luck - cheers!

-mistress k

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ill advised racing inc.

>>and believed him when he gave the detailed plan for paying me back<<

Do you have this in writing?

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clm
Nashville, TN
https://twitter.com/ironclm | http://ironclm.typepad.com

got any sympathetic relatives you could use for middlemen? partners/spouses? mom/dad/uncle? might seem less confrontational coming from a 3rd party, but you do need to start making some plans to get this $ back before it's basically gone forever. if the guy's got some bad spending habits and is back in the hole, it'll be years and years before you see the money again.

-mike

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https://lshtm.academia.edu/MikeCallaghan

http://howtobeswiss.blogspot.ch/

X2. If you have any semblance of a contract you might be able to sue in small claims court or put a lien on the house or...??? (IANAL)

I do not believe in lending $ to family, wait, let me correct, if I "lend" money to family, I do not expect to ever see it be repaid, thus I know at the time I hand it over that it is a gift. Any that does get repaid is a bonus.

Good luck, but you might have to let it go (seriously) or let him go (out of your life, seriously).

AP

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"How bad could it be?" - SimpleS

Thanks for all the advice. Lesson learned, and a costly one too. No, I have nothing in writing, except the "-$60,000" on my bank statement a year and a half ago. I emailed and asked him today if we could set up an automatic payment. He says he wants to get a $60,000 mortgage when I get a house, that will go toward my house when I buy one. Problems:

1) He is so far in debt I doubt he could get a $60,000 mortgage. And I never get 30-yr mortgages, only 15, and he has ONLY had 30-year (which is why I had quite a bit of equity built up and he had almost none built up for his current ($400K) house.) He says he wants to do the mortgage "for financial reasons that he doesn't want to go into". What could those reasons be??? He can either pay me, with NO interest, or pay a mortgage??? What's the advantage in the mortgage option?
2) I don't want him owning any part of the house I buy, and isn't that what he would get if he gets a mortgage on a house that I buy?
3) I don't yet know when I will be buying, and it seems to me like he is just trying to put off paying. He knows I have nothing in the works yet, as I may be moving for job reasons in the next year or so. He is paying alimony now, so I wonder if he is trying to stall until that is over. If so, he shouldn't he have told me up front that he couldn't pay until his alimony payments end (~2 more years).

On the flip side, he just spent $1000 on a scuba-diving trip he'll be taking next month. And he eats out every day / night. I've read some about this, and I know it's not right for a lender to be critical of their borrower's spending habits, but I have nickel-and-dimed myself over many years to be able to afford some things. And eating out is one of the biggest sources of unnecessary spending, in my experience.

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The road goes on forever and the party never ends

Whatever you do DO NOT let him take a mortgage out on your property when you buy. If he defaults, even if he gets one in the first place, you are LEGALLY bound by his screw-up. Whoever holds his loan may come after you.... You need to tell him that his proposed approach is not acceptable to you, now.

He may be waiting for the alimony to end, but why won't he just tell you that? Sheesh.

Consider it gone for now and count yourself lucky if it ever comes back.

AP

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"How bad could it be?" - SimpleS

I will preface my post by saying this is not legal advice...

While I'm unsure of the laws of your state, first and foremost, you need to get something in writing from him. You need a promissory note and a deed of trust. You need to file the Deed of Trust in the real property records of the county where the property is located. This will give you the right to foreclose. However, as the owner of the second mortgage, you would have to pay off the first mortgage if you would ever attempt to foreclose. Do you know anything about the original transaction? if not, you could probably get the name of his lender from the real property records. I'm assuming that whenever he closed on the house, he didn't disclose where this money came from OR he said that it was a gift. Unless he disclosed that this was a loan, this is technically mortgage fraud. He would be in violation of his mortgage and his lender could foreclose. Likely, not really - but it could be worth a threat.

Again, do not let him get a mortgage on your property. As an initial matter, no bank is going to do this. Seriously, why would a bank take your property as collateral for his loan? That doesn't even make sense. You'd have to agree to that. AND DON'T. if he defaults, you are on the hook for it. If he is going to do a personal loan or a second mortgage on his property, then take the money and run! Then, his poor financial choices won't impact you.

I second the request for another family member to intervene in the situation. Surely there are others in your family that knew about the situation.

Take this as a lesson for why you don't lend money without a promissory note. Because of the amount of money, you don't even qualify for an oral agreement/contract. You need to strong-arm him into signing a prom note. without a written agreeement to pay it back, the money is a gift...

Good luck! Let me know if you need a sample promissory note. I can probably find one for you.

THIS!

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DISH is how we do it.

Just to add that if he thinks the $60,000 was a gift then it's above the $25,000 interfamily "gifting" amount so he should have paid taxes on that money. Might be worth "threatening" him with that. If it really is a loan then you should be charging interest on that loan (which is how you could prove to the IRS that it wasn't a gift). Maybe give him a choice to sign a loan agreement and abide by it or tell him you'll alert the feds to the unreported "gift" on his income tax return.

Please realize that I'm not attacking you when saying this but you need to question why you would loan anyone - family or otherwise - this much money and then require that they pay you back for less then you would make in the open market. Using rough figures as an example, at $600 per month payback it would take him 8+ years to pay you back. Alternatively, using the rough "rule of 7s'" which basically says that money well invested doubles every 7 years, you could have $120,000 8 years from now (give or take market flucuations). So in one scenario you get your original money back and in another you double your money. At the very least the loan should have included interest so that your money is 'growing' while it's 'invested' with this family member.

Listen, you're in a shitty situation and he's obviously pulling low jabs to avoid discussing the actual matter at hand. I have no patience for people screwing with my hard earned money so I'd say it's time to start pulling any legal angles, like threatening to alert the IRS to this 'gift,' you can.

Edited: In re-reading this I realized that this makes me sound very money-grubbing. What I meant was that in this type of situation, where someone wanted to avoid paying PMI and it's not someone who has a life-threatening medical emergency or is facing foreclosure then you should approach this situation as a true investment. In family emergencies, foreclosures, etc it's another matter entirely...

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http://smallfoodbiz.com
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Money Grubber :-)

You are spot on. FWIW, I don't think you sound like a money-grubber. When it comes to money, family, and friends do not mix well. When money is involved, it is always a business transaction.

Interesting note about the tax consequences. I know the real estate side but not the taxation side of the transaction! Thanks for teaching me something new.

Oh, isn't there a way that she can "forgive" the bad debt and take it as a loss on her taxes? Or, is this just for companies? Wouldn't he have to take the debt write-off as income too? Once again, I'm not a tax lawyer...

Actually I realized that I misspoke - a couple can 'gift' $22K per year tax free to another individual but if it is just the OP and not OP and legal spouse/partner then the IRS gift limit is $11,000. In which case Bad Relative is significantly over that limit.

I'm honestly not well versed enough in tax law to know about whether the bad debt can be written off on taxes. I assume if it's seen as an investment gone bad (ie - he goes into forclosure, etc) then it could be but I think the IRS would question why the asset (house) was still solvent and this was being written down as a loss on taxes. Seems like it might just draw the attention of the IRS which is not something you ever really want since an audit ranks up there with root canals. But again, I am not nor do I pretend to be a tax attorney. Also, if you can write it off as bad debt then that's money the OP will never get back.

The key, it appears, is getting that promissary note. Technically it appears that as of right now there's no legal reason why this guy should pay the OP back and he can wander off happily into the sunset with that $60K jingling in his pocket so he really needs his hand to be forced and get a promissary note so that more options for collecting on that money is available to the OP.

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http://smallfoodbiz.com
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Actually, its the giver of a gift over 13,000 (double for couples, and indexed for inflation) that needs to file a gift tax return. No gift tax will be owed but reporting is required and it eats up part of the 5 million (right now) estate tax exemption. Receiver never owes tax on a gift.

Personal bad debts can be written off as a short term capital loss when they become totally worthless. If the IRS challenges it, you would need to show that there actually was a loan... You should be reporting interest income to support that.

60k / more than a year is above the limit for an oral contract, so you need to get him to sign a promissory note. Without that, its a gift and he's in the clear as far as the law is concerned. Its a little better if you can get him to sign a note. With interest; the IRS can and does impute interest income (taxable to you) for below market loans- I think their minimum rate is around 4-5% for long term loans right now. Draw up an amortization schedule and get him to stick to it. If there isn't a definite due date, then how do you know when he's in default? I don't know how it works, but there's a way to have the note secured by his property... if you do that he would be able to deduct the interest he pays you as mortgage interest.

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"When the going gets tough, get going!"

wow - not to be all doom and gloom about it, but i think your relative might have some serious problems going on here. $60 000 is a TON of money, and he's blowing it off and not wanting to talk about it? plus, the tidbits i'm hearing from you - too much house, alimony, scuba vacation - suggest some disordered spending and behaviour and a guy who's starting to freefall a bit. is there any chance he's got gambling problems, addiction problems, etc? is there a chance he's also quietly borrowed money from other family members and you're all in the dark?

like the others, i'm very much a family-first kind of person, and i'd gladly offer up a kidney the second they needed one. but it sounds like you're being taken advantage of and being blown off, and you have every right to be very insistent about this - it's a lot of money, you've worked hard for it, and you've got some important plans for it!

-mike

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____________________________________
https://lshtm.academia.edu/MikeCallaghan

http://howtobeswiss.blogspot.ch/

My bad - I stand corrected by someone who is much more knowledgeable!

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http://smallfoodbiz.com
</blatent self-marketing>

Loaning money to family members is a tough one. Fell for you b/c I received the same kind of response from my cousin when he stopped paying. He has done this to everyone in our family dumb enough to participate. The hard thing is cutting them off, but it made him grow up. He came begging to me with nothing and I told him he had sewn his seeds and was reaping the crop. He lost his home, car and everything. Ended up getting a job and low and behold, he is happy and has all he needs.

I would have zero reservations about telling this family member to go pound sand, sadly he is telling you how much you will get back if you listen carefully:(

With the amount of money you are talking about, I would spend a few hundred dollars and speak with an attorney in your area who knows the laws of the state and what your options are.

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clm
Nashville, TN
https://twitter.com/ironclm | http://ironclm.typepad.com

I would definitely talk to a lawyer. It's sad that this is what the world has come to that even your own family is screwing you over. I had the same situation with an uncle and it drove a wedge never to be repaired. You just can't trust ANYBODY these days! Sad that your word means nothing anymore. Where did our morals go?

X2, good point. I had a family member who stole a lot of $$$ from myself and my brother, oh ~10+yrs ago, but it was due to drug addiction. We cut him off and he eventually (and very painfully I might add) straightened himself out. I never once asked for that $ back, nor did my brother. There was no point in asking.

60K is a lot. You need to talk to a lawyer, but you also need to talk to your relative and ask him if everything is all right, see if there's something bigger going on here...

AP

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"How bad could it be?" - SimpleS

He has no intention of paying you back. His tantrums are a way to make you uncomfortable, throw you off balance and get you to back down. Ignore the insults and stay focused on a very simple message such as signing a payment agreement ( I saw this alot in a previous life as a therapist). And definitely consult an attorney. Maybe even let him know that you've retained an attorney.

Squid is right. This guy has no intention of paying you back. Why do you feel like you have to be nice? Get an attorney and don't back down.

Please consult an attorney. Lack of a written agreement alone is generally not enough to be fatal to your interests, depending on the laws of your state.

Again, thanks for all the good advice. And no, lilpups, you do not sound like you are attacking me, OR that you are money-grubbing. Just thinking rationally, which I apparently wasn't doing when I got talked into this "agreement". I am so gullible, and have been betrayed and back-stabbed several times in the last couple of years (except not with money issues) that I should know better. When will I learn to stop trusting people? ... As for the middleman idea -- it's a good one, iron_mike, except he would probably go ballistic if he finds out I told anybody about this and asked them to intervene. But maybe it would shame him into paying! I emailed and asked him if we could set up the automatic payment and he wrote back and asked for my bank info to set it up. But I doubt it will ever happen. In 2 years, when his alimony ends ... his daughter will be going to college ........