gift?

I live in NE, in 97 I loaned my sister $500.00 for christmas, there was not a written agreement or anything to prove I gave her the money or when she would pay me back. In Dec.99 my sister bought me a hope chest for my daughter I was to make her monthly payments. We got into a fight in July and haven't spoken, now she is threatening to take me to court if I don't pay her in full by the end of 00. We never had any kind of written agreement nor have I signed anything. Can she collect on this when she doesn't have proof (besides the bill) that it was a gift?

It will be her word against yours. That's proof enough, depending on who the judge believes. Quite frankly this is something you should get a third party, such as a clergyperson, to help resolve.