Recovering money from a family member and wife he is about to divorce

[nate829]

What is the name of your state (only U.S. law)? I live in California, they live in Colorado.

I started loaning my 25 year old struggling cousin and his wife money 1 year ago. He just moved to a new state and lost the job he had so was forced to look for new jobs. He had a few low paying, part time jobs over the last year but I was largely supporting him. His wife never worked. I loaned him $100-$1500 at a time to pay rent, food, gas, bills, etc. It added up to $40,000 (I know this is more than I could sue for in small claims court, can I sue them once a year for 8 years?). I have receipts and text messages for everything but no promissory note since the loans were small and spread out. I'm cutting them off and the stress has caused them to break up. His wife went back to live with her family and I'm guessing she will file for divorce. He is working full time so he'll be fine. She was an anchor around his neck.

How can I make sure I get my money back if they refuse to pay me back?
She would be liable for half of the debt if they get divorced, correct?
Should I have my cousin sign a promissory note before they get divorced as further proof that she is liable for half? Is it necessary or are receipts enough?
I've read the statute of limitations in Colorado is as short as 2 years for a verbal contract. Does this mean I have to sue within a year if they don't start making payments? If they make a payment does this time limit reset?
I'm afraid that despite the proof that I gave them money they will try to say it was a gift. They would have to have claimed a gift that large on their taxes which they won't so does that protect me? They also won't show enough income on their tax returns to live on so it will be obvious they were getting money from somewhere.

It's obviously in my cousins interest to get his wife to pay half so I think he would cooperate with signing a promissory note. I'm not freaking out just yet but I want to make sure that I take the correct action before they get divorced soon. I also want to make sure that the statute of limitations doesn't pass if my cousin decides to screw me over in the next couple of years.

Thanks for any advice you might have!

 

[LdiJ]

What is the name of your state (only U.S. law)? I live in California, they live in Colorado.

I started loaning my 25 year old struggling cousin and his wife money 1 year ago. He just moved to a new state and lost the job he had so was forced to look for new jobs. He had a few low paying, part time jobs over the last year but I was largely supporting him. His wife never worked. I loaned him $100-$1500 at a time to pay rent, food, gas, bills, etc. It added up to $40,000 (I know this is more than I could sue for in small claims court, can I sue them once a year for 8 years?). I have receipts and text messages for everything but no promissory note since the loans were small and spread out. I'm cutting them off and the stress has caused them to break up. His wife went back to live with her family and I'm guessing she will file for divorce. He is working full time so he'll be fine. She was an anchor around his neck.

How can I make sure I get my money back if they refuse to pay me back?
She would be liable for half of the debt if they get divorced, correct?
Should I have my cousin sign a promissory note before they get divorced as further proof that she is liable for half? Is it necessary or are receipts enough?
I've read the statute of limitations in Colorado is as short as 2 years for a verbal contract. Does this mean I have to sue within a year if they don't start making payments? If they make a payment does this time limit reset?
I'm afraid that despite the proof that I gave them money they will try to say it was a gift. They would have to have claimed a gift that large on their taxes which they won't so does that protect me? They also won't show enough income on their tax returns to live on so it will be obvious they were getting money from somewhere.

It's obviously in my cousins interest to get his wife to pay half so I think he would cooperate with signing a promissory note. I'm not freaking out just yet but I want to make sure that I take the correct action before they get divorced soon. I also want to make sure that the statute of limitations doesn't pass if my cousin decides to screw me over in the next couple of years.

Thanks for any advice you might have!

Just FYI, any gift above 14000.00 per year, per person, has to be reported on a gift tax return by the person GIVING the gift. The person receiving the gift never has to file a gift tax return.

If you can get your cousin to sign a promissory note it wouldn't hurt.

 

[racer72]

(I know this is more than I could sue for in small claims court, can I sue them once a year for 8 years?).

Nope, it all has to be done at one time.

 

[rooms222]

The good news for you is that it appears these gifts were made over two tax years, so depending on the timing, that could be up to $28,000 in gifts per person. Since they were married, you could possibly have been able to gift them $56,000 without filing a gift tax return. http://www.irs.gov/Businesses/Small-Businesses-&-Self-Employed/Frequently-Asked-Questions-on-Gift-Taxes

If you were to receive a judgment, it would be very possible that either party might file Chapter 7 bankruptcy to relieve themselves of the burden of repayment.

 

[latigo]

What is the name of your state (only U.S. law)? I live in California, they live in Colorado.

I started loaning my 25 year old struggling cousin and his wife money 1 year ago. He just moved to a new state and lost the job he had so was forced to look for new jobs. He had a few low paying, part time jobs over the last year but I was largely supporting him. His wife never worked. I loaned him $100-$1500 at a time to pay rent, food, gas, bills, etc. It added up to $40,000 (I know this is more than I could sue for in small claims court, can I sue them once a year for 8 years?). I have receipts and text messages for everything but no promissory note since the loans were small and spread out. I'm cutting them off and the stress has caused them to break up. His wife went back to live with her family and I'm guessing she will file for divorce. He is working full time so he'll be fine. She was an anchor around his neck.

How can I make sure I get my money back if they refuse to pay me back?
She would be liable for half of the debt if they get divorced, correct?
Should I have my cousin sign a promissory note before they get divorced as further proof that she is liable for half? Is it necessary or are receipts enough?
I've read the statute of limitations in Colorado is as short as 2 years for a verbal contract. Does this mean I have to sue within a year if they don't start making payments? If they make a payment does this time limit reset?
I'm afraid that despite the proof that I gave them money they will try to say it was a gift. They would have to have claimed a gift that large on their taxes which they won't so does that protect me? They also won't show enough income on their tax returns to live on so it will be obvious they were getting money from somewhere.

It's obviously in my cousins interest to get his wife to pay half so I think he would cooperate with signing a promissory note. I'm not freaking out just yet but I want to make sure that I take the correct action before they get divorced soon. I also want to make sure that the statute of limitations doesn't pass if my cousin decides to screw me over in the next couple of years.

Thanks for any advice you might have!

With regard to the "gift theory" please understand that the purported donee(s) would have the burden of proving donative intent by "clear and convincing evidence".

"Clear and convincing" meaning a level of proof beyond the normal evidentiary rule as applied in civil actions that only requires producing a preponderance of persuasive evidence.

The consequence is that their word against yours would not sustain the defense of gift. It would require independent evidence/circumstances that the money was indeed intended as a gift rather than a loan. One such circumstance could be the very fact that you chose not to require some written documentation identifying the purpose of the large remittances. Another the family relationship. Another the absence of efforts to collect until now seemingly motivated by the marriage break up. A marriage failure in the family, which by the way, is not an uncommon stimulus to pursue questionable rights to restitution.
____________

HOWEVER! In view of your admission that the arrangement was entirely "verbal" and that the total purported loan and the amount you would claim as owing exceeds $25,000 you also are facing what appears to be an insurmountable hurdle in sustaining a lawsuit.

And that would be overcoming Colorado's statute of frauds; to-wit: (paraphrased)

" * * * * no creditor may file or maintain an action or a claim relating to a credit agreement involving a principal amount in excess of twenty-five thousand dollars unless the credit agreement is in writing and is signed by the party against whom enforcement is sought." Colorado Revised Statures 38-10-124 (2)

So, it would be well that you obtain the suggested promissory note. And good luck in obtaining signatures to it, particularly that of so-called cousin's "albatross" of a wife.

Aside from the claim being possibly barred by the statute of frauds and assuming that the wife declines to document the alleged loan another legal issue might be whether or not she can be held personally liable beyond her vested interested in marital property. And I am not qualified to speak on how Colorado law might view her liability.