It's payback time! Or is it?

September 28, 2009 2:08 PM

Is Girl legally obligated to pay back her half of a 401k loan?

Boy meets Girl. They fall in love, move in together and get a joint bank account where both paychecks are deposited and all bills are paid. Boy takes out a 401k loan to pay off debt and gives half what he takes out to Girl so she can pay off some of her own debt. Loan payment is taken directly out of Boy's paycheck.

Several months later, the relationship ends. All money in the joint account is split evenly (including Girl's last paycheck) and Girl moves out. Boy states he expects Girl to repay her half of the loan. She once verbally, and once in an e-mail, agrees to pay back at least $100 a month.

Ignoring the moral obligation, (and I cannot stress enough how we should be ignoring the moral obligation) is Girl legally obligated to pay back her half of Boy's 401k loan? Does the e-mail constitute written agreement?

Extra info: Girl broke up with Boy, and they both live in Texas. In Girl's defense, she is asking so she fully understands the situation, not because she plans to screw Boy over. Any links you can provide would be helpful.

posted by anonymous to work & money (18 comments total)

I'm not even going to try to give a specific answer other than to say that Girl is really going to need a lawyer if Boy goes after her for the money in a legal setting. It's really a matter of whether Boy is willing to pursue legal action, or if he'd rather forget it before it goes that far.
posted by ishotjr at 2:12 PM on September 28

Oh and it would help if you said "Girl's" city. There are various legal aid organizations with which Girl may be able to get a consultation, but many/most are locally-based.
posted by ishotjr at 2:13 PM on September 28

Of course it is a binding agreement, especially in writing. Just a verbal agreement would suffice, but it's rather difficult to prove in court. Now, the girl could have simply ignored the boy's request for paying back the gift (since that's what it sounds like it was), but since she agreed to it, she's now committed to it.

Moral of the story: Don't agree to pay money when you don't have to.
posted by saeculorum at 2:13 PM on September 28

Was the money given to Girl as a gift, or was it discussed at the time and understood at the time to be a loan? I would think that would have significant bearing here.
posted by bricoleur at 2:16 PM on September 28

I would think that the email indicates something very close to a promissory note. Without details about what exactly was in that note and where you lived, I couldn't say more.

Girl needs to pay Boy back. Ethics aside, you won't have a clean break until you have paid him.
posted by misha at 2:22 PM on September 28

She once verbally, and once in an e-mail, agrees to pay back at least $100 a month.

Binding acknowledgement of debt and a binding agreement. Done. End of question.

Now, actually getting the money is an entirely different question. You'll need a small claims court and/or an attorney.
posted by Cool Papa Bell at 2:31 PM on September 28 [1 favorite]

IANAL, and you should probably talk to one, but SOMBFAL*: I am pretty certain the verbal agreement and email agreement amount to some form of legally binding agreement. Obviously a verbal promise is hard to prove in court, but the email promise is more cut-and-dried. A lawyer would argue you're on the hook for the $100 you agreed to pay (but no more).

* some of my best friends are lawyers
posted by axiom at 2:34 PM on September 28

In Girl's defense, she is asking so she fully understands the situation, not because she plans to screw Boy over.

In all likelihood, Girl wouldn't be asking if she didn't plan to screw Boy over. Don't kid yourself. Give the guy his money and call it done.
posted by Inspector.Gadget at 2:34 PM on September 28 [18 favorites]

Girl *probably* established enough of a paper trail that she is now obligated to repay at least the money provided by boy to pay off the debt. The good news is, no terms of interest were established, meaning that this is unlikely to require interest paid on the loan. With that said though, if boy did go after legal counsel he *might* try to pursue funds covering any early penalties to his 401K.

If this was a divorce, you could look to offset this by dividing up agreed upon shared property. Keep in mind though, shared property devalues - a year-old flat-screen TV that cost $1,000 is not worth $1,000 in a settlement. Debt, on the other hand, does not devalue as such.

If girl is considering not repaying the money, girl should be looking for a good lawyer.

Seriously though, if you are describing yourself as girl and him as boy... this is the time to call mom and dad and get a hand ending this quickly: "Mom/dad, I did something regretable and accepted a loan I should not have. Will you help me end this debt quickly so that I can be rid of boy permanently, and I will repay you under the same terms of the old loan?"
posted by Nanukthedog at 2:47 PM on September 28

All cases like this that show up on Judge Judy or similar wind up with the person who verbally, but especially in writing agreed to pay back the loan being legally compelled to pay back the loan.
posted by Kimberly at 2:51 PM on September 28

Pay off "Boy" for goodness sake. That's his 401k money. If you get deposed and have to say that yes, you agreed via email to pay him back then you're going to lose any litigation.
posted by Burhanistan at 2:58 PM on September 28

Would you rather 1) set up a repayment scheme now or 2) set one up later after very possibly losing in court, after accruing additional court costs and legal fees? You should also consider the considerable time and mental energy you'd waste on this issue.

IANAL - I'm just a second-year law student, and law students don't know nothin' about nothin' - but I do know that there is a very healthy, nonzero chance that your verbal and written agreements to pay back Boy will come back to haunt you should you make the mistake to litigate this issue.
posted by Sticherbeast at 3:06 PM on September 28

IANAL but seconding much of what's been said: even an experienced small claims lawyer in Texas would probably be unable to give you a definitive answer without knowing the full contents of the conversation and the email, including the entire exchange that surrounded your agreement to pay. (From a legal perspective, I don't see the oral agreement as less relevant than the email unless you'd be willing to perjure yourself as to what was said orally.) My guess is the other details (joint bank account, understanding of the initial transaction, etc) are much less relevant.

I'm not sure what kind of links you're looking for, but articles about the validity of email contracts or how to document a personal loan are probably a red herring. If you want to handicap the legal question yourself, I'd start with the wikipedia entry on common-law contract terms and focus on the "offer and acceptance" and "consideration" requirements.

From a practical perspective, you imply that this isn't the only unfinished business between you two and he's wronged you in some other way(s) that would make you feel less guilty about welching on this promise. Without knowing those details I won't presume to lecture you on what's right, but the best way to think about it is to put yourself in his shoes and ask whether he's really likely to hire a lawyer and pursue the debt in court, embarrass you by telling mutual acquaintances about the situation, etc. Which probably has a lot to do with the size of the debt and the nature of these other factors.
posted by pete_22 at 3:10 PM on September 28

Yeah, this really depends on the exact words used for the first loan. To me it sounds like a gift and the oral promise of repayment/email aren't enforceable since there was no underlying obligation.
posted by lockestockbarrel at 3:57 PM on September 28 [1 favorite]

Hive Member requires more detail regarding Girl and Boy.

1. When was this email written, is the total amount owed stipulated and agreed to by both parties?

2. As a result of this email, can the total amount owed or the amount paid so far be confirmed or disputed?

3. This is purely a judgement call but if Girl originally accepted funds thinking Boy and Girl would eventually be married, and then discovered Boy cheating on Girl... I think that mitigates the situation somewhat.

Often, money represents control in relationships. Only the Girl and Boy know what was really meant when payment was offered or accepted.

Everyone else agrees that what was borrowed should be repaid. I concur. Unless there are obvious complications, ie - if the monies were originally offered in bad faith & additional expenses were incurred by Girl as a direct result of that bad faith offering. In this type of situation, Girl is (at least morally) free to offer any monetary settlement that satisfies her conscience and be done with the obligation. A lawyer might help. Or mediation. (calculations of additional expenses pertaining to the loan may need officiation.)

I wish both parties best of luck.
posted by jbenben at 4:19 PM on September 28 [1 favorite]

Ignoring the moral obligation, (and I cannot stress enough how we should be ignoring the moral obligation.

With all due respect unless you are saying you, I mean, Girl doesn't have moral standards, then the moral obligation should be at least considered, right?

Look Boy wronged Girl clearly. I'm guessing this was pretty harsh and somewhat recent, too. Yes, hell hath no fury as a woman scorned. Trust me, having had my fair share of scorn and subsequent fury, I get it. You want to figuratively and perhaps literally remove the testicles from his person. (And in case that's another AskMe, I presume that would be a misdemeanor, I believe. But really, IANAL and have no idea about Texas testicle laws.)

But seriously, and I fully acknowledge my mom would be proud of me for saying this, but take the high road. Yes, he's a prick. But keep in mind, the universe has a crazy way of correcting Karma on it's own.

Does the e-mail constitute written agreement? She once verbally, and once in an e-mail, agrees to pay back at least $100 a month.

Quite possibly from everything I would presume and what people are citing here.

So... does Girl want potential legal defense bills on top of what she owes Boy?

If you pay him, not cash, not money order. Paypal, personal check, something you can track that he received payment and you, in turn, have receipt.
posted by jerseygirl at 4:31 PM on September 28

Do you mean, "Can I pay this back at my convenience, or will he be able to take me to court about not holding up to the terms of our agreement?" Because yeah, he can take you to court (and he may win and he may not win, as others have said, depending on your jurisdiction).

So if it's not possible for you to keep the agreement and you want to renegotiate it, it's in your interest to do so in advance, rather than waiting until he takes you to court.

If it is possible for you to keep the agreement and you just don't want to do it because you're angry with him, that's a shitty way to live your life and I would encourage you to cut that shit out.

And borrowing money "to pay off debt" makes some sense when it's a higher-interest debt being paid off with a lower-interest loan, but it only works if you realize that the loan is also a debt. In addition to dealing with this like a grownup, I strongly encourage you to seek some financial counseling.
posted by Sidhedevil at 4:45 PM on September 28 [1 favorite]

She may have a legal obligation based on the joint understanding that it was a loan.

What is the maximum amount that can be sued for in Small Claims Court in TX? Going after someone in Civil court is non-trivial. Enforcing a loan in Small Claims Court is much easier.
posted by theora55 at 4:50 PM on September 28