In a lawsuit, the plaintiff has the burden of proof of convincing a judge (or in this case, the clerk magistrate) that a loan was made and not a gift. There is no legal requirement that a loan agreement must be written, although such an agreement is obviously useful. However, your attitude -- the "it couldn't be a loan because they knew I didn't have the money to pay it back" thing -- is not going to play well in court. Besides, your refusal to pay the money back has really damaged your reputation and the quality of your relationships, and friendship is worth far more than money.
Ask your parents to give you the money, pay it to your sister, and get this whole thing behind you.
E. Alexandra "Sasha" Golden is a Massachusetts lawyer. All answers are based on Massachusetts law. All answers are for educational purposes and no attorney-client relationship is formed by providing an answer to a question.
If you go to court and lose, a judge will determine if you have the capacity to pay. If not, the judgment against you will be a meaningless piece of paper. (But remember that the judgment might hurt in other ways, such as reducing your credit score if you want to borrow money from a bank or get a credit card.)
Evaluating any legal question requires a detailed knowledge of the specific facts involved. Since a short question will rarely contain all the relevant facts, the answer here should be considered a general comment for your consideration and not legal advice.
The filing fee would exceed the damage amount. If your travel exceeds the value of the claim, it may not make sense to appear and argue. Even if a judgment is entered against you, she/he must then pay to seek execution of the judgment. Good luck.
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The defense that they should've known better than to lend you the money seldom works.
I HIGHLY doubt she will go court for $40 when the filing fee alone is more than that. If she did, based on your post, I'd say you have a good chance of losing.
You should find a way to execute a repayment plan--that is the Sisterly thing to do.
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