I am in the process of getting a divorce. In 1988, my wife's parents loaned us $100,000 as a down payment on a house.

Asked over 1 year ago - Lexington, MA

We signed an agreement to repay the debt, but there was no time specified. Since then, my in-laws told my wife that they did not expect repayment. However, they still hold the 25 year old document with my wife’s and my signatures on it. I am concerned that, in the process of the divorce, my in-laws will try to call in this debt. The statute of limitations on debt in Massachusetts is 6 years, but I don't know what date this is referenced to, particularly in my case, where the contract did not specify any repayment terms. Also, my understanding is that, even if the statute of limitations has passed, it could be restarted if either of us made a partial payment on the debt. If my wife did this, would both of our obligations under the contract be re-activated, or only her own?

Attorney answers (6)

  1. Karla Mansur

    Contributor Level 13

    6

    Lawyers agree

    Answered . Unfortunately this happens all the time in divorce cases. You are correct that there is a 6 year statute of limitations for contract claims, but because there is no date of payment on the contract you are not technically in default, and the clock has not yet started running. You might be able to argue that the contract is not valid because it fails to properly state any of the pertinent terms, and as such there was no meeting of the minds, and was a gift and not a loan.

    What that being said your in-laws are not a party to the divorce. If they wanted to force you to pay they would need to sue you civilly. The divorce will however deal with the division of marital debt and assets, so you should consult with a family law attorney who can advise your of your rights and review the contract you and your wife signed. Best of luck.

    Sincerely,

    Karla Mansur, Esq.
    Law Office of Karla M. Mansur, LLC
    81 Middle Street
    Concord, MA 01742
    P: (978) 341-5040 / F: (978) 401-0687
    www.mansurlaw.com

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  2. Jeffrey Allan Miller

    Contributor Level 7

    3

    Lawyers agree

    Answered . I agree with my colleagues. You should both be claiming equal shares of the $100k debt on your financial statements.
    Maybe your parent's in law can write a letter that the debt has been forgiven, or if/when/ and how this debt is to be repaid. (note: It may not be in your best interest to sign any papers regarding this "debt" until you speak to a qualified attorney). Your attorney should at least ask. If the parents deny your request for the letter, then you can use this letter to show to the court that you both owe this debt, in essence, it will cancel each others claim regarding the division of the marital debts.
    If her parents only forgive your wife's half, (prior to the divorce), then the court may look at the $50k as a joint marital debt. This is a difficult situation, because her parents have the option of enforcing the contact against you, and not their daughter. You would have to join your soon to be ex, as a party to the action if her parents pursue this matter in court. If you are served a Complaint regarding this loan.... DON"T WAIT. Hire an attorney.
    It is difficult to give a concrete answer without looking at all of the relevant documentation.
    My advise is to contact an attorney, as the issues at stake are probably going to be higher than any attorney's fees you encounter.
    I'm sorry that you are in this position, and extend my sympathies. I wish you the best of luck, and feel free to contact myself, or another attorney for a consultation.

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  3. Catherine Taylor

    Contributor Level 13

    2

    Lawyers agree

    Answered . You are correct that there is a 6 year statute of limitations; however, if your in-laws attempt to collect this debt from you, you may be able to successfully defend the claim by arguing that the contract is not valid because it fails to state a material term (repayment term). The divorce will not impact any obligations you and your soon-to-be ex-wife have with regards to the loan. If your in-laws pursue collection of the loan, I would contact a qualified contract attorney to determine your exact rights and obligation. Good luck.

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  4. Kenneth P Doherty

    Contributor Level 11

    2

    Lawyers agree

    Answered . In a court of equity, the divorce court, a judge will not likely hold you responsible. Most judges will see the transparency and apportion that "obligation" to your wife. It is not uncommon that parents condition such gifts as loans in case the marriage does not work out in the short term. I would be curious to know whether the parents gave other children such large "loans" and whether they have been repaid.
    Also, assuming you borrowed money from a lender in 1988, the lender may have inquired as to whether the $100,000 was a gift or loan, and the in-laws may have provided the lender with a "gift letter". This is important to the lender when determining whether you can afford its loan.

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  5. Henry Lebensbaum

    Contributor Level 20

    1

    Lawyer agrees

    Answered . I think you may be confused about the law. But in any case, this is a complicated situation and this is a question of morality and legality. Sounds to me that you are willing to overlook morality in favor of legality. In any case, you should speak to a lawyer because many of these of fact dependent



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  6. Timothy Edward Kalamaros

    Contributor Level 15

    2

    Lawyers agree

    Answered . There are some assumptions you are making that trouble me, First of all you are talking about a debt being "reactivated" when I don't see that it was ever "inactvated." Basically, it sounds like a valid debt, whether you have paid on it or not. From what you say, it obviously has not been forgiven. So put it in the pot with all the other debts and assets to be divided and let the process take care of that debt along with the others.

    Nobody should presume that because there was a family relationship, the debt is not valid. Whether or not it is valid is a matter of state law in your jurisdiction, and a family relationship does not disqualify a debt from being valid.

    Be sure and talk this over with your divorce lawyer.

    No legal representation exists by virtue of this answer. Consult your attorney. Licensed to practice law in... more

Related Topics

Divorce

Divorce is the process of formally ending a marriage. Divorces may be jointly agreed upon, resolved by negotiation, or decided in court.

Debt in a Divorce

Responsibility for debts acquired during marriage may fall upon both parties after divorce, even if only one spouse incurred the debt.

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