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Chapter: 1600 Assets Program: MSSI, SFP 27

corporation, or institution named on the note. A promissory note may or may not involve the loan of money or goods (e.g., a promissory note may be given in return for goods or service rendered).

A personal and real property agreement is a pledge or security of a particular property or properties for the payment of a debt or performance of some other obligation within a specified time period. Property agreements on real estate (land and buildings) are generally referred to as mortgages but may also be called land contracts, contracts for deed, or deed of trust, etc. Personal property agreements (e.g., pledges on crops, fixtures, inventory, etc.) are commonly known as chattel mortgages. 1640.0560.01 Evaluating Loans (MSSI, SFP) Loans may be formal (written) or informal (verbal). The individual must provide information on the type, amount, purpose, and unpaid balance of the loan. The loan contract can be used as the source of this information.

Any loan agreement must be legally binding under state law to be considered a bona fide loan for Medicaid purposes.

A bona fide agreement is an agreement that is legally valid and made in good faith. A bona fide loan must meet all of the following requirements:

1. The loan must be enforceable under State law ; and 2. The loan agreement was in effect at the time the cash proceeds were provided to the borrower; and 3. The lender and the borrower both acknowledge the lender has an obligation to repay the loan; and 4. The loan includes a plan or schedule for repayment by pledging real or personal property or anticipated income; and 5. the repayment plan must be feasible.

A negotiable agreement is an agreement where the legal title to the instrument itself and the whole amount of money expressed on its face can be transferred from one person to another.

Loans by verbal agreement that will affect an individual's eligibility must be reviewed by Circuit Legal Counsel to determine if the loan is negotiable/bona fide. When the loan is an informal verbal loan, information such as the type of the loan, parties involved, and the commitment to repay, must be obtained to determine if the loan is legally binding.

When the individual is the borrower:

1. The loan agreement itself is not an asset. 2. Cash proceeds of a loan may be an included asset if retained into the month following the month of receipt. 3. Cash proceeds of a bona fide loan are not income in the month of receipt. 4. When the loan is not bona fide, cash proceeds are income in the month of receipt.

When the individual is the lender:

If the loan is determined to be bona fide and negotiable:

1. The loan agreement is an asset valued at the equity balance. The equity balance is the outstanding balance owed to the individual minus any debt. 2. The principal portion of the loan payment is conversion of an asset, not income. 3. the interest portion of the loan payment is excluded as income in the month of receipt in eligibility determination, but is counted as income in patient responsibility calculations. If retained into the following month, the interest is included as an asset.