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MISSISSIPPI DIVISION OF MEDICAID Eligibility Policy and Procedures Manual CHAPTER 200A – Income: ABD Categories Page |21 Effective Month: July 2025 200A.03.14 PROCEEDS OF A LOAN Bona Fide Loan The proceeds of a bona fide loan are not income to the borrower because of the borrower’s obligation to repay. Money received as repayment of the principal of a bona fide loan is not income to the lender; however, the interest received on money loaned is income to the lender. A bona fide loan is an agreement that is legally valid and made in good faith. The agreement must have been in effect at the time of the transaction. Money given with no obligation to repay cannot become a loan at a later date. The repayment plan must be feasible. The loan agreement must be in writing and include: • The borrower’s acknowledgment of his obligation to repay, with or without interest. • Schedule and plan for repayment, e.g., borrower plans to repay when he receives anticipated income in the future, and • Borrower’s express intent to repay by pledging either real or personal property or anticipated future income. Non-Bona Fide Loan If the loan is not bona fide, the proceeds received in the transaction are unearned income to the borrower in the month received. If the loan is not bona fide, payments toward principal and interest are unearned income to the lender. As indicated above, the interest received by the lender on money loan is unearned income whether the loan is bona fide or not. 200A.03.15 PROMISSORY NOTES AND PROPERTY AGREEMENTS For the Medicaid client who is the borrower, under both SSI and liberalized policy, cash paid by the lender to the borrower is not income if a promissory note or property agreement is bona fide, but it may be a resource the following month. Also under both policies, if the agreement is non-bona fide or non-negotiable, cash paid by the lender to the borrower is income in the month received by the borrower and any retained cash (or property received) may be a resource the following month.