A promissory note is defined as a written agreement created with funds between two or more parties in which one party agrees to loan a specified sum of money in exchange for the agreement from the other party, and declares repayment of such loan according to the terms of the promissory note.
A promissory note can also be created in exchange for repayment to be made by return of goods or services rendered, or by repaying the amount loaned in a specified amount of time either by lump sum or by regular scheduled payments with or without interest. A promissory note will involve at least two parties, most commonly referred to as the Lender and the Borrower.
Refer to the Promissory Note Guide involving Cash, or a Promissory Note involving Property.
Determining the Resource Value of Promissory Notes
- If the applicant/participant is the Lender:
- Promissory note is a bona fide negotiable agreement
- Assume the resource value is the outstanding principal balance owed on the note unless verification is provided the note cannot be sold for that amount to a third party – at which time its resource value is the amount it can be sold for
- Cash, or real or personal property transferred to the borrower is no longer a resource unless the Lender can access the funds/property for his/her own personal use
- Payments received from the borrower against principal are considered unearned income in the month of receipt, and a resource if retained into the following month
- Promissory note is bona fide and non-negotiable
- The Promissory note is a resource of the Lender, but the resource value is $0 as it cannot be sold
- Cash, or real or personal property transferred to the borrower is no longer a resource unless the Lender can access the funds/property for his/her own personal use
- Payments received from the borrower against principal are considered unearned income in the month of receipt, and a resource if retained into the following month