Legal Question in Credit and Debt Law in Tennessee

Re: Gift or Loan

I am not familiar with TN law, but I'd be inclined to say that you are liable as you agreed to pay for this loan when you signed the loan documents. I have no idea what possessed your stepfather to pay off the loan. Maybe he didn't like having this unpaid loan (even though it was current) on his credit, and he was worried about his debt to income ratio. Who knows, but co-signers typically do not co-sign a loan with the expectation of actually paying the loan off. You were planning to pay the loan in any event, I'm not sure it matters whether you are paying the original lender or your stepfather, but you might want to consult with a TN attorney about what recourse your stepfather would have if you didn't pay. I would imagine, what would happen would he would sue you in court under the original loan requesting contribution for the payments he made.

Re: Gift or Loan

If you say it wasn't a loan, and you feel there is no obligation to pay it back, then don't. If he decides to sue you, then he will have to prove that the transaction was a loan and that you owe him money. His chances of winning depend on what state the "agreement" took place and/or where you live, as each state's laws are different, and I'm answering this based on Michigan law.

It may also depend on what the loan was for, i.e., if it was for student loans for you going to college or for a car that you are continuing to use and have derived a benefit from. Your history of transactions would also be relevant, such as whether your stepdad had given you money before, cosigned for other items without any expectation of payment, etc.

For the sake of keeping your family ties intact, I'd suggest trying to work out some sort of resolution that is fair to everyone, and put everything in writing from now on, no matter who it is with. You'd be surprised how many family members and best friends find themselves in this situation.