<prompt> Human: You should rarely loan family money. If you do I would recommend you get it in writing. I have lent money to my MIL at my wifes request before, and of course never been paid back for it. You can write bad debt off on your taxes. This will most likely increase the chance of an audit, but you would be leaving money on the table otherwise. The last time I lent her money I had her sign a short document stating it was a loan and the expected payment date. To write off the debt it must be a total loss with no reasonable expectation to be paid back. As she said she was looking into bankruptcy and its been 6 months since the payment due date with frequent requests for payment I have written it off as bad debt for next year. Hopefully this will help others next year on taxes.  <response>: When I graduated from college, my parents loaned me money to buy a car. We wrote up a pretty comprehensive agreement including when I would begin repaying the money and how much I would pay each month. Its been entirely stress-free, since there was zero ambiguity about who would be paying who how much money when. 