IOUs, Guarantees, Gifts and Debts: Protecting Your Money in Personal Dealings

Most disputes about money between people come down to paperwork. These habits are cheap and turn an argument into evidence.

Write a proper IOU

An IOU should name the lender and borrower, the amount, interest rate, term and repayment method, signed by both. Move the money by bank transfer rather than cash, so it can be proved in court. Interest above four times the LPR is not protected by courts. Writing ID numbers and the word "loan" is common good practice.

Before guaranteeing a debt, look for the word "joint"

With a general guarantee, the creditor must sue the borrower and fail to collect before coming to you. With a joint-and-several guarantee, the creditor can ask you directly. Be sure you would be willing to repay the amount. Also check you are signing a guarantee, not the loan contract itself.

Limitation periods: 3 years for civil claims, 1 year for labour arbitration

Civil claims must be brought within 3 years of when you knew your rights were harmed. After that, the court won't raise it itself, but a single remark from the other side, "limitation period has passed", is enough, and your money is still owed but can no longer be recovered. A recorded message demanding payment restarts the three years. Labour arbitration is a separate system with a 1-year period. Agreements to "waive the limitation defence" in advance are invalid, and so are agreements to lengthen or shorten the period.

If you are sued or enforced against, report assets honestly

Moving your house into a company or your money to relatives is exactly what the crime of refusing to enforce a judgment describes: up to 3 years in prison, and 3 to 7 for especially serious cases. Relatives and companies who help are treated as accomplices and the assets can be recovered. Refusing to report or falsely reporting assets can be fined up to 100,000 yuan for an individual and detained for up to 15 days. Genuinely having no money is not a crime, and living costs for you and your dependants are deducted when judging this. Repaying some or all before prosecution, for a minor case, can lead to no prosecution.

Large gifts between partners are generally one-way

Before the gift is transferred into the recipient's name you can withdraw it freely. After it is, it can be revoked only if the recipient seriously harms you or your close relatives, fails to support you when they should, or fails to perform agreed obligations. So before any large transfer, decide whether it is a loan or a gift, and write that in the message. A notarised gift cannot be taken back at will.

Betrothal gifts ("caili")

Demanding money under the guise of marriage is prohibited and courts support return. You can ask for it back if you did not register the marriage, registered but did not actually live together, or the gift left the giver in hardship. If you registered and lived together, generally it is not returned. Pay by transfer with a memo, keep the chat logs, and note that the giving party holds the burden of proof, men and women alike. How "excessive" a gift is depends on local income levels; there is no national figure.

Gambling debts in the family

Money owed at the gambling table is not protected by courts; neither are loans made by a creditor who knew they would be used for gambling. A loan taken by one spouse to gamble is not treated as a joint marital debt. Keep transfer records and gambling-platform or police records to prove where the money went.

Don't be a nominal legal representative

Lending your ID to register a company makes you the legal representative. The company pays for harm caused in that role, then can recover from you for fault. Beyond liability, when the company is enforced against, you can be restricted from high consumption. If you are already one, you may resign and the company must appoint a new representative within 30 days.

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Source and license: adapted from HowToLiveBetter (高性价比人生指南) by eternity4719, Sections 8 and 12, licensed under CC BY 4.0 (https://github.com/eternity4719/HowToLiveBetter). We condensed and translated the original entries; see the source for evidence grades and citations. Rules described here apply to mainland China and may change. This is educational content, not investment, tax or insurance advice.