A demand notice in action on a promissory note is deemed required to remind the debtor to pay the creditor what is owed. Aside from reviewing various notice templates in Word or private notice templates in terms of letter layout, certain critical considerations must be considered, including their distinct legal powers. A demand notice can be used by itself or in conjunction with other collection techniques.
The most common purpose for using a demand notice in action is to encourage payment from an insolvent debtor. If the debtor is still solvent but simply does not want to pay, they can ignore the demand notice. In this case, further actions may be necessary to obtain repayment. The most common additional action is to file suit against the debtor. However, other actions may also be available depending on state law requirements. For example, under some state laws a creditor is permitted to attach the debtor's property to satisfy the debt if it is still due and owing after receiving the demand notice.
It is important to understand that although filing a lawsuit is one way to collect a debt, it is not the only way. For example, if you file suit and lose, you would have to pay your opponent's attorneys' fees even if you believe they are excessive. This can be extremely expensive. If possible, trying to work out a settlement first is always best for all parties involved.
Using a demand notice as part of your collection strategy requires knowledge of note law and drafting skills.
How to Write a Demand Notice for the Payment of a Promissory Note
Demand Notice Format for Promissory Note Overdue Payment A promissory note is one of several forms of negotiable documents used in monetary or payment transactions. A promissory note is a legal instrument that is written on a sheet of paper. It is a contract between a lender and a borrower, which allows the lender to receive money or other valuable goods (i.e., collateral) from the borrower in return for a loan. The note itself is the evidence of this contract. It is usually made up of three parts: the amount of credit being extended, any interest rate agreed upon by the parties, and a statement of consideration (or exchange). The consideration part includes information about whether or not there are any payments due before the date the note is signed. If no payments are due until later, the note will state so. Otherwise, the note would be paid off before its due date.
If you are assigned the note, you should send the original lender a demand letter/notice as required by the terms of the note. The notice must include the following:
1. Your name and address, including your business address if applicable. If you are a corporation, your president's name and address should be listed instead.
2. A copy of the assignment, if applicable. An assignment is a transfer of rights under a contract.
When you possess a demand promissory note, you have the option to call in payment on the obligation whenever you choose. You will need to send a demand for payment letter to obtain payback. It is critical that your demand letter is clear and adheres to the terms of your promissory note. If it does not, your bank may ignore it which could cost you money.
The person who signed the promissory note can decide when they want their debt paid off. However, if they do not make any further payments on the loan then you will need to take legal action against them to recover the amount still owed. At this point, the note becomes due and payable.
If you are having trouble deciding when to call in your demand note, here are a few things to think about: If you don't pay back your loan within a reasonable amount of time, you risk being charged late fees and interest charges. These additions to the original principal amount of the loan will increase the total amount you owe. For example, if you start receiving notices from your lender that your repayment schedule is extending by several months because you aren't paying your bills on time, it might be time to call your bank or credit union to discuss your options.
The best way to protect yourself from loss if you cannot collect on your note is to negotiate with the borrower.