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Question: “I have a personal note from my friend for this amount. He is insolvent so I need to collect my money at the time of forcloseure sale. How do I do this?”
Answer: Assuming the friend refuses to grant you a lien on the property, you’ll need to sue him for a judgment. The judgment can then become a lien on his real estate. Of course, you won’t be paid until prior liens are satisfied. If the property is sold for less than or equal to the bank’s lien, then, unfortunately, you won’t get anything from the sale (though you can still go after your friend’s other non-exempt assets).
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You need to have your friend sign a security agreement that grants you a lien on the property. Since the note apparently doesn’t already provide such a lien, he should sign a new note that does grant you the lien (the note should specify the address of the property). You’ll then need to file a notice of lien with the county records office. You can find forms for both documents HERE and HERE. Note that the forms can be adapted as needed. You should also state that the second note is granted in exchange for a release of the first note (this will ensure that it meets the requirements of an enforceable contract).
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