A secured note is a loan agreement secured by collateral. It is not secured by "future earnings" since you have nothing to foreclose on if they default. It can be secured by his personal assets and you would need to identify those. A secured note is similar to a mortgage, whereby the lender
is making a loan
to be secured by the house
if there is a default. Given that there is an identified collateral it typically avoids bankruptcy since that debt would be first to be paid.
From the scenario you present I don't see how this would work since you are not making a loan but rather you are accepting an IOU to the difference which cannot be paid. Further for each event they cannot pay the entire balance you would need to create a separate note since you are required to provide specific terms of what has been in default and what collateral has been used to secure it. In my legal opinion I don't see how this would work since this is not a loan agreement and you would require specific terms for each amount that is borrowed and security for the note.
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