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Timothy D. Smith
Timothy D. Smith, Attorney
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I am a Maryland resident I am lending $3000 to a non-related

Customer Question

I am a Maryland resident

I am lending $3000 to a non-related individual that owns a home which has equity. I am planning to have him sign a note tomorrow. I would like to include provison for a confessed judgement in the note since I feel there is a high probability he will not be able to repay the money. I want to place a lien on his property so I can recover my money when the house is sold or refinanced.

I prepared a note (not signed yet) that I brought to the court house to find out if there would be any problems. They didn't seem to understand what happened next. They mentioned going to the judge. What is the procedure for filing the confessed judgement note if the borrower defaults?
Submitted: 1 year ago.
Category: Legal
Expert:  Timothy D. Smith replied 1 year ago.

I hope this message finds you well. Your question was as follows:

 

What is the procedure for filing the confessed judgment note if the borrower defaults?

 

Some judges handle confessed judgment clauses differently than others (some even allow the defendant to challenge the nature of the default). However, as a general rule, once the note is on file with a court having proper jurisdiction over the matter, the collect and potentially have a lien placed, it is as simple as filing a notice of default with proof of default with the same court in which the note was originally filed. You may also want to draft a draft order for the judge to sign based on the default and the confessed judgment portion of the note.

 

That said, if the person defaults, it is advisable to notify them of the default via certified letter with a return receipt. This is and will be good evidence to show the court relative to the default and your good faith effort to solve the problem without the court's intervention. Give the person a reasonable amount of time to make the necessary and required payment (10 business days is reasonable). Tell them that you will seek legal judgment against them if they have not paid the requested amount in that time. Wait until that time has passed and file your petition for judgment with the court.

 

Let me know if you have any other questions or concerns.

 

Best wishes going forward.

 

 

Timothy D. Smith, Attorney
Category: Legal
Satisfied Customers: 2184
Experience: 10 years practicing IP law and general litigation
Timothy D. Smith and 6 other Legal Specialists are ready to help you
Customer: replied 1 year ago.


Timothy,


 


I thought the confessed judgement avoided the involvement of judge. The wording in the note he will sign states he was agreeing to a judgement that would involve placing a lien on his property. That is what I wnat to accomplish. The individual has verbally given me that agreement.


 


Drew


 


Expert:  Timothy D. Smith replied 1 year ago.
You will still need the signature and approval of the court (the judge) in order for the lien to be placed on the person's property. The sequence that is avoided by way of the confessed judgment clause is actually having to have a day in court in which you have to illustrate or prove the default, while at the same time arguing against the individual. You avoid having to serve process on the defendant/debtor and you avoid them being able to argue their side of the issue (in most cases - as stated above, some judges will still want to hear from the defendant/debtor).

In short, you are correct in that they agree to the judgment by signing the promissory note, but you still need the court's approval to assign the lien to the deed on the property. This is the reason you must show the court that the person did indeed default and that you gave them opportunity to correct this deficiency.

Let me know if there are any other points of confusion. I want to make sure you are completely satisfied with the answers given.
Customer: replied 1 year ago.


Last Point:


 


Now, assuming default, what do I need other than the confessed judgement note to get court approval to place a lien on the property. And, do I request that, or must I rely on the court to take that action. At the court house today there wasn't any form to state the balance owned on the loan-- Is there a standard format or is a letter stating the amount of the default enough. Does it have to be signed by the debtor?


 


Thank you for your help. I am very satisfied.


 


Drew


 


 


 


 

Expert:  Timothy D. Smith replied 1 year ago.
Drew:

If/when the default takes place, you simply file a request before the court to assign a lien against the property that is the subject of promissory note (or a related and owned piece of property). The could be in the form of a motion to perfect a lien in view of promissory default.

You must request this action before the court.

You can fill out a sworn statement with an attachment (accounting statement of payments received) that contains the original balance (you can attach a copy of the original note as well), the remaining balance as well as a reference to the confessed judgment. Sign it and have it notarized. This is an affidavit and can be attached to you motion before the court to assign the lien.
Customer: replied 1 year ago.

Timothy

A follow up question from our session the other day regarding a confessed judgement note.

That confessed judgement note is not accomplishing what I am looking for. I just lent an individual $3000 to buy a car. He does not have the money to repay me monthly; however, he owns a home and has equity in it. I want to enter into an agreement with him to repay the money from proceeds of a sale or refinancing of his home. He will agree to this. Can this be done with a simple sales contract that can be recorded in land records so the money is disbursed to me directly when mortgages are paid off.

Drew

Expert:  Timothy D. Smith replied 1 year ago.
Yes. You will need to attach a lien against the home via this contract. Essentially he will agree to a lien. If there is a mortgage company involved, you will be considered a second lien holder. This means if they foreclose for some reason, you are second in line and will not get paid until they are paid in full. As you correctly stated, this information needs to be filed with the deed in the county in which the home sits.

This is good in that you now will have a direct tie to his main asset. It is bad because it will limit you to this asset as the second lien holder. As long as he has equity and/or the house appraises for more than he owes, you should be fine though.
Customer: replied 1 year ago.


Tim,


 


Thanks, I am not concerned about 2nd or 3rd position. I am only concerned about the procedure for filing the lien. I must need more than the note. Is there a form, or format for requesting a lien?


 


I am going out in 10-15 minutes. I will sign back on later in the evening.


 


Drew

Expert:  Timothy D. Smith replied 1 year ago.

Drew:

 

I apologize for the late response. I have been away from electronics since Friday. There is no technical form that is either published by the state or the courts for this type of agreement. There are, however, on-line legal resources, such as uslegalforms.com, which will have fillable formatted contracts for your state which will help accomplish the task at hand. Most of these forms are in the neighborhood of $25.00, dependent upon complexity.

 

Once again, once the contract is signed, you will need to file it with the court. You also need to file it with his mortgage holder as well. This will give them notice of the lien on the property. In so doing, it is advisable that you reference the mortgage by name and address as well as his account number within the contract.

 

Let me know if you need anything else.

 

Best!

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Timothy D. Smith
Timothy D. Smith
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10 years practicing IP law and general litigation