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Alex J. Esq.
Alex J. Esq., Attorney at Law
Category: Legal
Satisfied Customers: 16721
Experience:  Experienced Licensed Attorney
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I live in Texas. A friend and I drew up a promissory note

Customer Question

I live in Texas. A friend and I drew up a promissory note stating that I would loan him $1000 and he would pay me it back in 10 monthly payments @ interest of 10% remaining principle monthly balance per month. ex.first payment is 200 2nd payment is 190 ects...After the 4th payment he plainly said Im not going pay you anymore and stop calling me. So I am suing him in a small claim court for the balance. I receive a counter claim from an atty stating that the interest rate is usury and they are suing me for damages and penalties??? In the collection letter I wrote him I signed it with my name and my fathers LLC which is a real estate company but I do not own it (my father does) and the Counter claim is addressed to both of us. (company and myself). I guess I wanted the letter to seem stronger so I put my fathers company name on their but it has nothing to do with this personal loan which the promissory note is solely in my name as lender. Will this guy win and not pay me and will I have to pay him??? What must I do?
Submitted: 4 years ago.
Category: Legal
Expert:  Alex J. Esq. replied 4 years ago.
Hello. My name is Alex and I will be happy to answer your question.

I am sorry about your unfortunate situation.

Attorneys are allowed to represent litigants in Texas Small Claims court.

Unfortunately, the legal interest rate that can be charged on personal loans in Texas is 6%.

Unfortunately, not only the court can declare this loan agreement void and illegal, but the court can also award the judgment to the borrower and you as a creditor can be liable to the debtor for the greater of 1) three times the excessive interest contracted for charged, or received, or 2) $2,000.00 or 20 percent of the amount of the principal, whichever is less, plus borrower's attorneys' fees.

At this point it would make sense for you to contact a local attorney and to work out some type of a settlement with the borrower's attorney and to avoid exposing yourself and your father's LLC to further potential liability.

I wish you the best of luck!
Customer: replied 4 years ago.

So does that mean that the borrower is no longer liable for the principle balance he owes me? Are you saying that not only does he not have to pay me but I owe him now $200 + Atty fees?

Expert:  Alex J. Esq. replied 4 years ago.
Dear Roland,

Thank you for your follow up.

Unfortunately, the law is pretty clear on this issue and it would be up to the judge to rule whether the loan would be void and also the amount of money that you might owe to the borrower.

However, at this point it would generally be in the best interest of someone in your position to hire a local attorney to negotiate and amicable resolution of this situation.

I wish you the best of luck!
Expert:  Alex J. Esq. replied 4 years ago.
Dear Roland,

Do you have any related follow up questions for me?