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Questions about Promissory Note Law

A promissory note is a legal document that is written between two or more individuals that make a promise to repay either a loan or debt according to certain specific conditions. Normally there is a time that is stated on the promissory note, how many payments are needed to be paid, and when they are due. A promissory note will state the parties involved, the amount of responsibility and some type of reading of the issue for the responsibility, and often will include the terms of the repayment and if any interest rate will be included. A promissory note can also include an “acceleration clause”, which will make the whole amount due if a payment is not made. Below are the most commonly asked questions about laws related to promissory notes.

Is someone still responsible for a promissory note that was signed for a mortgage after they have filed for Chapter 7 Bankruptcy?

This person would no longer be responsible for the promissory note. In a Chapter 7 Bankruptcy filing this would be removed from their personal responsibility on the mortgage, but not if there was a lien against the property. If the property was foreclosed, then the lender will have the ability to sell the property to fulfill the debt, but then will not be able to get a judgment against this person for the part of the debt.

If a person had signed a promissory note that stated “erased if bankruptcy is filed”, if filing for bankruptcy would the promissory note still be in affect?

The person’s right to file for bankruptcy is protected by the United States Constitution. It is not legally possible for someone to sign another’s right away to file for bankruptcy. In the case that the promissory note says that this cannot be removed in a bankruptcy, it can in fact be removed. If this statement was binding, then it would be the same as signing away a person’s right. This is not usually enforceable.

Can someone place a section in a promissory note that the note cannot be released when filing for bankruptcy?

In most situations, a non dischargeable section in a promissory note will not be enforced. The bankruptcy court will have the right to ignore the section in the debt, which would normally be allowed to be removed when filing for bankruptcy.

If someone files for bankruptcy because they cannot pay back a promissory note, can the Limited Liability Company come after their personal possessions in New York?

If this person has signed a personal agreement, then the debt would only be allowed to be removed in the corporate bankruptcy for this corporation. The Limited Liability Company can in fact come after who has signed the promissory note, unless this person does file for bankruptcy. So, when making the decision to file for bankruptcy, the promissory note does not have to be listed. When the promissory note is removed, the debt is also removed and the creditor does not have the right to continue to collect their money. Now, if there is any collateral that is listed on the promissory note, then a lien on the collateral will not be removed. If there is a collateral this person is required to either pay the creditor in order to keep the collateral, or they will need to give the collateral up in order to protect the promissory note.

When signing a promissory note, the individual will need to read carefully over the agreement, and make sure they understand everything that is included in the promissory note. For more information on a promissory note, and to get answers to any other questions you may have about a promissory note, you can contact Experts to understand the legal implications as applicable in your case.
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