A promissory note is a contract, a binding agreement by which someone will pay your company a sum of money. In general, losing a promissory note does not eliminate the borrower's obligation under the promissory note. However, recently, courts have refused to allow some lawsuits for default on student loan notes in which the notes were sold and the current debt holder is unable to file the documents. If you have the promissory note or related documents stored on a computer in word processing, scanning, or digital photo format, print copies.
Along with the new promissory note, you will need to sign a document called the Lost Promissory Note Affidavit and Indemnity Agreement. There's no need to panic if you lose a note, but you should know what steps to take to reinstate the note. You may want to hire an online service provider to help you prepare the replacement note, as well as the Lost Promissory Note Affidavit and Indemnity Agreement. Secured or “guaranteed” notes explicitly specify assets that could be used as collateral if the debt is not repaid in accordance with the terms of the agreement.
If you are the holder of a promissory note and discover that you have lost the document, steps must be taken quickly to protect yourself and the borrower. In such cases, borrowers must execute new documents, a process that begins with the completion of a lost promissory note affidavit. Promissory notes must also contain “consideration of” clauses, which specify the terms of interest to which the lender is entitled. Individuals and businesses often need to borrow money to keep businesses afloat and will provide proof of this loan with promissory notes.
Unsecured notes can be especially difficult to enforce, because they often involve not just a lawsuit, but more post-trial collection efforts. If the promissory note is secured, it would also enforce a mortgage or guarantee satisfaction agreement. It is also important to immediately notify the borrower that the promissory note has been lost and request that a new promissory note be executed. If the borrower refuses to sign a new note, they will need to establish the lost note in court.
If you plan to borrow or lend money, for personal, business or real estate purposes, you need to know the difference between guaranteed and unsecured notes.