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Q.What can I do if someone fails to pay a promissory note on time?

A.The first step is to obtain a judgment against the person for the total amount owed. To do this, you will need to file a lawsuit in either Small Claims Court or Superior Court (in California the maximum recovery in small claims is $5000). If you claim belongs in the Small Claims Court, you should obtain the Complaint form from the local Small Claims Court where the debtor resides, fill it out and file it. A hearing will be scheduled where both sides can present their case. If the court finds in your favor, a judgment will be issued for the amount of note plus interest and costs. If the Note was secured (meaning there was collateral mentioned), in your Complaint you may ask the court to seize the security until the note is paid in full.

Assuming the court renders a verdict in your favor, and assuming there is no collateral, the person still may refuse to pay. If this happens, you will need to institute another action to either seize property, garnish wages, or ask court to order a payment plan. Often times you can obtain a judgment stating John Doe owes you money, however, if John Doe has no assets (real estate, bank accounts) to seize and no money to pay, you may not be able to fully recover the money.

If the Promissory Note is for more than is allowed to be collected in Small Claims, you should hire an attorney to bring the lawsuit since the rules in Superior Court are much more complex than in Small Claims.

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Copyright 1999-2019 Melissa C. Marsh. All Rights Reserved. All Information on this website is subject to a Disclaimer and Use Agreement. This information is provided as general information only and should not be construed as legal advice. We advise you to seek the advice of competent legal counsel to address your own specific questions, facts and circumstances.