How to Collect on a Promissory Note

Step-by-Step Guide

1. 1

   Step 1: Calculate how much the debtor owes.

   The debtor may owe interest, fees, and penalties.
   
   Look at your promissory note to see what late charges you can assess.
   
   Then add up the total amount the debtor owes. , Federal and state laws prohibit debt collectors from engaging in aggressive collection practices.
   
   You can avoid the problem by not making any phone calls.
   
   Instead, communicate with the debtor in writing.
   
   Illegal collection practices include using obscene or profane language, threatening to arrest debtors, and calling at inconvenient times., Send the first letter as soon as the debtor is 30 days late.
   
   Remind them they are late and tell them how much they need to pay to get current on the loan.
   
   Also include information about the date of the promissory note and the date payment was due.
   
   You can also send 60-day and 90-day past due letters if you want.
   
   Remind the debtor that you will pursue other remedies as spelled out in the promissory note if they don’t pay you back in time.Send the notification certified mail, return receipt requested and keep the receipt with your copy of the letter. , The debtor might ignore your late-payment notices.
   
   In that case, you need to send a demand letter.
   
   Review your promissory note to see what actions you can take.
   
   For example, your promissory note might allow you to accelerate payment, meaning the debtor must pay the entire amount owed.
   
   Format your demand letter like a business letter, and use letterhead if you have it.
   
   Include a brief description of the dispute.
   
   Mention dates: the date of the promissory note, the date payment was due, the date you sent notifications, etc.
   
   If you go to court, a judge will find this background information helpful.State what you want the debtor to do.
   
   If you want the entire debt paid off, then include a deadline.
   
   Remind the debtor you will sue in court if they don’t meet your demands. , After receiving your demand letter, the debtor might call, panicked.
   
   Discuss why the debtor has been late and when they might catch up.
   
   You can choose to let them skip a few payments if that will help them get current on the loan.
   
   Alternately, you might want to play hardball and not let them miss a payment. , The debtor might have pledged property to back up the loan.
   
   In that situation, you can seize the collateral.You should have a signed security agreement that identifies the collateral and where it is located.
   
   When seizing collateral, you can’t breach the peace.
   
   This means you can’t trespass on the debtor’s property or trick the debtor by pretending to be a police officer.Sue in court if you can’t reach the collateral. , The debtor might have no money, and if they declare bankruptcy you'll probably be completely wiped out.In that situation, you should consider settling the debt for less than the full amount.
   
   You might have to negotiate.
   
   The debtor will want to pay as little as possible, but try to get them to pay at least 50% of what they owe.
   
   Demand a lump sum payment in cash.
   
   Feel out how financially stable the debtor is.
   
   Do they have a job? Do they have other debt payments, such as car payments?
2. 2

   Step 2: Avoid harassing phone calls.

3. 3

   Step 3: Send notification letters.

4. 4

   Step 4: Write a demand letter.

5. 5

   Step 5: Talk with the debtor about repayment options.

6. 6

   Step 6: Seize collateral

7. 7

   Step 7: if possible.

8. 8

   Step 8: Settle for less than the full amount.

Detailed Guide

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