Barbara’s Blog

Money, Money, Money

posted by admin on 20th February, 2014 | No Comments

When someone borrows money, he can agree to repay the loan and shake hands with the guy who lent him the money, or he can sign a piece of paper.  The piece of paper is a Note (often called a Promissory Note), which is just a promise to repay, like an IOU. It usually says things like,  “Yes, I know this money is supposed to be repaid” (in other words, this isn’t a gift), and “Yes, I agree to pay you back before the cows come home.”

If the borrower fails to do what he promises to do in the Note, the lender must go to court to enforce the debt.  In court, the lender not only has to prove (1) that the borrower agreed to repay the money (this is why it is important to have a Promissory Note instead of just taking the guy’s word . . . and his handshake), the lender also has to prove (2) how much money is supposed to be repaid.

And, then, once the lender has a Final Judgment, saying that the guy really does owe him $xxxx, the lender usually has to go BACK to court to enforce the Judgment.  Enforcing the judgment means the lender has to ask the court for permission to go get something owned by the borrower that’s worth the same as the amount of money owed.  What a hassle!   It would be much easier if the lender already took something owned by the borrower in the beginning instead of having to go to court to ask for something later.

So, when a creditor is not sure that a borrower will pay back a loan, the creditor will ask for “security” from the borrower.  This is the lender’s very own “security blanket” – just in case the borrower does not repay the loan (as if that would ever happen  J).

The security can be anything – it can be someone’s watch, or a car or a boat, or some other type of personal property owned by the borrower.  Or, it can be a piece of real estate.  If the creditor has some of the borrower’s property as “security,” the lender can then take that property and sell it if the borrower does not repay the debt.  All the rules about how, when, where, why, and if the creditor can sell the property depend on what type of “security” is involved and where the property is located.

Be sure to hire a real estate attorney who knows the laws in your area because the laws and procedures are very different depending upon where you and/or the security is located.

Leave a Reply

Your email address will not be published. Required fields are marked*