What is a Promissory Notes?
If you plan on lending money or valuables to someone -- even if it is a close friend or family member -- it often makes sense to put the expectations of the loan in writing, to avoid confusion or ill-will later. "Get it in writing" is the function of a Promissory Note: to outline the terms and repayment schedule of a loan.
Promissory Notes are used to document and create a record of a transaction where money is loaned from one party to another.
Cognovit promissory notes do the same thing, but also permit the note holder (usually the person who lent the money to the borrower and the person to whom payments are to be made) to obtain judgment on the note if any payment or payments are missed – without having to go to a trial. However, a few states have passed laws that prohibit the enforcement of cognovit provisions in Promissory Notes, i.e. they are not legal. Even if the cognovit provision of this note is not enforceable in the state where the holder (the person to whom the money is to be paid by the person signing the Cognovit Note) resides, the Note itself is still enforceable and can be sued upon should the person signing the note miss any payments.
Some of the promissory notes provided in this software require a Personal Guarantee – if the person borrowing the money is a corporation or is an individual that does not appear to have a solid financial base, another individual will sign the guarantee, thereby promising to pay the loan if the borrower does not.
Also, the Guaranty of Payment form is a “stand alone” guarantee and can be used in the same cases described above either at the time the promissory note is signed or at a later date (in either case, the promissory note should be attached to the Guaranty of Payment).
The original Promissory Note document, plus a backup copy, should be held by the maker of the loan, or by the person to whom payments are required to be made as designated by the person signing the Note. Copies of this Promissory Note should also be provided to the person signing the Note, as well as anyone who signs the personal guarantee.