How Long Is A Promissory Note Valid?

Are you considering a promissory note and are wondering how long they are valid for? Perhaps someone has asked you to sign one, and you want to know more?

Or maybe the phrase is new to you, and you are gathering as much information as possible before proceeding? Whatever your reason might be for coming here today, we have the answer for you! 

We know how stressful financial situations can be, especially when you need to borrow or lend money. It can be hard to find all the information before proceeding, leaving many of us confused or unsure about the loans we sign or the promissory notes we agree to!

How Long Is A Promissory Note Valid

Well, no more! Today we are here to answer all your promissory note-related questions. Keep reading to find out how long a promissory note is valid and anything else you need to know before signing one.

What Is A Promissory Note?

For those that need it, let’s have a quick recap before diving in! A promissory note is like a legal I.O.U note. It states that one person agrees to pay the other (or company) a set amount.

The promissory note includes when the money will be paid, either by an agreed-upon date or on-demand, any interest charges, signatures of both parties, where it was signed, and the date. 

These notes can be used to secure loans for many people and have become popular across the country. Banks often use them when offering mortgages, with the promissory note having cash value until the mortgage and interest are paid in full.

Promissory notes are an excellent way for a range of people to borrow money, and as they are legally binding, hold up in court should the lender need to recoup their money. 

Legally they sit between informal I.O.U notes and agreed personal loans or credit. The legally binding note can also be used by people who would not necessarily be approved for bank loans or credit cards. 

Now that we have covered a promissory note let’s see how long they are valid!

How Long Is A Promissory Note Valid?

Let’s get straight into it! How long your promissory note is valid varies from state to state, meaning that the amount of time can vary dramatically across the country.

There will be a statute of limitation on your promissory note, and often it will be stated on the note. If not, you can speak to the lender to negotiate a statute of limitation on the promissory note or check what the limitation is in your state before proceeding.

It’s important to have all the information before you proceed to avoid any hidden surprises along the way!

Some states such as South Caroline, New Hampshire, Kansas, Mississippi, Washington D.C., Delaware, Arkansas, and Alaska have a statute of limitation of three years. After this point, your promissory note will no longer be valid, and there is no obligation to pay.

After this point, a lawsuit can no longer be filed to claim unpaid money, saving you from the need to encounter any more fees or court issues. 

In other states, however, the statute of limitation is much longer than three years. States like Wyoming, Wisconsin, West Virginia, Louisiana, Indiana, Illinois, and Rhode Island have a statute of limitations of ten years. That’s plenty more time to pay your debt or incur legal charges should you not pay. 

One state, Kentucky, has a statute of limitation of fifteen years. After this point, the obligation and time for debtors to place a claim to recoup the money will have passed.

Don’t forget to check the statute of limitation for your state if it is not listed on the list today! Generally speaking, though, the time frame will be between three and ten years.

What About When County Court Action Is Used?

Now that we have covered how long promissory is valid, you might wonder what happens if you fail to make payments.

In worst-case situations, the person you owe the money to can take legal action. A judge can allow the promissory note and the money owed to be transferred to a debtor in these cases. 

However, this can be a lengthy process, taking two or three years to get through the courts. It does depend on the court and the note in question, though, so be sure to seek legal advice if you find yourself in this situation.

The debt can also be passed onto a collection agency, where they will contact you to reclaim the money. Higher interest rates can be added in these cases, like when bailiffs or debt collectors come to collect money from other loans. 

They might place their own time frame on this debt, which will vary from a few months to a few years. The time frame will be made clear to you when the debt transfers to a collector or the courts make their final decision.

You will need to pay the money back in this time frame and any added interest costs to avoid incurring further charges and legal action. 

To avoid your promissory note and the attached debt entering the court, be sure to pay back the debt on time. Check the date and any agreed-upon payment plans and ensure that your payments are the right number and on time.

If you do run into any issues along the way, be sure to speak to the lender. Often, there are ways you can adjust your payments or extend the time of the loan, allowing you to spread your payments and avoid incurring legal charges.

Final Word

And just like that, we have come to the end of our promissory note journey today. As you can see, how long a promissory note is valid varies depending on what state you live in.

You can check online by searching for your state or contact a financial advisor in your area for details on how long your promissory note will last. Be sure to check how long your promissory note is valid to avoid any issues along the way.

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