Legal Question in Business Law in California

Re: promissory note (unsecured) on a purchase of a business

Depends on what the terms of the note says, or barring anything to the contrary... they can take you to court. I don't know what kind of promissory note this was, but depending on the parties and the note... you could be liable for their attorney's fees resolving the issue.

Re: promissory note (unsecured) on a purchase of a business

Basically, you expose yourself to a collection lawsuit if you don't pay on time. Whether this is highly likely or somewhat unlikely depends in large degree on the unpaid amount and whether the note calls for attorney fees to be paid by the loser in the event of a suit. The larger the amount, the more likely a suit; if the amount is less that $10,000, suit is more likely going to be brought in Small Claims Court.

In addition to having to pay a judgment against you, the suit would have adverse consequences for your credit rating.

Many notes given for the purchase of a business have unusual terms covering default and enforcement, including the taking of security interests or putting up collateral. You should review the terms of the note and all other documents relating to the purchase of the business. The seller or lender may be entitled to proceed against particular collateral such as your stock in the business, its assets, your real property, etc.

If the amount is substantial, I'd suggest consulting with a lawyer to see if you have any defenses.