Legal Question in Credit and Debt Law in Pennsylvania

Good day, My question pertains to a written agreement signed between 2 consenting parties in front of a notary. If there is an agreement between 2 people to repay a personal loan, can a 3rd party attempt to nullify this and force a balloon payment?This is not a bank note, it is a personal loan between 2 adults.

Asked on 6/01/12, 11:21 am

2 Answers from Attorneys

Matthew Nahrgang Nahrgang & Associates, P.C.

An agreement can be enforced either by a party or a third party beneficiary. The latter is the one for whom the loan was supposed to benefit. But neither party can unilaterally change the terms.

I would be happy to advise you by phone or in person on a free initial basis.

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Answered on 6/01/12, 11:31 am

A written agreement for a personal loan is called a promissory note - one party is the borrower and the other is the lender. The borrower promises to repay the lender as per the terms of the promissory note.

As noted by Attorney Nahrgang, the agreement is generally between the borrower and lender. The lender can assign the right to collect the loan repayments to another person. If the borrower is notified to pay someone else, then the borrower must do so. However, the new lender has no right to demand any balloon payment. The new lender stands in the shoes of the old lender and has exactly the same rights and responsibilities.

The problem, I suspect, is that the borrower and lender did their own home-made agreement thinking it somehow is legal if signed in front of a notary. It is legal, although getting it notarized doesn't make it more legal. If this is the case, the agreement or promissory note may not have specified monthly installment payments and was a demand note. If the note was a demand note (and I or Attorney Nahrgang or any other attorney would actually have to review the document to know) then in that case any new lender (if the note has been assigned) or the original lender (if it has not been assigned) can demand repayment of the whole sum borrowed.

In that case, the borrower's options are limited and the borrower would have to repay the whole sum demanded or try and get a new promissory note (hopefully one that is properly drafted by an attorney) which provides for installments.

I suggest that you take Attorney Nahrgang up on the offer to evaluate your situation for free. Only after review of the documents can an attorney really give you advice as to what you can or cannot do.

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Answered on 6/01/12, 12:07 pm

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