Are Your Debts Secure?
As 2024 progresses, a larger feeling in the economy that a recession may be imminent has emerged. In light of this, parties with outstanding debts owed to them which are either not documented or are poorly documented would be well served by assessing their security and potentially updating their documents.
Several prominent examples of such creditors include parties who have recently sold a business without clear documentation as to the payments to be made to the seller over time as well as parties which have lent funds to another without clear documentation as to payback. Failing to have documents evidencing debt can quickly turn from seemingly irrelevant to catastrophic as the economic situation of a debtor worsens.
Failure to have any documents evidencing debt can result in collections being impossible, or at least more difficult, as well as potential issues with Michigan law (such as usury laws). As an additional snag, many parties find out too late that the limited documents that they do have, list the wrong party (such as naming an individual when the debt to be paid by a company or vice versa), which can have serious consequences.
Finally, failure to properly consider security can make all of the difference between a creditor being in a safe and prioritized position and struggling to get paid. Common examples of security include personal guarantees, mortgages, and liens. Further, the devil can be in the details with these documents. For example, a mortgage failing to give the secured party the right to foreclosure by advertisement results in a far greater time and expenditure on the part of the debtor in the event of a default simply by failing to have one short provision.
These issues can be assessed by attorney review. Further, in many cases, amendments to the debt instruments can be negotiated prior to default to ensure that the creditor is protected. Our attorneys at Mika Meyers are knowledgeable and experienced in the laws and other issues related to debts and security. Please feel free to reach out to Curtis Underwood at 616-632-8021, or by email at cunderwood@mikameyers.com, if you have any questions.
