What Is a Release of Promissory Note?
A Release of Promissory Note is a legal form that you can use after a debt has been paid off, in essence, to protect yourself from future legal action.3 min read
A Release of Promissory Note is a legal form that you can use after a debt has been paid off, in essence, to protect yourself from future legal action in the event it should arise. A form of this nature serves as an IOU in many instances, one of its numerous functions.
When and How to Use a Release of Promissory Note
A Release of Promissory Note mainly serves as a release form after a debt has been paid off. After the person who borrowed money from you has paid his debt in full, as noted under the Release of Promissory Note, both parties are then relieved of their obligations under the note. It is a clear and straightforward form detailing every minute aspect of the process.
Though the transaction would appear a simple one, there still are some things to keep in mind:
- Make sure you're satisfied first. Once the note is issued, it is set in stone. There is no going back. In other words, check that you are satisfied with the repayment and timeliness of it before issuing a Release of Promissory Note. If not, consider charging some interest in a way that is fair to both parties. Remember that once both parties have been released through the Release of Promissory Note, the note then becomes void to the full effect. So check every aspect and detail one last time before proceeding in order to cover yourself.
- Address any liens. If the borrower's property, for instance, was what was used to secure the promissory note, then you must responsibly ensure that any documentation in evidence of such liens is either terminated or canceled. For instance, let's say your respective lender chose to file a UCC filing statement by means of a regulating government authority. The then falls upon that authority to enact a terminating filing with which to release the lien.
- Get it notarized. It never hurts to properly notarize your release if you can afford to do so. This can limit unexpected challenges that may arise later, especially those stemming from a challenge to the initial document signature's validity, or even that of the release itself. Always cover all your bases here. If you should choose not to notarize, then simply delete the paragraph that speaks of the notary or holds any mention to it as you are legally permitted to do so upon promissory release.
Writing a Release of Promissory Note
You can find Release of Promissory Note templates online. First, begin by writing in the identifying information behind the promissory note, not failing to include the original amount agreed upon by both parties as well as the correlating date of effective commencement/release.
And if there happens to only be a sole note holder who is to sign off on the release, then delete every possible reference to the second person, such as "we" — or any other language that could possibly suggest a second note holder in addition to the principal one. Avoid confusion and retractions as much as possible. Get it right the first time, and re-read to make sure all of the little details are there to the very best of your ability; better to catch a mistake at this point in the process than to do so much later down the road.
Additionally, make sure that you always enter a legible and accurate address for each party involved, including yourself. Should you wish to have the other party's address, for any reason, you can have it here in fine print. Should the other party need the same from you, he or she will have it accessible as well. Use the blanks provided to enter each party's address as you go along.
Finally, consider using registered mail as the means by which you could send the final release. Although this is not a strict requirement, it certainly does help. Sending the document via registered mail provides a record of your actions. Should disputes surface later on, this will help you tremendously.
A Release of Promissory Note is a legal form that protects both parties. It is mutually binding. It is effective. And many continue to use it today.
If you need help with setting up your first Release of Promissory Note, you can post your legal need on UpCounsel's marketplace. UpCounsel accepts only the top 5 percent of lawyers to its site. Lawyers on UpCounsel come from law schools such as Harvard Law and Yale Law and average 14 years of legal experience, including work with or on behalf of companies like Google, Stripe, and Twilio.