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Four Keys to a Strong Guarantee in a Loan ContractA loan contract can have more than one party who is liable for the debt. For instance, a loan may have a guarantee, in which a third party called a guarantor promises to repay the debt in the event that the principal debtor defaults. A guarantor can be an individual, bank, or other financial institution and can agree to put up assets as collateral for the debt. For creditors, a guaranteed debt provides security if lending to someone who has a poor or unproven credit history. However, the guarantor could try to get out of their liability by finding a weakness in the contract. Here are four tips for creating a strong guarantee in your debt contract:

  1. Get the Guarantee in Writing: It may seem obvious, but it is crucial that the guarantee is a written agreement. Courts typically do not recognize oral agreements for guarantees, and even if they did, an oral agreement is an unreliable way to set strict terms for the guarantee.
  2. Use Clear Terms and Conditions in the Contract: The guarantee in the contract should state when the guarantor becomes responsible for the debt and how much they must pay. For instance, you could have an unconditional guarantee that requires the guarantor to pay regardless of the reason for the default or a guarantee that is conditional on actions such as attempting to collect from the principal debtor before collecting from the guarantor. 
  3. Include Terms Giving Consent to Modify the Agreement: One argument the guarantors have used against creditors is that the guarantor was unaware of a modification to the loan agreement that significantly increased their burden if they became liable for the debt. You can protect yourself against this argument by including a section in the contract in which the guarantor consents to pay the debt regardless of modifications.
  4. Check on the Guarantor: Having a guarantor for a debt does you little good if that person has a poor credit history. Do a background check on the guarantor just as you would with the principal debtor. Make sure they have the income or assets to pay if needed and a history of making payments on time.

Contact a Chicago Creditor’s Rights Attorney

When a debtor or guarantor balks at repaying a defaulted debt, you will rely on the strength of your contract and your legal team to protect your financial interests. An Illinois creditor’s rights lawyer at Walinski & Associates, P.C., knows the tactics that debtors use to avoid payment and how to respond. To schedule a consultation, call 312-704-0771.

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What Are the Statutes of Limitations for Debts in Illinois? There is no statute of limitations on how long a creditor can attempt to collect an unpaid, but there is a deadline for when they can still use litigation to receive a court judgment against the debtor. Litigation has advantages over other debt collection practices because: The debtor is legally obligated to repay what they owe. Creditors can request methods of enforcing the court order, such as wage garnishment. The mere threat of litigation may be motivation for the debtor to cooperate. If you allow the statute of limitations to expire on a debt, you are left with fewer options for collecting that debt. You must understand how the statute of limitations works to know whether it is too late to file a lawsuit over an outstanding debt. What Is the Statute of Limitations? The number of years you have before the statute of limitations expires is different depending on the state and type of debt. In Illinois, the statute of limitations is: Five years for unwritten debt agreements and open-ended agreements Ten years for written agreements and promissory notes An unwritten agreement could be an oral agreement between two parties on a debt. Credit card accounts are the most common form of open-ended agreement, which allows debtors to continually borrow and repay their debts. Many debts are entered through written agreements, which must state the terms and conditions of the loan. A promissory note, such as a mortgage or student loan, requires the borrower to repay the debt within a specified time frame and often with interest. Illinois’ statute of limitations for written agreements is longer than most other states, while its statute of limitations for unwritten and open-ended agreements is about average. When Does the Statute of Limitations Start? It is important to know that the countdown for the statute of limitations starts when the borrower first defaults on their debt and not when the agreement was first created. You may have entered a written debt agreement 10 years ago, but the statute of limitations to file a lawsuit will not have expired if the borrower stopped making debt payments less than 10 years ago. Keeping an accurate record of debt payments will prove that you have not passed the deadline. Contact a Chicago Creditor’s Rights Lawyer When a borrower defaults on their debt payments, you must decide how you will pursue collection of the debt. If you wish to use litigation, it behooves you to act sooner rather than later. A Chicago creditor’s rights attorney at Walinski & Associates, P.C., can explain how the litigation process works. Schedule a consultation by calling 312-704-0771 today.There is no statute of limitations on how long a creditor can attempt to collect an unpaid debt, but there is a deadline for when they can still use litigation to receive a court judgment against the debtor. Litigation has advantages over other debt collection practices because:

  • The debtor is legally obligated to repay what they owe.
  • Creditors can request methods of enforcing the court order, such as wage garnishment.
  • The mere threat of litigation may be motivation for the debtor to cooperate.

If you allow the statute of limitations to expire on a debt, you are left with fewer options for collecting that debt. You must understand how the statute of limitations works to know whether it is too late to file a lawsuit over an outstanding debt.

What Is the Statute of Limitations?

The number of years you have before the statute of limitations expires is different depending on the state and type of debt. In Illinois, the statute of limitations is:

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Illinois Law Protects Commercial Loan LendersWhen creating a loan agreement in Illinois, there is a big difference between personal loans and commercial loans. Individuals or spouses take out personal loans in order to pay for family or household expenses – the most common example being home mortgages. Commercial loans are credit agreements made with business owners for the purpose of starting or expanding a business. In Illinois, commercial loans are more favorable to lenders than personal loans because of the Illinois Credit Agreements Act. Thus, making sure to classify a loan as a credit agreement could save you from a lengthy legal battle.

Commercial Loan Rules

The Illinois Credit Agreements Act states that a credit agreement or any revisions to an agreement is valid only if the agreement is in writing and signed by both parties. The law defines credit agreements as not including credit cards or loans for personal, household, or family purposes. The lender and the commercial debtor cannot create an agreement by:

  • Discussing changes to an existing agreement;
  • Reaching an oral agreement; or
  • Sending a letter or email with the terms of the oral agreement.

Debtors try to use oral agreements to defend themselves against lenders who are attempting to collect on a loan or to file a claim against a lender that they accuse of violating their agreement. With credit agreements in Illinois, commercial debtors have no claim or defense based on oral agreements.

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Illinois Reducing Interest Rate, Revival Deadline on Consumer Debt JudgmentsIllinois Gov. J.B. Pritzker is expected to sign a bill that will change the rules for collecting consumer debt after a debt judgment. The bill, which has passed both the Illinois Senate and House of Representatives, would reduce the interest rate charged to outstanding consumer debts. More significantly, the bill would cut by 10 years the amount of time that a creditor has to revive a judgment that has become dormant. Sponsors of the law tout it as a way to protect low-income Illinois consumers from cumbersome debts. Creditors of Illinois debtors may need to work faster to collect on court-ordered debt judgments.

Qualifications

There are two important caveats of the law as it applies to debtors. The changes affect debt judgments only if:

  • They involve consumer debts; and
  • The debt is $25,000 or less.

Consumer debts are debts accrued by individuals for personal, family, and household expenses. Nonconsumer debts are debts from an organization or business or debts that an individual accrues for purposes other than their personal expenses.

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Filing a Probate Claim on a Debtor's EstateThe debt that someone owes you does not disappear when he or she dies. Instead, you can turn your collection efforts towards the deceased debtor’s estate. Creditors have a deadline to file a claim against a debtor’s estate and collect compensation from the estate before the debtor’s beneficiaries inherit the assets. You may lose your ability to collect your debt if you miss the deadline. You must know who you may contact about the debts, who can be liable for the remaining debts, and how quickly you will need to file a probate claim.

Contact

The representative of the debtor’s estate handles all contact with creditors about claims on the estate. Once you know who the representative is, you are not allowed to contact the debtor’s family members. In many cases, the representative will notify you of your debtor’s passing and your right to file a probate claim against the estate. The representative could also send you a letter to cease contact because there are no assets in debtor’s estate to repay you. After receiving this letter, you are not allowed to contact the representative unless you are filing a lawsuit to dispute the claim of no assets.

Liable Parties

In most situations, personal debt does not transfer to another person when the debtor dies. However, there are exceptions that make family members liable for the debts, including:

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