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Jacob Sensible is a financial advisor with decades of experience in the financial planning industry.  His journey into finance began out of necessity, stepping up to support his grandfather during a health crisis. This period not only grounded him in the essentials of stock analysis, investment strategies, and the critical roles of insurance and trusts in asset preservation but also instilled a comprehensive understanding of financial markets and wealth management.  Jacob can be reached at: jake.sensiba@mygfpartner.com.

What Happens if Debt Is Sold to a Collection Agency?

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When debt is sold to a collection agency, it’s incredibly common to get upset and/or worried. Odds are, you’ll start getting calls, emails, and text messages about you paying what’s owed.

In today’s post, we’ll discuss what leads to debt going to collections, what to do, what the collections agency can do, and what happens to your credit.

Why does debt go to collections?

Debt goes into collections when you’re behind a certain period of time (usually 30+ days) on your payment.

The lender will either use their own debt collectors or hire a third party to collect. What might also happen is your debt is sold to a collection agency, where they buy the debt from the lender (at a reduced amount than what you actually owe) and then attempt to collect on that amount.

Mortgages

With regard to mortgages, there are certain time periods to keep in mind:

  • 1 – 15 days – Typical grace period. Your payment must be paid in this period.
  • 16 30 days – You’ll start getting reminders, and you’ll likely pay a small late fee. No damage to your credit.
  • 31 – 59 days – Reminder calls and letters will increase. Your credit will reflect your current late status and your credit score will fall.
  • 60 – 90 days – The reminder calls and letters will stop. Someone from your lender will come to your house.

Read more on this subject, here.

What to do when your debt is sold to a collection agency

Don’t ignore it. The best thing you can do is get ahead of it. Gather information about the debt in question. Have them send it to you in writing.

Contact the creditor. Dispute it if you believe there are inaccuracies, or if it’s just not your debt. If it is your debt and everything is accurate, try to negotiate with the lender – they prefer to receive some of what you owe!

If the collection agency is harassing you, submit a request in writing for them to stop.

What if you’re at your wit’s end and don’t know what to do? Hire an attorney. All correspondence, going forward, has to go through them. If anything, get a consultation from an attorney (which is often offered for free) and see what they recommend.

What can they do?

When it comes to collections and the law, there are a few things they can do and several things they can’t do. If you want to know more about that, click here.

Your credit

There are two important things to know when it comes to collections and your credit report.

  1. A collection (or a charge off) hurts your credit score. Not only that, but your payment history (number one factor when calculating your score) will no longer be 100%, and that’s damaging as well.
  2. A collection will stay on your credit report for 7 years. You can implement strategies to improve your score, but you’ll only be able to do so much while that collection is on there.

Having a debt sold to a collection agency isn’t the end of the world. There are several things you can do to rectify it, dispute, or recover from it.

Related reading:

What You Need To Know About Bankruptcy

Deep Dive Into Credit Cards

What Affects Your Credit Score

The Pros and Cons of Being a Financial Advisor

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If you’ve ever considered a career as a financial advisor, there are some things you’ll want to consider before jumping in headfirst. There are definitely some perks like being your own boss and earning what you’re really worth, but there are some pitfalls too. Here’s a look at some of the pros and cons of being a financial advisor to help you make your decision.

The UpSide

You can be self-employed

While working for a firm, either public or private, is an option, so is working for yourself. You can set up an office at home to save money on office rental and even set your own schedule in a way that works with your lifestyle. If you don’t want clients coming to your home office, you can set appointments at their home or office and go to them.

There’s no salary limit

Working in another field usually comes with a salary based on your experience and the company’s pay schedule. As a financial advisor, you set your own fees for the services you provide and can even earn commissions on the products you sell. Your earning potential is up to you.

Start-up costs can be low

If you’d like to be self-employed, this is definitely a plus. Of course, you’ll have to pay licensing and other business fees, which can be a little costly but are usually a one-time or annual expense. As far as your monthly expenses, you can keep these to a minimum, especially if you work from home. Monthly website fees and a little online advertising can cost about $300 – $500 a month. Be mindful of Errors and Omissions Insurance (E&O). You must be cognizant of fees assessed by your firm, if you decide not to work for yourself.



You get to help others

Whether you’re working with individuals or small families, you can help them reach their goals of buying a home, saving for their child’s college education, or putting money away for retirement instead of living paycheck to paycheck. A job where you get to do something useful and help others is a great way to spend your days.

Get your own finances in order

As you’re developing your practice, as well as going through the licensing process, you’ll have to learn a lot about finance. Every part of the “financial journey” needs to be an area of expertise. When you’re helping others meet their goals, you’ll be able to get your own finances in order using the knowledge you acquired.

The Down Side

There’s a lot of stress

In order to be successful, you have to be great with numbers and a pro at multitasking as you’ll be switching from one thought to another all day long. The only way to make more money is to take on more clients, which leads to more stress. You have to learn how to manage your day instead of letting your day manage you.

It’s a lot of work

Depending on where you live, your state and even your county will have licensing and certification requirements that you will have to meet. You may need a college degree or special training. And in most cases, you will need to be sponsored by a brokerage firm which means you’ll need to work for one for a bit. You’ll need to acquire a lot of knowledge about finances, as well as sales, marketing, and psychology. Continuous prospecting and licensing are needed to propel your business forward.

You have to be a people person

While you’ll begin receiving referrals at some point, finding clients of your own will be difficult in the beginning. You have to be committed to going to networking events, calling people, asking for referrals, and marketing your services. This can mean working a lot of hours when you’re just starting out.

There are certainly some great perks to being a financial advisor, but there are some challenges to consider before deciding to make this your career choice.

Related Reading:

Hiring a Financial Advisor

5 Questions You Should Ask Your Financial Advisor

Different Ways Financial Advisors Charge

Is It Safe to Throw Away Bank Statements?

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Before we answer the question as to whether or not it’s safe to throw away bank statements, we need to cover how long you should keep certain statements. The following list is provided by TrueShred.

Statements to shred right away:

  • Sales receipts (unless you need them for tax purposes; in that case, scan them first)
  • ATM receipts
  • Packing slips and online purchase orders
  • Canceled and voided checks (that aren’t tax-related)
  • Utility, internet, and cell phone bills (once paid)
  • Credit card, insurance, and bank account solicitations that come in the mail
  • Expired warranty coverage
  • Correspondences from the DMV or IRS (once settled)
  • Travel-related materials (besides your passport)

List of documents to throw out after 3 years

  • Bank statements
  • Credit card statements (once paid)
  • Pay stubs (once checked against your W-2 for accuracy)
  • Medical bills (once paid and free of insurance disputes)



List of documents to throw out after 7 years

  • Tax returns
  • W-2s
  • Tax-related receipts and canceled checks
  • Records for any tax deductions you took
  • Other tax records

List of documents to throw out (variable intervals)

  • Auto titles (keep for as long as you own the car)
  • Home deeds (keep for as long as you own the property)
  • Disputed medical bills (keep until the issue is resolved)
  • Home improvement receipts (keep until you sell your house and pay any related capital gains taxes)

List of documents to keep forever

  • Birth certificates
  • Adoption papers
  • Social Security cards
  • Marriage certificates
  • Divorce decrees
  • Citizenship papers
  • Passports
  • Death certificates

You should keep these documents in a very safe place. I’d recommend a fireproof safe to keep these things protected.

How should you dispose of sensitive documents?

It is safe to throw away your bank statements, as long as you do so in a particular fashion. If you have a significant amount of paperwork, hire a shredding service. If you don’t have that type of volume, put it through a shredder. Tearing the papers up once or twice won’t do the trick.

Another safe disposal method, as recommended by Patch.com is to wrap up unused or spoiled food with the sensitive documents, and throw them in the refuse bin. Scavengers are more likely to “skip over” the refuse bin when they’re looking for sensitive information for identity theft purposes.

Below, are several ways to dispose of your sensitive documents without the use of a shredder. This list is provided by WigglyWisdom.com.

  1. Hand shred – tear up the paper with your hands. Make sure you tear the vital information and place it in separate recycling bins.
  2. Burn them – local ordinances can hinder your ability to do this, so be sure to check the laws for your municipality. Tear up the paper first, in the same way, you would for point #1, in case a piece of paper flies away.
  3. Compost – paper breaks down and can add carbon to your compost pile.
  4. Soak them in water – 24 hours in a bucket of water can leave your documents illegible.

There are three other items on that list if you’d like to learn a little more.

Conclusion

Bank statements and other financial documents contain incredibly sensitive information. It’s important you a) keep proper records and b) dispose of these items in a safe manner.

Related:

Earlier this year, I wrote a piece about the most important financial documents. If you’d like to learn more, go check that out here.

 

**Securities offered through Securities America, Inc., Member FINRA/SIPC. Advisory services offered through Securities America Advisors, Inc. Securities America and its representatives do not provide tax or legal advice; therefore, it is important to coordinate with your tax or legal advisor regarding your specific situation. Please see website for full disclosures: www.crgfinancialservices.com

How to Avoid NJ Exit Tax

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Federal income taxes are the same for every state. The only difference is how much money you make and what tax bracket you fall in.

State taxes are a completely different story because each state has its own rules. New Jersey is a perfect example with their “Exit Tax”. In this article, we’ll talk about ways to avoid NJ exit tax.


 

What’s the deal?

When you sell your NJ home and then move out of state, you have to pay the NJ exit tax.

When you sell a home, regardless of the state you live in, you have to pay tax on any gains you made. How much tax you pay depends on how long you owned and lived in the home.

According to NJMoneyHelp.com, “On June 29, 2004, New Jersey enacted P.L. 2004, Chapter 55, which requires sellers of real estate who are not residents of New Jersey to make an estimated income tax payment on the gain from the sale.”

It has nothing to do with selling and moving out of state. It’s just about selling the home and paying taxes on any gains made at the time of closing. The rule was enacted to ensure that NJ would receive the taxes owed on the property regardless if the seller was an NJ resident or not.

If you do not fill out one of the forms (see below) and pay the estimated taxes owed, the deed may be rejected.

Exemptions

There are 1 of 4 forms that you need to file when selling a home in NJ. Form GIT/Rep 3 Seller’s Residency Certification/Exemption – has 8 exemptions. The first applies to NJ residents. The remaining exemptions are listed below:

  • Real property was used as a principal residence and qualifies under IRC Section 121 of the Internal Revenue Code which excludes up to $500,000 of gain for married taxpayers, $250,000 for single taxpayers. Remember this does not include vacation or investment homes.
  • Addresses a mortgagor conveying the property to a mortgagee in foreclosure.
  • Seller is a governmental agency.
  • Seller is not an individual, estate, or trust, i.e. corporation, partnership, etc…
  • Total consideration is $1,000 or less
  • Gain from the sale will not be recognized if qualified under Sections 721 (contribution to a partnership), 1031 (like-kind exchanges), 1033 (involuntary conversions) and non-non-like kind property received
  • Transfer is by an executor/administrator of an estate pursuant to decedent’s Will

If one of these exemptions doesn’t apply to you, then you’ll have to pay tax on the proceeds and fill out Form GIT/Rep 1 or 2.

Conclusion

There are several ways to avoid NJ exit tax, but if you don’t qualify for one of those ways, make sure you fill out one of those forms and pay the taxes due.

Related Reading:

Should You Report Income From the Sale of Your Home on Your Income Taxes?

How is Passive Income Taxed?

Why Financial Literacy is Important

What Are The Different Types of Wealth?

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types-of-wealth

 

Most people think “lots of money” when they hear the term wealth. Though that is part of the basket, we’ll call it that today, it’s not the only part of the wealth equation.

There are four different types of wealth: financial, social, time, and health.

In today’s post, we’ll go over each, what they consist of, and what you can do to get more.

Financial

We’ll tackle this one right away; this is The Free FINANCIAL Advisor, after all. Financial wealth is what everyone has in mind when the term wealth is used.

Whether that means investments, savings, disposable income, no debt, what have you. Financial wealth implies that you don’t have to worry about your finances and you can now spend on things that matter to you.

To improve your financial wealth, there are a few things you can do:

  • Eliminate your debt – Debt costs you money, both in interest and opportunities. Opportunities to invest and/or to free up your time (more on that in a bit).
  • Invest – stock market, direct lending, real estate, or hard assets (precious metals, art, ect.).
  • Spend wisely – Keep a budget, review your expenses, and monitor your spending.

In my opinion, financial wealth is the least important of the four types of wealth we’ll discuss here. My explanation is in the “conclusion” section.

Social

There are two ways you can look at Social Wealth. One way is status – your social hierarchy and social class. The other way (and how I look at it) is your connections and relationships.

Unfortunately, social hierarchy is important in today’s society. People higher up in the ranks tend to have better connections and job opportunities. I’m not discounting its importance but underlining how integral good relationships are to your life.

We’re social creatures. We evolved this way. That’s why we care what people think, and that’s why we need to nurture our friendships. Healthy relationships help us live longer, happier lives.

Do you want to improve this? Communicate with people that align with your values. Tell people what they mean to you. If you love your buddy, tell them you love them.

This brings me to the next type of wealth.

Time

We truly do not know when our time will run out, for you or for me. That’s why it’s so incredibly important to make the most of it.

Using your “financial wealth” to free up your time is a great way to “create” more of it. Would rather spend time with your family and not cut the grass? Pay someone to do it for you.

Time is our most precious, yet our most wasted resource. We always think, “maybe tomorrow” or “I’ll do it next week”. Next week might not get here. If it crosses your mind, take action.

I elaborate on this in last week’s reflection

Health

I can’t decide if time or health are the most underappreciated forms of wealth. Time is the most finite of resources, but I feel like health is an afterthought, in most cases.

Your body and your mind have to be a priority. Watch what you eat, take walks, exercise, journal, meditate, speak with a therapist. Whatever you need to do to be mentally and physically healthy, I promise you, it’s worth the time/money/energy.

Conclusion

If I had to rank these types of wealth in order of importance, I’d go time, health, social, and financial. Your rankings may differ, as this is my personal opinion.

Without time, you have nothing. If you have the time, focus on your health and your relationships. If you don’t have either of those, having money doesn’t mean a darn thing.

Related reading:

The Psychology of Money

Ways to Increase Your Wealth

What Are The Levels of Wealth?

Time is Finite. We Must Understand That

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time-is-finite

 

This week, we’re going to change things up a bit, and today’s post will get heavy so bear with me.

I’ve been reading a lot over the past year or two about Stoicism, as I’ve mentioned before. The basic teachings of this philosophy are as follows:

  • Controlling your response and your emotions, not outside forces and events
  • Amor fati – “Love of fate”. Accepting everything that happens in life and using it (events, etc.) as a catalyst or a resource.
  • Memento mori – Meditating on your mortality. Realizing that time is finite and that you must make the most of it while you have it.

The last point is what I would like to focus on in this post.

Memento Mori

Marcus Aurelius said, “You could leave life right now. Let that determine what you do and say and think.”

On September 21th, 2020, my best friend, Samuel Profeta, passed away tragically in a car accident.

Sam was such a beautiful soul. He had an enormous heart and he was as loyal as they come. Thankfully, we spent some time together the day before. I only wish I would have told him I loved him one last time.

One of my favorite things about Sam is how much he loved life. How much he lived in the moment. And how he lived life to the fullest.

You go through life assuming that your friends, your family, your living situation, and/or your job will be there tomorrow or next week. You put things off, saying, “I’ll get to it later” or “I’ll call them tomorrow”.

If it’s important, don’t put it off until tomorrow. Tell those dearest to you that you love them. Don’t wait until later, because you don’t know if later will come, for you or for the people you love.

You can’t forget someone like Sam. His personality was big and his heart was full. He was with me through my high points and low points, as well as I for his.

Sometimes you need a lesson pounded into you several times until it changes your behavior. After this terrible experience, I’ll hug a little longer, love a little harder, and tell my people that I love them every time I have the chance.

Time is our most precious commodity. We mustn’t waste it.

Related reading:

What is Memento Mori?

Be Kind While You Can

What Are The Levels Of Wealth?

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There are several different ways to view wealth and the “levels” associated with it. Some people like to rank it in three tiers: not concerned with debt, not concerned with restaurant prices, and not concerned with spending on vacation.

I think this is a good place to start, but it can leave out some pretty important details.

In this article, we’ll break down our five levels of wealth, what they mean, and how you can identify where you sit.

Levels of wealth

As I mentioned in the introduction, we identified 5 levels of wealth. Below lists what those levels are, the details about them, and identifying characteristics.

  • Pay off debt and save
    • You can pay your bills. You may be paycheck to paycheck, depending on what you think that means, but you’re not falling behind. Liabilities are becoming less of a burden and your net worth is improving.
    • Development of habits – saving money and paying off debt. You’re probably wary of how much you spend on certain items, groceries, for example.
  • Increase savings and use investment vehicles
    • Your goals of paying off “high-interest” debt and establishing an emergency fund have been met. Your attention shifts to planning far ahead. Retirement savings and investing are your focus.
    • Saving at least 15% of your income for retirement and future goals. Automation implementation. Tracking net worth. Probably a little less concerned about your day to day spending.
  • Feeling comfortable and spending changes
    • You’re much less concerned about your discretionary spending. Though you’re less willing to spend money on stuff and more willing to spend money on experiences, and/or you’re encouraged to spend money on things that will create memories.
  • Financial freedom
    • You exceeded your goal net worth or nest egg number. Daily spending and discretionary purchases don’t register. You’re not concerned with how much you spend in most cases. Make sure, however, that how much you spend and how much you have actually makes sense from a mathematical perspective. There’s nothing worse than thinking you have more than you actually do. 
  • Philanthropy
    • One thing to keep in mind: make sure you are making memories and creating quality experiences before you get to this point, as well as after you get here. Time is limited. Make the most of it.
    • The quality of the experience matters more than the price. You shift your focus to using your wealth for good. How can you spend to make the world a better place?

What this all means for you

There are three things I would like you to walk away with from this article.

The first two steps in climbing the wealth ladder:

  1. Discern what level of wealth you are looking for, and what it specifically looks like for you. Everyone has different values and different wants, that means what your Financial Freedom looks like will differ from what Jane Smith’s level will look like.
  2. Craft a plan to get to your desired level. Figuring out what you want and what it looks like is great, but a goal without a plan or action is just a dream. Make it a reality.
  3. Financial wealth is great but should be viewed as a tool. It can also be viewed as a relief or peace of mind when you get to YOUR level. However, time is our most precious commodity. Truly wealthy individuals realize this truth and orient their lives accordingly.

Related reading:

Why Financial Literacy is Important

Your Wealth: What You Shouldn’t Do

Ways to Increase Your Wealth

Where Do I Send My Child to School?

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what-school-for-my-child

 

At the present moment, we’re figuring out what school to send our three-year-old for K-4 next year. I’ve had a lot to think about and it’s opened my eyes as to what matters to me. It has also given me a chance to evaluate my current living situation and where I want to end up.

This is actually quite frustrating for me, as I made a decision for a school district and a city to live in late last year. It’s why I’m living in Brookfield, WI. Elmbrook School District is the best in the state of Wisconsin right now.

However, after speaking with people (prior students and parents with children in school) and reflecting, I don’t know if Brookfield and Elmbrook School District are the way forward. I have three areas of concern when it comes to the school we choose.

Character development

I read How Children Succeed by Paul Tough, and one of the important themes in the book was character development. Both the impact home has on that development and what school can do to help.

Ideally, I’d like a school that sees the value of improving one’s character. What’s more important than that, though, is how teachers, administration, and peers treat students.

Treatment of students

I need to know that there is a culture of mutual respect between students and teachers, the teachers and faculty have the students’ best interest at heart, mental health is taken seriously, and the possible steps needed to thwart bullying have been taken.

I think all of these points start with culture. I feel like if mental health is taken seriously, respect is earned and given, then bullying might be less of an issue – I have no facts to support this, just an opinion. A culture derived from character, respect, and tolerance, I believe, has the greatest chance of student/teacher success.

Opportunities

Will my son like sports or theater? Chess or music? In the end, I don’t care. My job is not that of influencing what he participates in, it’s supporting his passions. That said, I would like where he goes to school to have broad opportunities available to him, so he is able to pursue those passions are.

Home

There’s no doubt that school is important. It’s where students learn what they need to in order to keep progressing academically. It’s where they develop their personalities and socialize with their peers. However, I believe what we teach at home is more important.

At home, kids learn about manners, right and wrong, and work ethic. As a parent, you have an impact on the early parts of your child’s life and how they develop into young people. Your child’s personality and genetic wiring will be a driving force, but I think we, parents, have at least one hand on the wheel.

Where’s home?

For me to be at my best as a parent, does the living situation make a difference? Do I move again? Do I move to a place where I feel more “at home”? Or is it a matter of viewing things through a positive lens and making the most of what I have?

I really don’t know the answer to that. Currently, as I said, I’m in Brookfield, WI. Good city, great school district. I own a home in Oconomowoc that I’m renting. So right there, he has two options of where he can go to school (that’s without open enrollment – not off the table).

However, I would like to live in close proximity to the school he attends. He can make friends in the neighborhood or in the area that go to the same school as him.

Conclusion

I haven’t decided yet on where my son will attend school. The last step in the process is a tour and a conversation with some of the administration.

In the last year, a lot of my decisions when people are involved have come down to the energy/vibe I get from them, and my gut. Once we tour the school and I speak with some of the faculty, the decision will become easier.

Related reading:

My last reflection

Back to School Money Tips

When are Per Diem Payments Taxable?

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Per diem payments are used when businesses have employees that travel. These payments are designed to relieve the employee from certain costs associated with traveling. Particularly meals and incidentals (ground travel, laundry, room service, etc.), and lodging.

This is great for both the business and the employee, but there are certain situations when per diem payments are taxable. In this article, we’ll explore exactly when an employee will pay per diem tax.

Two types

There are two types of per diem payments, meal-only, and meal and lodging. The names imply their use. One pays for meals, the other pays for meals and lodging.

It’s important that we specify the meals must be “non-entertainment related” meals.

Stipulations

As with many parts within the tax code, per diem rules are very specific. Meals and lodging have different rates.

Also, different cities have different rates. These differences are typically relegated to “big cities” and “small cities”, with bigger cities getting the larger rates. This is referred to as the high-low method. Businesses may also make payments based on the state in which you travel.

The per diem payments must be equal to or less than the federal allowable limit (depending on what method is selected). The employee is responsible for filing an expense report within 60 days. The expense report needs to include, date and location of the trip, purpose of the trip, and lodging receipts (if the meal-only option is selected).

You’re not allowed to “transfer credits”. What’s meant by this is if you use less on your lodging than is allotted, you can’t use the excess on food, or vice versa.

Tax Consequences

As I mentioned in the introduction, per diem payments can have tax consequences.

  • If per diem payments over the limit are taxable on the employee’s wages
  • If an expense report isn’t filed, or the filed expense report doesn’t include the required information, those per diem payments become taxable to the employee.
  • If the employer allows you, the employee, to keep whatever you don’t spend.

If you travel for business and receive per diem payments, just make sure you keep good records, and you hang onto your receipts. It’s better to have too much information than not enough.

Related reading:

Some Often Overlooked Tax Deductions for Busines Owners

Top 5 Overlooked Tax Deductions You Should Be Using

Why Financial Literacy is Important

 

*Be advised: Securities America and its representatives do not provide tax advice. Please consult a tax professional for specific information regarding your individual situation.

How to Make a Legally Binding Promissory Note

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legally binding promissory note

A legally binding promissory note is used when lending money. It’s a document that states the parties involved, how much is being lent, any pertinent financial information, and signatures by the involved parties.

The agreement must be clearly defined so that no argument can be made.

Four parts

There are four integral parts to a legally binding promissory note.

  • Parties – individuals or entities involved in the transaction. A party must be of legal age and of sound mind capable of entering into a transaction.
  • Promise – Defines what is agreed upon. It defines the amount to be paid and should also include a paid off date.
  • Sum certain – Specific financial information including, exact amount, pay off date, interest, amortization, penalties, and when those penalties must be assessed.
  • Signatures – to be signed by all parties involved.

These four parts must be included and clearly defined, otherwise the agreement might not be enforceable.

Once the promissory note is signed and has all the necessary parts in it, it becomes legally binding. Once legally binding, all parties involved must meet their part of the agreement.

Promissory Note Uses

Essentially, a promissory note is used when lending/borrowing money. Mortgages, car loans, student loans, personal loans, and business loans all use promissory notes to legally enforce that the borrower must pay back the loan, plus interest, in a specified period of time.

Different kinds

There are two different types of promissory notes, simple and demand.

A simple promissory note is one scheduled, lump-sum payment on a specified date.

A demand promissory note is when the lender asks for payment to be made. Normally, there is a reasonable amount of time needed between ask and delivery.

Collection

More often than not, the borrower will abide by the terms of the promissory note and pay on time. If they don’t, however, there are a few things you can do.

Talk to them. Make sure they are doing okay. Send them a written reminder. If need be, you can send one at 30, 60, and 90 days. If they’re in a tight spot, see if they can make partial payments.

A legally binding promissory note is a very important document. Make sure you include all four parts to make it enforceable and legally binding. Might not be a bad idea to have an attorney take a look at it before you enter into the agreement.

Related Reading:

What You Need to Know About Bankruptcy

How to Answer a Civil Summons for Credit Card Debt