Can a promisary note still hold up in court?

As a general principle of law, a discharge in bankruptcy under Chapter 7 of the Bankruptcy Code relieves the debtor's legal obligation to pay most unsecured debts. An unsecured promissory note (meaning, no collateral) is the type of debt which may be discharged under Chapter 7.

Any magic language in an unsecured debt instrument purporting to create a preference for the creditor over other creditors in a bankruptcy would be unenforceable in the context of a bankruptcy. Otherwise, every lender would include language in its loan instruments saying "even if there's a bankruptcy, you agree to pay," and then there would be no such thing as a discharge in bankruptcy. And, of course, that's not the law.

Not legal advice as I don't practice law in Michigan. It's just my two cents on the facts you describe in light of general principles of law. If you need legal advice, please consult a lawyer who holds Michigan licensure. That's not me.

Your father should file a proof of claim and should consider hiring a bankruptcy attorney to represent his interests. If the trustee recovers no assets, there will be no distribution to creditors. You may want to review the filings to determine whether there may be undisclosed assets.

If there is a basis for the not being non-dischargeable (such as by reason of fraud) then you will want to consider hiring an attorney to file a "dischargeability" complaint.

This answer is for discussion purposes only and will not be considered legal advice. Further, a court could potentially decide the question contrary to my answer.

The clause in the promissory note stating that an unsecured debt is not subject to bankruptcy laws is unenforceable. Unfortunately, if your soon to be ex-husband files for Chapter 7 bankruptcy and he has no non-exempt assets for the court to distribute, the debt that he owes your parents will most likely be discharged in bankruptcy. Often times in cases involving debts to family members, the party filing for bankruptcy does not tell their attorney of the debt and this type of debt generally doe snot show up on credit reports. Your parents may want to consult with an attorney so that their interests are represented in the event that he has non-exempt assets to distribute.

Contact me at 480-263-1699 for a free consultation. You and I do not have an attorney-client relationship formed by our communications on this website. Advice given by me on this website is general advice based on partial information. You should not rely on any advice given without first hiring a lawyer in the area where the case is pending, and providing that lawyer with full information.