As a result of a settlement agreement, we have obtained a promissory note for payment. What is the process for making sure we have obtained the best priority? I'm assuming the race-notice statute applies to promissory notes of this nature. If not, what is the process for obtaining the priority in case of bankruptcy?
You are asking a simple question that has a very complicated answer. You should contact a local debt attorney to explain the nuances. The following is by no means complete, but is more of a bar exam answer that might help get you in the right direction.
Assuming the promissory note is governed by Washington law, look at RCW 62A.9A (http://app.leg.wa.gov/rcw/default.aspx?cite=62A.9A). The important steps are 1) attaching the security interest (a valid agreement); 2) perfecting the agreement (additional steps as described in RCW.9A-312; http://app.leg.wa.gov/rcw/default.aspx?cite=62A.9A-312); and 3) determining priority relative to others.
To obtain the best priority, essentially, try to perfect your interest as soon as possible. You can likely do this by filing your security interest here: http://www.dol.wa.gov/business/UCC/ucconline.html. Filing is not free.
This area of law is complicated, convoluted, and should not be taken lightly. If the promissory note is large enough, it would be wise to retain local counsel.
The very best way for your note to have priority is for the debtor to give you a security interest in either real estate, or a large asset such as a truck, an automobile, or a tractor. That can be accomplished with the execution of a simple security agreement, and the filing of a Form UCC-1 at your local county court. In order to have a first priority lien against the property, it must be an asset that does not have any preexisting liens against it. This is a much more simple process than getting a lender or creditor to subordinate their security interest or debt under your debt obligation. Go see a commercial lawyer in your community to obtain additional advice on this issue.
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