The Note Payments Stopped and the Numbers Did Not Match

The situation

'How much does he actually still owe me?' Milica asked at the first meeting, and it took most of the file to answer that question properly. She and her brother Goran had sold their small appliance repair shop in Simcoe two years earlier for a price in the low six figures, most of it financed through a promissory note from the buyer, Javier, payable in monthly instalments over five years. Milica worked as a gas station attendant and Goran as a transit operator; the shop had been a side venture the two of them built up over a decade, and the note payments were meant to be a modest supplement to both their incomes going into retirement.

Javier had run the shop competently enough by all appearances, but his first full year of ownership fell well short of the sales forecast the deal had been priced around. Payments arrived late, then partially, then stopped. Milica had been tracking what was paid and what was owed in a personal notebook and a series of bank deposit slips, not a formal ledger, because the sale had been handled without much structure beyond the note itself.

Goran had not wanted to sell the business in the first place. He had agreed to it under pressure from Milica, who wanted out of the day-to-day involvement, and he was now the one pushing hardest for the note to be enforced at full value, arguing that any concession to Javier was a concession Milica should not be making on his behalf too. That disagreement between the two sellers ran underneath the whole file.

By the time Milica came to us, Javier had gone quiet for nearly four months on payments, and the total arrears had grown to an amount that, on Milica's own count, was substantial relative to what remained on the note. She wanted to know whether to demand the balance in full, seize whatever security the note gave her, or try to work something out. Answering that meant first working out what the real numbers were.

Milica had also started to worry about her own exposure. The shop's lease, which she and Goran had assigned to Javier as part of the sale, still carried her name on an older personal guarantee that neither of them had thought to formally release at closing. If Javier's business failed outright rather than simply falling behind on the note, she was concerned she might still be on the hook to the landlord regardless of how the note dispute went. That question sat alongside the payment default as a second, quieter worry she raised almost as an afterthought in the first meeting, but it shaped how cautiously we approached any move toward accelerating the note or pushing Javier toward default rather than a workout.

Why this was harder than it looked

A defaulted promissory note sounds like a straightforward collections problem: a fixed sum is owed, payments stopped, the note likely has an acceleration clause that lets the seller demand the full remaining balance on default. That much was true here. But before we could rely on any of it, we needed an accurate account of what had actually been paid, and Milica's own records did not agree with the account she had given us at the outset.

Her notebook showed a sequence of payments that, when we reconciled them against her bank deposits, did not match the amount she believed was still owed. Some payments Javier said he had made did not appear in her notebook at all; some entries in the notebook did not match any deposit we could trace. It became clear that Milica had been rounding, estimating, and in a few cases recording a payment on the date she expected it rather than the date it arrived. None of this was dishonest — it was the ordinary imprecision of an informal bookkeeping habit — but it meant the number she wanted to demand from Javier was not a number we could stand behind with confidence.

This mattered because a demand for the full accelerated balance, if wrong, does more than embarrass the person making it. If Javier could show the demand overstated what he owed, it would undercut Milica's credibility on the rest of the file, and it risked handing him grounds to argue the whole default position was unreliable. Under the note, acceleration on default is a right the seller can rely on, but only if the underlying arrears figure is accurate. An inflated number is a self-inflicted weakness in what should have been a strong position.

There was also the question of what security the note actually gave Milica and Goran. Some seller notes on a business sale are secured against specific assets of the business; others are essentially unsecured personal promises to pay. This one had a general security interest registered against the business assets, which was useful, but its priority against Javier's own lender needed checking before we could say what it was actually worth if it ever came to enforcement.

Javier, for his part, was not simply refusing to pay. His account was that the business had underperformed the projections used to set the sale price, and that he had raised this with Milica informally, months earlier, without a clear response. That was not, on its own, a defence to the note — the note was not conditioned on the business hitting any particular revenue target, and a buyer generally cannot rewrite a fixed payment obligation because the venture underperformed after closing. But it explained why he had stopped paying rather than come back with a formal request to renegotiate, and it meant any resolution had to address the underlying disagreement about the business's performance, not just the arithmetic of what was paid and owed.

What we did

1. Rebuilt the payment ledger from source documents. We asked Milica for every bank statement covering the period since the sale and cross-referenced each deposit against her notebook and against the payment schedule in the note itself, rather than relying on her running total. This took several passes because some deposits combined note payments with unrelated transfers between her and Goran, and each one had to be separated out and confirmed.
2. Reconciled the two accounts against Javier's version. We wrote to Javier's counsel asking for his own payment records rather than opening with a demand letter. His figures, once compared line by line with ours, revealed a smaller gap than Milica had assumed — he had, in fact, made two payments she had not recorded, though he had also missed more than he claimed. Reconciling both sides before taking a position kept us from making a claim we would later have to walk back.
3. Confirmed the security position under the note. We reviewed the registration securing the note against the business assets and checked its priority against Javier's operating lender, so Milica understood realistically what enforcement would actually recover if negotiation failed — which turned out to be less than the arrears figure, given the lender's prior claim on the same assets.
4. Settled the disagreement between Milica and Goran on instructions. Because they held the note jointly, we needed one negotiating position, not two. We met with both of them together to walk through the reconciled numbers and the security analysis, which gave Goran a factual basis to see why a negotiated outcome, not a demand for the full theoretical balance, was the realistic path.
5. Opened a structured negotiation with Javier's counsel. With accurate figures in hand rather than Milica's original estimate, we proposed a revised schedule: a reduced lump sum to bring the account substantially current, followed by a restructured monthly payment reflecting what the business could actually support based on a year of trading history, rather than the original forecast-based figure. Anchoring the proposal to reconciled numbers, instead of a demand either side could dispute, meant the conversation moved quickly to terms rather than stalling on whose figures were right.
6. Documented the workout as a formal amendment to the note. Rather than an informal understanding, which would have left Milica and Goran with nothing enforceable if Javier stopped paying again, the revised terms were put into a signed amending agreement that preserved the original security and the acceleration right on any future default. This gave the new schedule the same legal footing as the original note, so a second default would not require starting the enforcement analysis over from scratch.
7. Set up a simple record-keeping practice going forward. We gave Milica a short payment log template and asked her to record each payment against her bank statement on the day it cleared, rather than continuing the notebook-and-memory system that had produced the original dispute. This meant that if Javier missed payments again, Milica would be able to produce an accurate arrears figure immediately instead of needing another reconciliation exercise before she could act on it.
8. Resolved the lease guarantee question separately. We contacted the landlord's agent to confirm whether Milica's personal guarantee on the original lease had been released when it was assigned to Javier, and obtained written confirmation that it had — closing off the second exposure she had raised at the first meeting, so the note workout was not the only loose end left unresolved from the original sale.

The outcome

The workout Javier and Milica ultimately signed reduced the arrears Javier had to pay immediately by roughly a third compared to what Milica originally believed she was owed, reflecting both the payments that had genuinely been missed and the ones her records had failed to capture. In exchange, Javier agreed to a modestly higher monthly payment than the original note required, spread over the remaining term, to make up the difference over time rather than all at once.

Neither side got what they had opened with. Milica did not recover the full amount she had believed was outstanding, because a meaningful part of that belief turned out to be a bookkeeping gap rather than an actual missed payment. Javier did not get the extended, reduced schedule he had initially proposed, because the reconciled arrears were higher than he had argued and the security behind the note gave Milica real leverage even after accounting for the lender's priority ahead of it.

Goran remained unhappy that the outcome was a compromise rather than the full enforcement he had wanted from the start, and told Milica so directly during the final review meeting. But once he had seen the reconciled numbers and the security priority analysis for himself, he signed the amended note alongside her, which mattered, since both their names were on it and a split position would have weakened it against Javier either way.

Payments under the revised schedule have been on time and complete for the several months since, tracked now against Milica's bank statements rather than a running estimate. Whether that continues for the rest of the term is not something we can promise, but the file that would have supported enforcement, if it comes to that, is now accurate — which is the part that was missing at the start.

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