Notice of Purchase Money Security Interest

When a bank or creditor wants to get money by selling the security interest to potential buyers, the creditor is obligated to inform the debtor with a formal notice in order to ask him if he wants to buy the collateral property or shares or if he allows the creditor to sell the property and collect his debt.

Importance of Notice of Purchase Money Security Interest:

Before we start describing the importance of the notice of purchase money security interest or PMSI, it is important that first we define what security interest is. When an individual or a company gets mortgage loan or credit from a bank or loan company, it is required to give something to the bank as the insurance. Usually the debtor pledges a piece of real estate or property as the collateral with the bank but in this case, the debtor gives ownership or collecting interest rights to the bank on some shares and stocks as insurance. This way if the debtor is unable to pay off his debt, the bank has the legal right to sell the shares and collect the debt capital amount.

Before the bank sells the shares, it is obligated to inform the owner or debtor about this sale and ask him if he wants to buy the shares with money and if he wants to pay off his debt in some other way or if he allows the bank to sale the shares. This is where the formal notice of purchase money security interest or PMSI comes handy. With this notice, the bank notifies the debtor that is being declared defaulter for the debt that he is required to pay to the bank and as standard procedure, the bank is inviting him to pay for the debt and buy his shares back or the bank has the right to sale the shares for collecting the debt money. This notice is very important for the bank because if it doesn’t notify the debtor about the sale, the debtor has the right to file a case against the bank because he wasn’t notified before the sale and didn’t provided with a last chance to pay off his debt.

Useful Tips for Writing Notice of Purchase Money Security Interest:

This notice is a legal document and usually banks hire attorneys and lawyers to draft this notice. But, as an individual, if you want to write this notification letter for the debtor, you can get help from some tips. The first tip is that you need to notify the debtor and send the letter at least 10 to 15 days prior to the sale. This way the debtor can arrange for the money to pay off his debt if he wants. Secondly, you need to mention the amount (i.e. money) that you will collect after selling the collateral in order to notify the debtor about how much money he is required to come up before the sale deadline.

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Notice Purchase Money Security Interest


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