Quick overview

Promissory note defaults and cure rights are central to virtually every loan relationship where a written promise to pay exists. A promissory note spells out the borrower’s payment obligations and other promises (covenants). When a borrower fails to meet one of those obligations, the note may enter default. Cure rights are the mechanisms—either written into the loan documents or required by law—that let a borrower remedy the default within a defined period so more severe actions (like acceleration, foreclosure, or repossession) may be avoided.

This article explains the common types of default, how cure rights typically operate, the practical steps a borrower should take when a default occurs, and how lenders treat cures. The guidance below is educational and current as of 2025; always consult a qualified attorney or financial advisor about your specific loan and state law.

Authority and further reading: Consumer Financial Protection Bureau (CFPB) resources on mortgage default and foreclosure are helpful background (consumerfinance.gov). For secured-transaction rules under the Uniform Commercial Code (UCC), see UCC Article 9 summaries (law.cornell.edu/ucc/9).

Types of default you’ll commonly see

  • Payment default: Missing a scheduled payment of principal, interest, or both. This is the most common trigger.
  • Covenant default (non-monetary default): Violating other promises in the note or related loan documents (e.g., failing to maintain insurance, not keeping collateral in specified condition, unauthorized transfers of property).
  • Insolvency or bankruptcy default: The borrower becomes insolvent or files for bankruptcy; many notes treat these events as automatic defaults.
  • Cross-default: Default under one agreement that triggers default under another tied agreement.

Each default type has different legal consequences and may prompt different cure periods or lender responses.

How cure rights work (contractual vs. statutory)

  1. Contractual cure rights

Most promissory notes and loan agreements include a section titled “Events of Default” and another section on “Remedies” or “Cure.” Contractual cure language specifies:

  • What counts as a default;
  • A notice requirement (what the lender must provide and how);
  • A fixed time period to cure (e.g., 10, 30, or 60 days); and
  • What payment or action will be accepted as a cure.

If the borrower cures within the agreed period and complies with any conditions (such as paying missed amounts plus permitted fees or providing required documentation), the lender typically must acknowledge the cure and refrain from exercising remedies tied to that default.

  1. Statutory cure rights and state rules

Some protections come from state law rather than contract. For example, certain states impose notice requirements or minimum waiting periods before a lender may schedule a foreclosure sale. These statutory protections vary widely. There is no single national cure period that applies to all loans; instead, expect variation by loan type (mortgage, car loan, commercial loan) and state jurisdiction. Consult local statutes or a lawyer for specifics.

Authoritative source: Consumer Financial Protection Bureau guidance on delinquency and foreclosure provides practical borrower protections and timelines (consumerfinance.gov).

Common lender remedies when cure fails (or is not attempted)

  • Acceleration: Declaring the full outstanding balance due immediately. Many notes include an acceleration clause that the lender can invoke after notice and any cure period.
  • Foreclosure (mortgages): Taking steps to sell the secured real property through judicial or non-judicial foreclosure depending on state law.
  • Repossession (personal property): For secured consumer or commercial loans, the lender may repossess titled collateral (vehicles, equipment) under UCC rules.
  • Collection suits and judgments: Suing for the unpaid balance and related costs.

Note: Some remedies may be temporarily restricted by bankruptcy filing or specific regulatory relief programs. See CFPB resources for mortgage-specific processes and borrower protections.

Reinstatement vs. redemption vs. cure — what’s the difference?

  • Cure: The act of correcting a default — commonly by paying overdue amounts, fees, and costs within the allowed period.
  • Reinstatement: A formal loan status change where the lender agrees to restore the loan to its pre-default standing, often after receipt of the cure payment and approval.
  • Redemption: A borrower’s right, in some jurisdictions, to pay the full debt and redeem the collateral after a foreclosure sale (state-specific).

A cure usually leads to reinstatement if the lender accepts the cure. If the lender has already accelerated the loan or completed foreclosure, reinstatement or redemption rights depend on the loan language and state law.

Practical steps for borrowers who are in default or at risk

  1. Review your promissory note and any related documents immediately. Key sections: Events of Default, Notice and Cure, Acceleration, Late Fees, and Remedies.
  2. Note timelines. If your loan includes a cure period, calendar the deadline and work to meet it in writing.
  3. Communicate early and in writing with your lender. Lenders are more likely to offer workouts, forbearance, or temporary relief if you engage proactively.
  4. Get proof of payments and communications. Keep copies of letters, emails, payment receipts, and statements.
  5. Ask for written confirmation when a lender accepts a cure or agrees to a workout. Oral promises are hard to enforce.
  6. If contested, consult an attorney experienced in loan workouts, foreclosure defense, or commercial loan enforcement. Legal counsel can confirm whether notice and cure requirements were followed by the lender.

In my practice, early, written engagement with a lender often leads to better outcomes than silence. Lenders generally prefer repayment or restructure to costly enforcement.

Tips for lenders drafting cure provisions

  • Be specific. Define what constitutes a cure (amounts, fees, documentation).
  • Provide clear notice mechanics (how notices are delivered and when they’re effective).
  • Consider business realities: allow for reasonable cure periods for business borrowers facing cash-flow interruptions.
  • Address acceleration cure scenarios: specify whether cure will rescind acceleration and what fees apply on reinstatement.

Precise drafting reduces litigation risk and creates predictable outcomes for both parties.

Examples and short scenarios

  • Mortgage example: A homeowner misses two mortgage payments. The lender sends a default notice describing the missed amounts and offers a 30-day cure period per the loan terms. The homeowner pays the arrears plus allowable fees within the period and obtains written confirmation of reinstatement. Outcome: default resolved; no foreclosure.

  • Commercial loan example: A small company violates a financial covenant (debt-to-equity ratio). The lender provides a notice of default and a 60-day cure period to provide audited statements and a corrective plan. If cured, the lender avoids triggering remedies that could cripple operations.

  • Auto loan example: After missing payments, the borrower seeks a short forbearance. The lender agrees to a 45-day deferred schedule; once the borrower makes required catch-up payments under the new plan, repossession is avoided.

When a cure may be unavailable or impractical

  • Bankruptcy filings or insolvency may limit the practical effect of cure rights.
  • If the borrower lacks funds to make required cure payments, the right to cure exists in name but is not a practical solution.
  • Lenders may refuse to accept a cure in limited circumstances (for example, habitual defaults or cases where the contract expressly allows refusal). Contract language and state law determine the limits.

Related topics (internal resources)

These pages explain connected topics you’ll encounter while reviewing default and cure provisions.

Common misconceptions

  • Misconception: Cure rights always stop foreclosure. Reality: Cure rights may halt or delay enforcement, but judicial timelines and state laws can still allow foreclosure steps in parallel unless the borrower timely cures and the lender acknowledges it.
  • Misconception: Oral promises from loan officers are binding. Reality: Written confirmations are critical; governmental and court records typically rely on written evidence.

Final checklist for borrowers

  • Read your note and any security instruments.
  • Act quickly when you get a default notice.
  • Communicate in writing and retain proof.
  • Get written confirmation after cure.
  • Seek legal help when unclear or when large assets are at risk.

Disclaimer

This article is for educational purposes only and does not constitute legal, tax, or financial advice. Loan terms, statutory cure rights, and foreclosure procedures vary by state and by loan type. Consult a qualified attorney or licensed financial professional about your circumstances.

Sources and further reading

(Information current as of 2025.)