What happens if you do not pay the loan – the consequences of non-payment
The availability of credit has led to the fact that loan obligations have received hundreds of thousands of customers. Receiving funds from a bank, citizens are counting on a speedy repayment of the debt, but often solvency only worsens, debt is formed, and penalties are charged. Assuming delay, the client thinks about what will happen if you do not pay the loan, if further payments are no longer possible.
The urgency of the problem with non-payment of loans
In recent years, the general economic situation does not please the financial prospects of the majority of the population. Reduced income, rising prices and tariffs in certain segments of the economy, reduced turnover and profits of entrepreneurs, loss of employment by employees – these are the circumstances faced by the majority of defaulters in consumer and target loans (car loans, mortgages, etc.). The non-payment problem is becoming widespread, which requires the adoption of additional measures of financial protection from both the borrower and the bank.
Some banks resort to mass actions to refinance debt on loans taken from other banks, others insistently offer to issue insurance policies for the period of crediting, others offer loans with registration of collateral.
For individuals, the situation is complicated by the fact that the most popular type of lending was credit cards issued almost on demand, without proof of income and no additional effort on the part of the person. The presence of “easy” money allowed for a time to compensate for the deterioration of the financial situation, however, as the funds were spent on the card and the loan period increased, the amount of debt for 1-5 years grew as a “snowball”. Attempts to refinance at another bank led to the formation of all new debts and obligations to pay interest to the bank. In the absence of timely active actions, the debtor of banks fell into a situation of bankruptcy with further negative consequences for at least 5 years.
The seriousness of the situation makes it necessary to pay special attention to lending in the new conditions, when the risk of losing work or losing other sources of income is very high.
What do citizens of the number of 25% of the population of the whole country who have been in a very unpleasant position for years, are decided on the basis of a specific situation, taking into account the possibilities available for settling the issue by peaceful means or through court. The main thing that you need to understand when the amount of the monthly payment exceeds the monthly income, that the problem can not be resolved without the active participation of the debtor in it.
Consequences of failure to comply with financial obligations to the bank
For many borrowers, faced with the inability to service the debt accumulated in front of the bank, the situation looks like a disaster. Proper assessment of the situation and the choice of the right decision will allow you to get out of a long vicious circle of endless fines and trials.
The termination of payment on loans leads to vigorous actions by banking services that require funds to pay off debts and pay fines. If the pre-trial settlement had no results, an appeal to the court could be the way out. This will stop the interest accrual process and fix the amount of accumulated debt. In the future, the parties (the creditor and the debtor) will be able to resolve the problem on the basis of a court decision, which will take into account not only the interests of the bank, but also the position of the debtor, if he presents sufficient evidence that the non-payment arose for objective reasons beyond his control.
If there is nothing to pay the debt, and the amount only increases, it makes sense to think about conducting a bankruptcy procedure. However, the process is quite lengthy and takes a lot of effort. In addition, the consequences of bankruptcy will adversely affect the life of the borrower over the next 5 years or more.
Bankruptcy or restructuring?
Appearing relatively recently, collection activity has made a certain stir among the many defaulters of credit institutions. Sometimes their methods of work border on violations of the law (threats, blackmail, extortion). In 2015, a law was passed that directly related to the debtors of the bank, “On Bankruptcy”.
The provisions of this law have clarified the issue of regulating relations between debtors and creditors, which were previously based only on general provisions of the law. As a result, customers who were unable to pay all their debts to banks were able to initiate the bankruptcy recognition process.
For credit institutions, such a solution of the problem means the risk of total non-return of funds. Debt cancellation is a highly undesirable measure that is unprofitable for the bank, so the lender, like the client, is interested in stabilizing the situation and finding a way acceptable to both parties.
Based on the dynamics of the growth of non-payments, credit institutions more willingly began to use various options that made it possible to terminate actions for the recovery of debt, with compensation for losses with smaller amounts, longer terms and with lower interest. More than ever, various restructuring and refinancing programs with a deferred payment or a maturity longer than the initial one are popular, with cancellation of penalties. The success of regulating the issue of non-payment to a bank largely depends on the client himself – the sooner the borrower starts negotiations with the bank and reports financial difficulties, the less consequences this will result.
Ignoring the bank’s calls with reminders about debt repayment, the borrower forces the bank to take more stringent measures – letters and SMS informing, charging penalties, and, as a result, transferring the claim demanding payment of the debt to court.
Instruments of impact on the debtor
At the negotiation stage with the bank, unpaid loans will force the bank to use a wide tool of measures to influence the client:
- Debt relief from the client’s accounts (if any, and including in the loan agreement a clause giving the bank such a right).
- Appeal with the requirement to return the debt to the guarantor, co-borrower, guarantor.
- Assignment of the issue of debt collection to collection agencies (without repurchasing debt).
- The trial (if the amount of the debt is up to half a million, the case will be considered in a magistrate’s court within 10 days, in the absence of an appeal, the court’s decision is transferred to the execution of the bailiffs).
- Submission of claims to other persons involved in the loan (guarantors and co-borrowers). If the property is available, the debt will be repaid by arrest and further sale of the property of the debtor, borrower or guarantor.
- Registration of the assignment of the right of demand – the signing of the cession agreement, as a rule, with a collection agency. As a rule, the collector buys back debts in large volumes, since it is not always possible to repay the debt in full and with interest. Losses on one of the repurchased debts can be offset by profit on other debts.
These measures relate to the actions of the bank to coerce to pay the debt. However, the issue can also be resolved through peace agreements. The decision whether to appeal to a third party (to collectors or to court) to receive funds is made individually.
Requirement to repay a debt in court
The general scheme of actions of the bank, faced with non-payments, is as follows:
- Actions before going to court. The borrower is experiencing psychological pressure from various bank services. It is recommended to document all negotiations with the bank (recording telephone conversations, preserving written evidence of abuse of legal authority by the bank).
- Litigation. If the preliminary stage of the impact on the debtor was not crowned with success, the creditor goes to court. For the period of judicial review all the property of the debtor is under arrest.
- Actions on the basis of a court order. At this stage, the work on the recovery of debt is carried out by the bailiffs.
It is important to choose the right tactics of action, as the wrong behavior will have even more serious consequences for the debtor.
Making the decision not to pay the loan will not be a solution to the issue with the debt. Even if a person cannot make a payment for objective reasons, a credit institution will necessarily remind about obligations.
After the borrower has not paid the next installment, a call will arrive from the bank, numerous SMS notifications will be sent with requests to pay the debt.
If the client stops responding to calls, the bank will act more firmly. The debt will be transferred to a special department dealing with penalties, or the bank will turn to collectors, whose methods of influence sometimes exceed the limits of legal and reasonable.
The best option for both parties is to reach a compromise solution and be open to the creditor.
Do not waste your nerves, leading conversations on high tones. Sometimes intimidation by the court is a more desirable way to resolve the issue if the bank is not going to make concessions and does not offer acceptable ways of settlement. When a person does not pay for a loan, what will happen to his debt and how the court will decide how to return it.
Actions after trial
After the court has considered the case and made a decision, the bailiff service is connected. As a rule, a court decision obliges the debtor to return the money to the bank, however, for the defendant, the positive thing is that the amount has already been fixed, and if there are compelling reasons, the amount of the debt does not include the accrued interest and exempts from paying fines. To get relief from the court, the defendant must prove that the formation of debt is due to serious reasons: loss of work, health, other sources of income, death of the main earner in the family, etc.
Having received a court order for execution, bailiffs have the right to:
- Take the property of the guilty person and arrange a sale, and use the proceeds to pay the debt to the bank.
- To make the arrest of accounts, forcibly sending part of the funds from them to compensate the debt to the bank.
- Regulate the procedure for collecting the debt from the defendant’s income.
- Restrict the right to travel abroad.
Until recently, former clients of the bank could hope that the arrest of a single dwelling was impossible. However, at present even such housing can be used to derive additional income, which would be used to pay the debt to the bank. It is within the competence of the bailiff to seize such property and prohibit the right to dispose of it until the debt is paid.
What will happen if you do not pay a loan to the bank?
To take a loan and not pay for it at all will not work. The absence of any actions and ignoring the problem only worsens the position of the debtor. Meanwhile, there are many ways to get rid of debt, even with a significant decrease in solvency.
Faced with further inability to service the debt, the client makes a decision:
- Completely refuse to pay.
- Go to negotiations with the bank in order to provide acceptable terms of debt repayment.
Sometimes the situation looks so bad that it is easier to get a court order that would take into account the client’s position than to continue to bear an unbearable burden. It is strongly recommended to involve a lawyer in the regulation of the issue or to seek help from experienced bankruptcy specialists.
Tips for resolving issues with defaults
No matter how hopeless the situation may seem, for a debtor who has taken a loan from a bank, there is always a way out.
The following tips will help the debtor to improve their position:
- Breaking or revising relations with the bank under the contract. Sometimes a careful study of the contract allows you to cancel the contract when you find items that violate the provisions of the law. In some cases, it is possible to get rid of commissions, forfeits, fines, to fix the debt.
- Repurchase debt. Not everyone knows that not only a collector can take a debt for a debtor. A similar right has the right to declare to the bank one of the relatives of the debtor. As a rule, the amount of debt upon redemption is significantly less than that actually accrued – from 20 to 50%. In addition, debt repurchase is allowed to legal entities.
- The use of restructuring measures in the framework of reaching a peace agreement with the lender (refinancing, credit holidays, restructuring). These measures will allow to reduce the amounts paid, to cancel fines, to increase the term of debt repayment.
- Declaration of bankruptcy. Due to the adopted federal law, the process of declaring a physical person bankrupt received tools for the legal solution of the defaulter’s problems. The bankruptcy of physical persons is a recognition of the insolvency of a citizen as a payer, which entails the impossibility of repaying the debt.
Deciding for yourself the question whether it is possible not to pay a loan, if you initiate your own bankruptcy, you should not assume that this procedure will relieve the problem without any consequences. This process is serious and is associated with the transition of the client to a special legal status.
There are many organizations involved in the recognition of the debtor, not paying the loan, bankrupt. Perhaps it makes sense to reassign the conduct of business to experienced lawyers specializing in this field.
The following measures will be taken as the consequences of recognizing a person as bankrupt:
- property owned by the defaulter is arrested;
- a ban on the disposal of funds in the accounts;
- existing assets are subject to further sale in order to repay the debt to the bank;
- for 5 years, senior positions will be closed for the debtor-bankrupt;
- 5 years impose a restriction on travel abroad.
When deciding on bankruptcy, it is necessary to understand the risk of loss of all existing property and valuables, savings. For this reason, on the eve of the bankruptcy procedure, it is necessary to carry out a number of measures to dispose of the property, if, of course, it is available.
The main conditions for declaring a person bankrupt are:
- the achievement of a debt of half a million rubles;
- accumulated late payments within a three-month period.
The proceedings are made in the arbitration court, to which the debtor is territorial. The reason for bankruptcy will be a statement.
If you do not pay the loan to the bank, even with the most compelling reasons, the debtor must be prepared for the debt settlement process. Using one of the existing solution schemes, a former bank customer must draw certain conclusions: there is no free money, and the consequences of “easy” money can make life difficult for a long time, even if they manage to resolve the issue with the bank with the least losses.