What Happens When You Become A Debt Defaulter?

Good-Guy

VIP Contributor
Debts and borrowing loans is something that many people have been doing for a really long time. Loans are one of the important aspects of finance and business. Unfortunately, dealing in loans is not that easy for lenders and borrowers. Whenever the borrower fails to pay the debts, they usually become a "Defaulter". The term defaulter could apply to a party that does not pay back the loans or pays the money late. It could also refer to the parry that does not pay the interest and it also applies to individuals or any body that does not provide mortgage to the lender. This is a normal situation when the companies or individuals go bankrupt and they become unable to pay their debts.

In fact, even many countries could become defaulter when they become financially weak and unable to pay the debt on an international level. During the pandemic, many people and companies became defaulter and filed for bankruptcy. I am not sure what happens after they become defaulter or file for bankruptcy, but I think since most of the business organizations are insured, they tend to recover the funds through insurance companies. I think this might be one of the reasons they tend to secure themselves. What do you think happens after some individual, country, or any business firm becomes "Defaulter"?
 

Kingsley

Valued Contributor
Thats will really be a nightmare no one will like to find themself in such a position where they will be heavily indebted and they end up becoming a defaulter. Because the embarrassment can be so much and we have even heard cases where people end up committing suicide just because they couldn't stand the shame and embarrassment that comes with it. The first that happens when one becomes a defaulter may differ from financial institutions to financial institutions. Banks generally will lay hold to the collateral you must have brough before you accessed the loan, and this will happen after some series of embrassing calls would have been made and in some cases the issue might end in court where the bank may likely lay hold to more collateral where the initial collateral doesn't not cover the worth of thr loan, although this is quite rear because the bank will always try to make sure they get more collateral that is worth more than the loans.

Then if it were to be a micro finance bank they are known for making a public show of embarrassment of their defaulters, are good are ridiculing their defaulters and they will use any possible means to retrieve the loan.
 

Caramelle

Active member
Becoming a defaulter can be a nightmare for an individual. It will mean being cut off from almost all possible sources of borrowed financial lifeline which can be a huge problem in the time of need. In the past, creditors resorted to collection techniques that are meant to embarass defaulting borrowers and force them to pay their debts no matter what. Nowadays, there are laws that protect borrowers and defaulters from pubic harassment, undue pressure, and excessive or oppressive collection processes by creditors and their collecting agents. However, these safeguards should not be taken by the defaulter as a reason to relax and ignore collection efforts.

Creditors can resort to legal means to enforce the collection of debts. They can have your salaries garnished which can be both embarassing and financially crippling. They can force you to appear in civil courts and charge you for the legal costs. Worse, if they can find grounds to charge you legally for fraud, they can file a criminal case against you which could land you in jail. While it's true that a debt is a civil liability that can be settled by money, things can go ugly for defaulters who can be found to have tried to defraud the creditors into lending the money by misrepresentation or omission of vital information. Thus, do your best to pay your debts on time and avoid these complications.​
 

Abigael

Valued Contributor
Defaulters are really hard people or organizations to deal with. They are are a big headache to the loan lending people, institutions or organizations. That is why those who give out loans secure themselves for sure. Failure to which they will have to just let go of the money that they lend to the defaulters. As for the defaulters, they get to face several issues that include;
1. Having trouble with the law due to their defaulting.
2. Loosing persons relationship with the person or organisation who lend them.
3. Having a bad credit history that hinders them from getting benefits and opportunities that come with a clean credit history.
4. Having mental health issues such as anxiety due to the stress of having unpaid debts, which can even hinder their physical health.

It is therefore for your own good to avoid being a defaulter. And if you are the one lending out loans, you should take up precaution measures. That includes;
1. Having a contract signed with your borrower so as to get legal help incase they default.
2. Taking an insurance policy that covers you incase your borrower defaults.
3. Always checking the credit history of your borrowers so that you don't lend money to a serial defaulter.

so
 

Alexandoy

VIP Contributor
This topic depends on the type of loan. For big loans such as mortgages there is the collateral that is required by the lender which is usually a bank or a financial institution. Worse if the lender is a private person which would levy an onerous interest charges especially when you have arrears in the installment payments. When you default on the debt the first thing the lender would do is to forfeit your collateral based on the loan agreement that you signed. You lose the collateral and maybe you need not pay the balance of your loan. That happened to a neighbor who mortgaged his property for a bank loan. When he couldn't pay the 11 million pesos balance of the loan the bank forfeited the property. Until now, after 10 years, the property is still owned by the bank because it is for sale but there are no takers.
 
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