Every year the number of problem loans in Ukrainian Banks only increases. This is facilitated by the ever-increasing number of borrowers who, for one reason or another, are not able to pay the debts incurred. Such a problem in our country has existed for a long time, and the parties to the conflict (borrowers and Banks) are still unsuccessfully trying to find the best options for its solution. Such a solution as debt reduction on the part of the Bank has not gained much popularity and efficiency. Although at first glance it may seem that this solution will allow resolving the situation with minimal losses for the lender and the borrower.
Kasyanenko & Partners Law Company offers its own vision of the credit problem and the opportunity to eliminate it.
Why do Banks sell their loans at a discount and who buys them?
To begin with, let’s deal with how Banks translate credit into the category of problem. This is due to the lack of payments in the required amount or in the terms stipulated in the loan agreement. That is, having paid not all sum or having prostrated term of payment, the borrower automatically becomes the problem debtor as from-for its actions or inaction the Bank bears certain losses. Remember that ensuring the Bank’s own interests is their first priority in the event of debt. Debt collection takes place according to the classical and long-known scheme, which consists of the following stages:
* notification of the borrower that the terms of the loan agreement have been violated. At this stage, negotiations with the Bank are not only possible, but also an excellent opportunity to resolve the problem situation in the least painful way for both parties.
* preparation by the Bank of the statement of claim in court with the requirement about compulsory collecting of debt from the unfair borrower.
* making a positive decision by the court for the Bank: appeal to the Executive service, inventory of property, its sale at auction (sale) and compensation for damage suffered by the Banking institution.
The described algorithm of actions demands from the creditor considerable time and material expenses. And enforcement can take up to several years. All this is an extremely unprofitable enterprise for the Bank, because it, having a lot of problem loans, risks not only financial resources, but also reputation and even a license to carry out Banking activities. All this forces Banks to sell problem loans and make a significant discount for the buyer.
Who makes the purchase of loans?
Collectors are engaged in redemption of problem loans from financial institutions. Collection activity has an official name-factoring.
Factoring activity in our country requires obtaining the appropriate license. Such companies make a profit due to the difference between the purchase of credit and the proceeds from the debtor. Paying attention to the borrower and the characteristics of the loan, the Bank discount for collectors can reach up to 90%.
Can I buy back my debt from the Bank on my own?
In Ukraine, the redemption of the debt is made only by third parties. The borrower or other (interested persons) have no such right. Factoring companies have every right to purchase a problem loan at a discount. Collection activity is on the verge of the current legislation. That is why all the intimidation and threats from collectors-it is nothing but a desire as soon as possible to return the invested funds. In most cases, collectors are ready for dialogue and make concessions. These concessions contribute to the loss of part of their profits, but guarantee a faster receipt (return) of funds spent on the repayment of the loan and knocking out of debts.
Remember that negotiating with collectors is a complex and protracted process that requires the involvement of a professional lawyer with significant practical experience. That is why many law firms have acquired licenses to conduct factoring activities. Now the debtor can negotiate with the law firm on the terms of repayment of the debt. The company, in turn, will buy the loan from the Bank and allow its client to repay it on the previously agreed terms.
Factoring or redemption of debt through Kasyanenko & Partners Law Company
Factoring, as already mentioned-is the procedure for redemption of a problem loan (debt) from a Banking institution. In this article we will talk about how to use this service from our company, and what advantages this process will give the debtor.
Most often, it is loans for the purchase of real estate (such as an apartment) go to the section of problem. For clarity in the description of factoring services of our company, we present the following situation.
Let’s say that you have made a loan in a financial institution (Bank) at 13% per annum and for a period of 20 years. For four years you were responsible for paying the monthly installments on the loan, but in the fifth year you began to have serious financial difficulties, because of what payment on the debt became impossible. You have not paid the loan for several years and during this period, in addition to interest for the use and the body of the loan, the Bank additionally counted you a huge penalty and penalties for non-payment under the contract. Given this, the debt increased and became even more than it was at the stage of concluding the contract. At this stage, there is a conflict situation: the Bank cannot write off your interest for non-payment, and you can no longer cover the debt of this size. At the same time, the restructuring of the loan agreement leads only to longer problems with payments and an increase in the amount of debt.
How to act in such a combination of circumstances and save your own money and time as much as possible? The opportunity for this exists and now it is not only for customers of commercial financial institutions, but also for customers of Banks that are at the stage of liquidation. You need to specify only the time that the debt repayment of microloans is not always possible. It is factoring that can help you get out of the debt pit.
The whole procedure for repurchasing a problem loan can be divided into two stages. But first you need to find out what factors directly affect the cost of redemption.
The cost of repurchase on the loan is affected by:
- the total amount of debt, which consists of the body of the loan, interest on its use, fines and penalties;
- the period during which there were no payments on the loan;
- availability of collateral and its market value at the time of repayment of the loan;
- the stage of development of the case on compulsory debt collection: court decisions, the presence of Executive orders, etc.;
- moratorium or no moratorium;
- if the loan was issued for the purchase of an apartment (mortgage), the cost of repayment of the loan is also affected by the residence of minor children in this housing;
- the position of the factoring company, which is negotiating with the Bank to repurchase the loan.
As the experience of Kasyanenko & Partners Law Company shows, the right choice of factoring company is already half of the successful solution to problems with debts. This directly depends on how much you will be able to save as a result.
The procedure for the redemption of debt from Banks
If the loan is repurchased at a Dutch auction, and the Bank is at the stage of liquidation, the procedure will be as follows:
- determining the date of the auction;
- negotiating with the debtor and determining the amount of repayment of the loan;
- the process of buying debt at auction;
- procedure for registration of the purchase agreement between a Banking institution and a factoring company;
- assignment of the right of claim to a third party or repayment of the loan by the factoring debtor.
If the loan is repurchased in a commercial financial institution (Bank):
- full-fledged financial audit of the loan agreement and determination of the amount owed to the Bank;
- assessment of collateral under the loan agreement;
- negotiating with the debtor and determining the amount of repayment of the loan;
- negotiations with the Bank regarding the terms of the buyout and its cost;
- repurchase of a problem loan from a financial institution;
- assignment of credit to the client’s Trustee to the factoring company or repayment of debt to the factoring company.
The above information provides a General understanding of the possibilities for repurchasing the loan from the Bank. The assignment of the right of claim, as shown by the legal practice of Kasyanenko & Partners Law Company is a unique opportunity to significantly save money and deal with the resulting exorbitant debts to the Bank.
Kasyanenko & Partners Law Company can achieve write-off of credit debt to the Bank or collection firm in the amount of 80% to 90%!
If you have a problem debt, and you want to carry out the procedure for repayment of the loan from the Bank and termination of litigation-please contact Kasyanenko & Partners Law Company for advice on the contacts listed on our website.
Dmytro Kasyanenko managing partner of Kasyanenko & Partners Law Company, has more than 15 years of theoretical and practical experience in the field of Banking and corporate law, as well as in the protection of clients interests in the courts of all levels.