Credit: how to avoid the lapse of the term?
How to avoid the lapse of the term, or how to detect a possible abuse of the lender.
Forfeiture of the term is the beginning of trouble when we repay a credit.
- Definition: lapse of the term
- What the debtor can do to protect themselves from the bank
- Recovery: what the bank can do to recover its money
- For further
By no longer paying its monthly loan, we risk triggering a very important clause of the credit agreement: the ” lapse of the term “. All those who could not pay their monthly installments at a given time could have known the horror that these words signify. If we try to understand a little better what this implies and the means to defend against a possible abuse of the bank or the credit society, we can end up in front of an incomprehensible mumbo jumbo! We are here in the presence of the law, of lawyers, of jurisprudences among other complicated terms, and especially of a lot of headaches. We will see what are the solutions to temporarily stop paying a credit, before the lapse of the term is pronounced.
Learn more about the debt overhang issue
There is free legal aid, as we explained in our article “free lawyer”, which can best deal with temporary difficulties with credit. It is not mandatory to go through a lawyer to go to the district court, a simple request is enough. I put you in the directory of the courts of instance, it is sufficient to enter his postal code to know the nearest court of jurisdiction.
With each mortgage, a borrower insurance, as we saw in the article of the guarantees of the credit. Insurance is there for the very difficult moments of life, which no longer allow the borrower to repay his credit. The loss of employment is one of the reasons to activate mortgage insurance, so why not use it?
The insurance will then take over the payment of monthly loan payments, until the situation is unlocked. There is also insurance for consumer credit, much less widespread than real estate insurance. In addition, consumer credit insurance rarely offers the “job loss” option. We are talking about insurance that is activated in the event of death or disability.
We have just seen the normal procedures to avoid lapse of the term, but sometimes the Bank or the credit society can “go wrong” and be illegal. It may either not have a contract “in good standing”, or trigger wrongfully the clause forfeiture of the term.
Forfeiture of interest
When the lender fails to comply with the law, for example with an incomplete contract, or with procedures that do not comply with the legal obligations, the judge may punish the lender with the forfeiture of interest. This is the principle we explain in our article on ananacredit.
Clearly, the borrower has only to repay the money he has borrowed, without paying interest. However, it is important to differentiate here a consumer credit from a mortgage. On a credit conso, this sanction is without appeal. For a mortgage, the judge can modulate the forfeiture of interest.
This possibility of the borrower is rarely used: only when he has problems repaying his loan will he look more specifically at his contract, and will try to look for “the little beast”. Here, the best is to have a good lawyer, who can verify that the credit agreement is not well written. The main errors visible on a contract mainly concern the calculation of the TEG.
Nullity of the credit agreement: only if the borrower was a victim of a mental illness that prevented him from making an “informed” decision, if the borrower was forced under the violence (physical or moral) or if the contract is made pass for what it is not (the case of a consumer credit making one believe in a mortgage). If the contract is void, the credit is canceled, and the “creditor” may even be ordered to pay damages.
Forfeiture of the abusive term
The decay of the term, as we have seen, can only be triggered under certain conditions: to be provided for in the credit agreement, and especially not to pay its monthly installments of credit. But credit agreements may contain ” unfair terms “, which are not legal. Example of unfair terms:
- Require the borrower to put his income in a bank account of the lending bank, under penalty of triggering the forfeiture of the term
- That the contract suggests to the borrower that the lapse of the term may be triggered at the slightest breach of its obligations, or even because of false non-essential information for the conclusion of the contract.
To challenge unfair terms, it’s very simple, you have to go through the court.
We have just seen the main possibilities of not paying his credit in case of problems, just before resorting to the file of over-indebtedness in case of lapse of the term. But before coming to the end of the term, banks or credit companies go through several stages if the debtor does not act. What happens if we do nothing, if we just let the bank or the credit society find that we did not pay the monthly payment?
In short: if for two years, the credit society, the bank or the collection company has only sent reminder letters or formal notices, without ever seeking legal redress, the person who owes money no longer has to pay its debt. Let’s say it right away: it’s rather rare, it’s better not to count on it, besides that. “It is not done not to repay what we owe! “. It is safer to have the collection company convicted of harassment! The harassment is mainly caused by repeated phone calls: it is a good idea to record them systematically, especially when you know that you can complain from two calls. To learn more, read our article on “how to defend against abusive recoveries”.
Judicial recovery, or litigation
This is the last step to recover a debt. The creditor will go to court to get a refund. Once the ” enforceable title ” has been obtained, the bank will be able to seize the assets of its debtor for reimbursement. It must first serve by bailiff to the debtor that it has an enforceable title. Once the debtor informed by bailiff, litigation recovery can take place: they come to pick up the furniture, seize a bank account or sell the house.
Obligation to pay
This is the most common legal procedure to force the person who owes money to pay. The creditor can thus obtain his enforceable title in two months, which is fast. This is the preferred solution for small sums of money, there is no need for a lawyer to use it.
As with any legal action, the debtor has the opportunity to challenge, which will have the effect of delaying the payment of the claim.
The summons must be drafted by a bailiff or a lawyer, but allows for a conviction of the defaulter in one month. This procedure is used in case of emergency, with complete evidence of the offender. Since this procedure is more expensive to implement than the payment order, it is used less often.
Assignation at the bottom
This is the heaviest of the three procedures. Here, the parties (debtor and creditor) must be represented by a lawyer. The judge will look “thoroughly” at the dispute. A litigation at the bottom is normally something complicated, where there is a big job to dissect the ins and outs, and can therefore last several months, sometimes even years. In the recovery of debts, this procedure is rarely used, a non repayment of credit is rarely questionable, the order to pay is sufficient in the vast majority of cases.