It can be both frustrating and bad for business when you lend money to an individual or another business and they default on the loan. Many lenders experience frustration and are fearful that a borrower, by stopping payment on the loan, will never repay it. This is not always the case, however, there are different ways for lenders to legally encourage debtors to pay their debts.
First Steps: Phone Calls and Bills
Most businesses send multiple bills and make personal phone calls when a debtor fails to make payments on time. If a buyer has a temporary problem such as work leave or illness, then the approach can work and the problem can be resolved. Unfortunately, this is only true for a small percentage of borrowers, and often borrowers are not making regular payments on their loans because they simply don’t have enough money to do so. In that case, sending multiple bills and phone calls will probably not be effective.
Loan Restructuring
After making multiple phone calls and submitting bills, it may be beneficial to consider a loan restructuring or modification. A loan restructuring is the negotiation of an initial loan modification by both parties, the lender and the debtor. It can include any terms agreed to by both parties, such as a lower interest rate, extended payment time, or forgiveness of principal.
Litigation and Loss of Right to Redeem a Mortgage
Sometimes the measures described above are not enough and lenders need to proceed through more formal ways to collect their lawsuit settlement loans. This often involves filing a lawsuit against the debtor to collect money owed, or taking part in the debtor’s bankruptcy proceedings to ensure that their loan is given the priority it is owed in the debtor’s plan. bankruptcy.
If you file a lawsuit against the debtor, then the Court can order the debtor to pay his debt according to a specific schedule and using money from a particular source. For example, the Court may require the debtor to sell specific property and pay your debt with those funds. Alternatively, the Court may require the debtor to use a certain amount from your monthly or weekly paycheck to pay you the loan. If the loan document on which you are collecting payment was well written, then it will probably contain a provision regarding attorney’s fees. This means that if you win your lawsuit, the debtor will have to pay your attorney’s fees.
Usually, the same attorney who represents you in your lawsuit against a debtor can help you protect your claims if the debtor files for bankruptcy. It is specifically important that you have representation in bankruptcy proceedings because once the bankruptcy is discharged, you probably will not have any right to collect money from the debtor beyond what is included in the settlement agreement. bankruptcy.
Sometimes creditors must go to court to collect on a defaulted loan. If you have not been paid the money you are owed, then you should consult with a collection attorney in your State to discuss your options.
Speak to an Experienced Creditor Rights Attorney Today
This article is intended to be helpful and informative, but legal matters can be complicated and stressful. A qualified creditor’s rights attorney can address your particular legal needs, explain the law, and represent you in court. Take the first step now and contact a local creditor’s rights attorney to discuss your particular legal situation.