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This article was updated on September 18, 2021
Poorly planned debt can be a real tragedy for an entrepreneur, a family or an individual as it can bankrupt a company and lead to severe personal problems. That is why it is important to know how to handle the issue of over- indebtedness in case we are falling or are already in a situation like this. For this reason, here are some of the most recurrent questions that I am asked in this regard.
1. Can I be jailed for a debt?
No. Article 17 of the Political Constitution of the United Mexican States says: “No one can be imprisoned for debts of a purely civil nature.” However, there are nooks and crannies since a commercial claim can become a criminal or custodial claim if fraud is proven. This applies to debts with banks, finance companies, popular savings banks or private lenders.
2. Can I be accused of debt fraud?
Not unless you falsify the information you provided for the opening of the loan or it is shown that you took it out with the clear intention from the beginning not to pay it.
3. Can I be seized?
Yes and more if there are promissory notes and / or a garment in between. That is, you have signed the credit or debt on a property, machinery or cars. However, this can only happen after a commercial lawsuit and a judge orders the seizure as a precautionary measure at the beginning of the judicial procedure and then give way to the trial as such.
4. What is the procedure in a garnishment?
If you are sued commercially for not paying a loan, the first step of the lawsuit is the seizure. An actuary duly accredited by a civil court wearing his official identification badge will present himself at the domicile set and will proceed to inform you of the attachment for said debt. You will have to let it pass and they will give you the option to choose the items that you want to be seized and that are valued at that time by the clerk to cover the amount of the debt and the judgment.
5. What if I do not let the clerk pass to my address for the garnishment?
In case you refuse to let it pass, the clerk can request support from the public force to force you, and if you refuse to choose the assets to seize, the clerk will choose them for you.
6. How can I avoid a garnishment if I am already sued?
You can pay the entire debt at the time of the garnishment to stop it or negotiate the payment directly with the creditor at the time with the clerk as a witness if the creditor agrees.
7. Can I recover the seized property?
Yes and there are three ways:
- Agree to pay the amount demanded of you in cash and the goods will be returned to you.
- Fight the trial and win it by proving that the debt they attribute to you is not legitimate.
- If the seized assets do not belong to the debtor, then a third-party lawsuit must be filed, where you will have to prove with evidence that the seized assets belong to someone other than the debtor.
8. Can a residence be seized if the debtor no longer lives there?
No, and it is the creditor’s job to locate and collect from the debtor in their new location.
9. Can they take my car away if I don’t pay?
There is what is called “dation in payment” and it is the voluntary delivery of a vehicle to be taken as payment of the remaining debt of the credit when the payments can no longer be met. However, this is a mutual agreement and not binding, otherwise the car could only be repossessed under the assumptions of the previous questions.
10. What about a mortgage loan?
As with cars, houses can pay for the remaining credit, and in the same way this must be done by mutual agreement and voluntarily. Otherwise, a lawsuit for the property of the house and in its case an eviction lawsuit would be initiated.
11. Can you charge referrals?
No. The only ones who can be charged are the jointly obligated and / or guarantees.
12. Can I be charged with theft?
13. What about abusive interests?
Many people are surprised by the large amounts that are paid in interest on their loans. However, generally at the beginning of the life of a loan, the user is informed of the Total Annual Cost (CAT) and the default interest rate, if applicable. In other words, abusive interests are generally accepted from the beginning of the loan and signed accordingly.
14. How likely is it that I will be sued for a debt?
Here six factors come into play that will determine the level of risk:
- Amount of debt: The higher the amount, the greater the risk. This can be relative depending on the type of debt, for a bank it can be in debt above 100,000 pesos, but for a microfinance company or an individual it can be for half that amount or even less.
- Time without paying: The more time you go without paying, the greater the probability that you will be sued.
- What type of debt is it: It is more likely to receive a claim for loans where there are signed promissory notes or if they are loans with an asset such as a mortgage or a vehicle loan.
- What type of creditor is it: It is different to owe the bank than to a portfolio buyer company. The bank’s business is investments and credits, commissions for its banking services. Instead, the business of portfolio buyers is exactly to achieve portfolio recovery by any means possible.
- How solvent are you: There is always a cost benefit balance. If the plaintiff realizes they will win the lawsuit, but what you have is not enough to cover the debt and costs of the lawsuit, they may lose less by not suing you.
- How locatable are you: You cannot repossess property owned by someone who does not know where he or she lives.
15. How long does it take for a credit bureau debt to disappear?
There is a scale depending on the level of indebtedness, but generally it is six years from the last update made by the entity that reports the default. It is worth mentioning that debts over two million pesos and debts with an ongoing lawsuit are not erased from the credit history.
16. What if my debt no longer appears in the Credit Bureau?
It means that by law the entity that reported you to the Credit Bureau and entities of its type will no longer do so. However, the debt remains and could be sold or sued.
17. What options do I have to deal with a debt situation when I can no longer pay it?
With adequate financial and legal advice, you could achieve very strong discounts on your debt and reduce or mitigate the risks of a possible lawsuit that will hit your assets, whether they are SME loans of millions, automotive fleets, or credit cards, payroll or automotive individuals, remember that at PROTEGE AC we can help you with that.