Credit card default may not be worrying.
Pic courtesy Wikipedia
The most common problem that the people of today face with respect to their finances are the EMIs or other Payments pertaining to your Credit cards; it normally starts when you take a chance and skip one monthly EMI.
The simplest advice would be to never take that chance; the chain of paybacks should never be broken, stop some other payment but let the Credit Card payments not lapse.
With the rationalizing of procedures related to the default by a Credit card holder, the finance companies were in the habit of using bouncers and musclemen whose job it was to throw their weight around and get the installments that were due.
This practice was prevailing in almost all countries and there were quite a few incidents involving assault of the customer who could not keep his repayments prompt.
But, the law had stepped in and taken care of this perennial problem that became a law and order problem due to the strong-arm tactics that were resorted to by the companies.
But, not anymore; subject to terms and conditions.
Financial Rehabilitation and Insolvency Act (FRIA)
The Supreme Court of the Philippines in Manila took note of the disturbing and inadequate provisions under the Financial Rehabilitation and Insolvency Act (FRIA) of 2010 and ordered the Sub-Committee on Commercial courts to analyze and promulgate effective rules and procedures that prevented the laws to be circumvented and contravened due to the inadequacies in their provisions and implementation.
Their job was to amend and alter the rules and procedures for financial rehabilitation under the corporate rehabilitation rules of 2008.
Senator Edgardo Angara took over the role of the Principal Author of this legislation that was becoming increasingly essential since the Credit Cards were growing at an astronomical rate and so were the incidents.
Thus, their wisdom was reflected in the provision of some special remedies to the debtor who was not able to meet his liabilities and defaulted; but, the rules that emanated due to their efforts were designed to help both the debtors and the financial institutions and banks.
Suspension of payments
This mechanism that was introduced for the first time and it applied to such of those debtors who were having the means to make payments but could not do them at the time that they were due.
In other words suspension of payments, applies to individual debtors whose liabilities are lesser than the assets owned by him but he is unable to discharge them as and when the liabilities arise.
In effect, the courts would supervise a reframed repayment plan and provide a temporary way out to the debtor for meeting his commitments through a rescheduled repayment plan and over an altered tenure.
How to avail the special remedy of Suspended payments
The debtor must approach the area of the local jurisdiction under which he has been resident for the last six months immediately preceding the filing of a petition.
The debtor should then be in a position to prove to the satisfaction of the court that he is fully eligible to avail the remedy of suspended payments as laid down under the rules. On being satisfied that the debtor fulfills the requirements to qualify for a suspension of payments, the court normally appoints a Commissioner who oversees the whole process of rescheduling of the repayment process as worked out between the financial institution and the borrower.
All creditors will normally be asked to start negotiations with the debtor and these proceedings will be supervised by the Commissioner appointed by the court to oversee the proceedings and ensure that all the directions of the court are implicitly followed in letter and spirit.
• The meetings between the creditor(s) and the debtor will aim to explore the various options that the creditor(s) wish to offer to the debtor and his responses to the aim,
• The creditors are not allowed to seek repayment of their loans under the terms of the original agreement between the debtor and the creditors except under the terms as finalized under the watchful eye of the Commissioner appointed by the court.
Applicability
The normal practice that is observed in most litigations of this manner is that there is a direction included in the procedure for obtaining a suspended payment schedule that has been revised in accordance of the new agreement.
The renewed details and the order of the court will be published in a few local newspapers so that it covers most of the populace odf the Philippines including local dailies in languages of the Philippines.
Once this requirement is fulfilled, it is assumed that the details of the agreement have reached all concerned parties and will be binding on all after publication.
The liabilities to the tune of at least 60% of the total due by the debtor is the criterion that should be represented at any meeting to make it valid as a proper quorum. If the representatives that attended represent less than 60% of the liabilities, it will invalidate the meeting.
Even those creditors that have not attended the meeting will have to abide by the final decision provided the minimum requirement of 60% of liabilities is fulfilled.
Second default and creditor rights
Contrary to what the popular belief is, the chance given to the debtor to get a second chance to prove his credit worthiness and reschedule the repayment plans may look like a step that is drawn up to favor the debtor essentially, but that is not really so.
The debtor is bound to discharge all his obligations as required under law. In case these are not complied with, the courts can be very severe if the agreement is violated by the debtor.
When that happens, all the rights of the creditor are enforced by the court with their full impact of all penalties and other penal clauses will be activated to his detriment.
There still remain some doubts in the minds of people connected with such legislation and the applicability of this special remedy; most of them concern the applicability of this special remedy to individuals versus business entities.
This remains a slightly grey area with interpretations differing according to the understanding of individual authorities. A typical example would be relating to those individuals who own proprietorship concerns that are duly registered with the DOT and industry.
The opinions here are divided and this grey area needs to be further clarified through a decisive appraisal of the problems being faced by the parties concerned. The procedures for rehabilitation and those for suspension of payments may have to be reviewed objectively to arrive at solutions that answer to the complexities.
That day may not be very far off.
Umrao singh
umraoz.wordpress.com
Friday, 04 November 2016
Written for: Lars-Magnus Carlsson
www.thephilippinepride.com?utm_source=rss&utm_medium=rss
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