As our experience shows, any person can find himself in a situation where it suddenly turns out that he has a debt in a bank and this debt has already earned considerable interest. In this article we will answer three main questions:
- How does this happen?
- What to do in such a situation?
- How not to pay extra?
How does this happen?
One day, you may receive a notice requiring payment of arrears to a bank or, in the worst case, a lawsuit against thousands or even tens of thousands of shekels. In most cases, the origin of this issue must be sought 10-15 years earlier, and the cause of a debt of thousands of shekels is a couple of hundred that were not repaid in time.
Here it is necessary to divide the situation into two stages:
- The first stage is a notice from the legal service of the bank.
- The second stage is a court claim.
The first thing a person feels when receiving a notice of unexpected debts is fear and desire to immediately resolve the issue, contact the bank and close the debt as quickly as possible. This fear is strengthened by anxieties that the bank can take some action against a person and his property, for example, making an arrest of real estate, a car, and other bank accounts, or issuing a ban on traveling abroad, and so on.
At the first stage
If you receive a letter from the legal service of the bank, it is only a prior notification. On the basis of this notice, neither the lawyer of the bank nor the bank itself physically can take any steps towards the debtor. It means that bank accounts cannot be arrested, especially in another bank, and any property cannot be collected at this stage. This is just a warning.
What to do in such a situation?
Contact an experienced lawyer to conduct negotiations on behalf of the debtor with the bank lawyers, find out the causes of the debt and ways to resolve the situation. You can, of course, try to do it yourself, if you are confident in your knowledge of jurisprudence. By the way, our clients note that with the involvement of a lawyer in their problem, even the tonality and time of communication with the bank are noticeably improved.
The advantage of resolving the situation at the stage of notification of debt from the bank is that everything happens without pressure, without threats to take any steps that complicate the life of the debtor and there is no race with time. It is just a notification of the bank’s claim that has no executive power. But the most important thing is the opportunity to reach an agreement quickly, with minimal costs and without the involvement of the courts.
How not to pay extra?
Such notifications are usually sent with overstated interest. You can always negotiate and understand what amount of the presented funds is the debt itself, how much is interest on the loan, and where is interest upon interest.
It is always possible to significantly reduce or eliminate “interest upon interest”, which is usually the greatest amount. You can also divide the amount of the debt itself into a large number of small payments so that the person can pay it off and the repayment of the debt does not take most of his income.
At the second stage
If the letter from the bank is ignored, the financial institution has the opportunity to either directly contact the bailiff with the request to collect the debtor’s debt, or go to court, file a lawsuit, and the court can award a refund. Here the threat of the debtor’s property appears, and restrictions on crossing the borders of Israel and other sanctions are possible.
What to do?
Definitely contact an experienced debt lawyer. It is extremely difficult to conduct such negotiations without a lawyer, as well as to count on high chances of a favorable resolution of the situation for the debtor.
An example of a successful settlement of an old bank debt case from our practice
A couple of months ago, a person turned up to our Patkin & Partners Law Office, who unexpectedly happened to indebt to one of the Israeli banks. Our client didn’t live in Israel for about ten years (from 2003 to 2013). In 2013, he returned to Israel and only in 2017 received a notice that he owed money to the bank since 2003, and the amount of debt is 92 thousand shekels. It was no longer a notice from the lawyers of the bank. It was a lawsuit. He immediately made the right decision to seek legal assistance. We quickly got involved in intensive negotiations with representatives of the financial institution, managed to point out certain shortcomings in the bank’s actions and argued that it would be more beneficial for everyone to resolve the issue peacefully and not bring the matter to court.
During the trial, it turned out that before departure from Israel his account turned out to be minus 11,000 shekels, additional 4,000 shekels was the commission for bank services and interest on the negative balance for 17 years.
As a result of the work on the case, our lawyers managed to write off 75,000 shekels from the required amount through negotiations. The client paid 15,000 shekels instead of 92,000. That is the amount of debt and interest on the debt. Considering that the term of the debt is 17 years, the amount of interest on such a loan has turned out insignificant. The debt was repaid immediately and in one payment.
What does this story teach us? If you find yourself in a similar situation, do not rush to deal with the bank yourself. Bank lawyers have hundreds or even thousands of experience with debtors in such cases. You will need to understand all the nuances yourself and quickly. Protect your interests with the support of experienced professionals.