The balance and write-off agreement to pay less debts – Debt consolidation
The final settlement is the possibility offered by the legal system to pay off its debt to a bank or a financial company by paying an amount lower than the amount due.
Debtor and creditor together evaluate the mutual convenience not to prolong a negative situation for both:
- for the debtor who, caught between a thousand economic difficulties, does not have the possibility of paying the sum due and which continues to increase due to the interest;
- for the creditor who risks having to face, if they are not already in progress, any legal disputes that do not always guarantee him to get hold of the sum due.
How does it work?
The agreement, which from a legal point of view is a transaction, can be proposed by the debtor both before the start of a judicial procedure and during a dispute before the sentence is issued.
There is no set minimum percentage, but it is the practice that the creditor does not accept proposals lower than 40 per cent of the sum due.
The debtor will have to send a registered letter with return receipt to the bank or the finance company with the subject: Proposal for a settlement agreement for the loan, the loan… number… registered to… “The description of the proposal will follow:” I hereby propose you to pay off my debt position corresponding to… with the payment of the sum of USD… including capital, interest and expenses no later than the day… “or” of the sum y divided into x payments to be made on the following dates and for the following amounts… “
Naturally the debtor must be certain of being able to honor the promised sum, while the bank through his legal office will formalize the acceptance of the agreement to balance and extract that must include the renunciation or extinction of possible judicial procedures of recovery of the credit, as an injunction or attachment, in addition to the cancellation of any reports made at the CRIF or CERVED databases, and the computer archives that indicate situations of suffering.
An important sentence
Anyone who has contracted the loan together with other people must know that he takes advantage of the balance and settlement agreement concluded by one of the contractors. This is what the Court of Cassation recently established in sentence 22231/14, confirming its previous orientation.
A concrete example
Let’s take a concrete example: Paolo, Roberto and Adriano have taken out a loan to buy a house but are no longer able to pay it. The amount due is 100,000 USD.
Instead of resorting to an executive procedure, which would be extremely burdensome and demanding, the bank decides to accept the transaction: the settlement of the balance and settlement proposed by Paolo which offers 20,000 USD. Asked whether at this point, as would be intuitive, Roberto and Adriano remain debtors for the 80,000 USD fee, the Court replied no. Roberto and Adriano remain debtors for the sum of 6666, 66 USD, that is for a reduced figure of the ideal quota that Paolo should have paid : 33.333 USD.
The principle applies naturally also in the case in which the transaction concerns more subjects. If Paolo and Roberto transit for 45,000 USD, Adriano will not be obliged to pay the jointly liable debt of 55,000 USD but 33,333 USD, that is the sum resulting from the subtraction of the ideal quotas that should have been paid by Paolo and Roberto.
In the event that Paolo, on the other hand, pays a sum corresponding to the ideal quota, in this case 33.333 USD, or higher, the co-debtors will remain obliged for the remainder. This is a very important novelty because it protects the borrowers who are not involved in the transaction from an aggravation of the debt position that would achieve a noticeable difference in treatment between the subjects of the same obligation.