Out of court debt settlement

The extrajudicial resolution of the debt allows to reach the regulation and the definition of the debts without the need to resort to the intervention of a judge. When debts are due and cannot be honored, creditors have the possibility and the right to apply to the judicial authority to claim their claims. However, before proceeding with the possible activation of an executive procedure and the consequent attachment, it is possible for the creditor and the debtor to sometimes find a solution that can be advantageous and inexpensive for both and that leads to an amicable resolution of the entire dispute.

There are basically two solutions.

Debt exposure

Debt exposure

The first is the possibility of returning from the debt exposure by means of a balance and excerpt, or a settlement proposal through which a percentage reduction of the entire debt is obtained. Debtor and creditor agree to pay a “balance” sum, that is, the debtor agrees to pay a lesser amount than the total residual debt. Transaction then defined as “excerpt” since the creditor, once the agreed payment has been obtained, will charge the residual amount of the debt not honored as “loss”, simultaneously declaring that it no longer has any claim against the debtor.

 

Preparation of debt repayment plans

The second way forward is the preparation of debt repayment plans that take into account the debtor’s current contribution capacity. We are talking about repayment plans in installments or in any case deferred, in which two are the main factors to be taken into consideration: the current sustainability of the installment and the time to repay the debt. The aim is in fact to make the debt burden to be paid to the creditor institution sustainable, facilitating the debtor’s payment of his debt and placing it again in the “economic conditions” suitable to satisfy creditors completely and pay off the debt position.

However, each situation is different and it is not possible to establish precise rules as in this type of agreement a lot also depends on the debtor’s accessibility. The purpose of the negotiations with creditors is however to find new agreements on the extinction and / or redefinition of the outstanding debts, an aim that must be certain, clear and aimed at finding a truly achievable solution.

Debt spiral – how to avoid it?

The debt spiral draws more and more people. Easy availability of loans and credits combined with making financial decisions under the influence of emotions and impulse is a truly explosive apartment. A mixture that can result in huge debts that are difficult to tame.

What is a debt spiral?

Simply put, the spiral of debts is a huge disproportion between the amount of our inflows and the amount of financial liabilities that we have to cover (especially loans).

By falling into a spiral of debt, we are not able to pay our liabilities. Their amounts exceed our financial capabilities. Feeling that the situation does not look good, many people decide to take out more loans and credits to repay existing debt.

Unfortunately, in this way, instead of improving, borrowers usually make their situation worse.

Causes of the debt spiral

debt loan

According to the 2015 Social Diagnosis, the percentage of households in Poland with loans and borrowings in 2015 was 34%, which gives about 4.6 million indebted households.

The reason for Poles’ huge debt is not only the easy availability of credit products and loans, but also … lack of imagination and making poorly thought-out financial decisions.

How to avoid a spiral of debt

How to avoid a spiral of debt

To avoid a spiral of debt, you should only take out loans that we can afford. A simple analysis, based on comparing revenues and expenses will allow you to assess whether you will be able to repay the entire loan amount in a timely manner.

The key to success here is also a thorough analysis of the provisions of the contract with the lender. By signing the contract yourself, you should be absolutely sure that all records of the document are clear and understandable to you. Also make sure that you are aware of the consequences of late repayment and that the lender will allow you to return the loan early and withdraw from the contract.

Before you get a loan, think about whether its purpose is really worth borrowing money. Can a luxury vacation not wait, and a newer, larger car is certainly necessary?

What if I fell into a debt spiral?

If you’ve fallen into a spiral of debt, first of all, don’t borrow any more.

Consider in what order you will pay back the loans you currently have and what amount you can realistically spend on repaying your debt.

Remember to use only factual data when making calculations. If you think you will get a bonus in 2 months, do not include it in the statement until the money appears on your account.

Reducing expenses

If you want to speed up your return, you will also need to reduce your expenses.

To start spending restrictions, start to control how much money you spend and where you spend it most.

When going to the supermarket, be sure to take a card with a shopping list with you and minimize spontaneous expenses.

Do not avoid talking to the debt collector and bailiff

Do not avoid talking to the debt collector and bailiff

If, as a result of debt, your case went to an external debt collection company or bailiff, do not avoid contact with them. The fact that you will not receive calls and correspondence will certainly not improve your situation. In most cases, it will make it worse.