If you are about to take out credit, you need to know what the lapse is. It is a term used at the level of financial organizations such as banks. In the following paragraphs, we present in detail all the information you need to know about loan forfeiture.
What is loan lapse?
Loan revocation is a measure put in place by financial organizations to compel their debtors to pay their debts. This measure can only be taken when the debtor is no longer able to pay his monthly payments on the scheduled date despite the formal notice. Loan lapse should not be confused with term lapse.
We speak of forfeiture of the term when the debtor is unable to pay his debts at the end of the contract. We speak of loan forfeiture when there is non-compliance with the payment date of the monthly payment. That is to say that in the event of default or even in the event of a simple delay, it will be possible for financial organizations to initiate loan forfeiture. This consists of terminating the contract before the end of the term and getting paid the entire sum with late payment interest and penalties.
The validity of the loan forfeiture
There are conditions to be met for the forfeiture to be pronounced and enforceable against the debtors. At first glance, it must be ensured that the debtor no longer responds to the creditor’s calls for negotiations. Indeed, financial organizations are very flexible towards their customers.
Before initiating lengthy procedures, they still seek to find amicable solutions. To do this, there is the formal notice. We call on our debtor to find amicable solutions. When the debtor does not want to negotiate, it is possible to start the loan forfeiture procedures. To start the procedures, you must apply to a judicial authority.
The financial institution will bring its right of early payment due. He may thus demand the reimbursement of his debts. If the request is admissible, the judicial judge will only have to pronounce the forfeiture.
The effects of loan forfeiture
When the forfeiture is pronounced, the financial organizations have free time to recover their money by all means. The first means of recovery is the seizure of the debtor’s income. The latter will no longer have access to his wages, as they will be paid directly into his creditor’s account.
But this means of forfeiture of loan is not possible if this salary is used for the household of the debtor’s family. That is to say for their survival without excess. The second way is to seize property. This is to take the property of his debtor. These assets will not pass directly into the hands of borrowing agencies. They still have to go through auctions. Thus, the goods will be transformed into cash to ensure reimbursement.