19/02/2015

Can my debt be sold?

Polish people are taking loans more and more often and more willingly. At the same time, more and more people face the problem with paying them off. It often occurs their cases end up at debt servicing companies. This may mean that the debt has been sold. What can be done in such situation? Who shall be contacted, then; the bank, or the debt servicing company managing our debt? There is no need to be concerned. In many cases, it may even mean good news. First of all, it is worth knowing that the debt can be sold by the creditor (that is to say the institution, to which we owe money) to another company or institution. Similarly, as any other good or service can be sold. It does not matter whether our payment is three months or three years overdue - just a few unpaid instalments for the computer, unsettled payment for the debit card, an invoice for electricity, telephone, or internet can be enough. Once our previous creditor decides he does not intend to wait any longer and claim the arrears, he puts the debts up for sale. It is practised by banks, loan companies, insurance companies, and other institutions that sell their clients’ debts to debt servicing companies. This mechanism is known all over the world and provided for by law. In legal language, such a sale is called an assignment, or transfer of receivables. In Poland, it is provided for under the paragraphs 509-516 of the Civil Code. Moreover, such change does not require the debtor’s consent, therefore the sale of the debt, in accordance with the regulations, can take place without the knowledge and consent of the person indebted. This applies to almost all the debts with a few exceptions indicated by law. What does the sale (i.e. the assignment) of receivables mean for a Mr. Smith? To sell a debt e.g. by a bank, the indebted person’s consent is not necessary. However, an official notification to the debtor on this fact is necessary. Usually, a letter with information on the assignment is sent by the previous creditor, or it arrives in the same envelope with the call for payment from the new creditor. What does it mean? It means, that from then on we should pay the new creditor, i.e. usually the debt servicing company. Thus, all contacts and relationships with the previous creditor are being closed. From then on the talks on the settlement of the debt should be already carried out with the new creditor and the payment should be made to his account. Along with the sale of the debt, the previous creditor conveys all the rights, duties, and information to the new creditor, who becomes the only entity to decide on the matter. What can be expected in such situation? Sale of debt to the debt servicing company may - despite appearances – be a positive news. This means we have a chance to make an agreement with the new creditor and we still can avoid court proceedings and the bailiff’s visit. There are companies, which enable paying off the debt at an amicable rate - in instalments possible to repay. This is how for example the KRUK Group works, which has an approach aiming at amicable solutions. After purchasing a debt, KRUK sends information with a request to contact them, and work together to work out a possible way to repay the debt. The most important is the first step and an open conversation with the company servicing the debt. We need to remember that dodging and waiting do not make the debt disappear, and the interest will rise. The most important thing is to take action and show the new creditor that we care about solving this problem. Then, there can always be found a way acceptable to both parties.