The Process of Suing for Unpaid Loans: How to Recover the Debt if the Debtor is Unable to Pay

If a loan recipient fails to repay a loan, you have legal options to recover the debt. This article outlines the steps involved in instituting a legal case and the process of enforcing a judgment if the debtor does not have the financial means to pay.

Step 1: Filing the Suit for Recovery

The first step in recovering a loan is to file a lawsuit for the recovery of the amount lent, plus any interest and court costs. This lawsuit must be filed within the period of limitation specified by law. This period varies by jurisdiction and usually ranges from one to six years.

Step 2: Obtaining a Decree and Application for Execution

If the lawsuit is successful, a decree will be issued for the amount of the loan and any interest and costs. If the defendant does not pay the amount decreed, you must apply for the execution of the decree before the same court that issued the decree. In this execution proceeding, you are referred to as the decree holder, and the defendant is referred to as the judgment debtor.

Step 3: Attachment and Sale of Immovable Property

If the judgment debtor has any immovable property, the court can order the attachment of that property. After at least six months, the property can be sold under the authority of the court. The amount specified in the decree must be paid to the decree holder, and any remaining balance is paid to the judgment debtor.

Step 4: Applying for Detention in Civil Jail

As a final step, the decree holder can apply to the court for an order to place the judgment debtor in detention in a civil jail or prison. However, the decree holder is responsible for any expenses incurred by the jail authority during the detention.

What If the Debtor Has No Assets?

If the judgment debtor has no immovable property or other assets, nothing can be done to enforce the debt. The decree will be unenforceable, and you cannot prosecute the debtor in a criminal court since the failure to pay a loan is not considered an offense under criminal law.

Additional Collection Methods

In some cases, you may choose to pursue other collection methods. These can include:

Bank Seizure: The judgment can be sent to banks to seize the debtor's bank accounts or freeze their assets. Garnishment: The judgment can be used to garnish the debtor's income from their employer. Asset Recovery: Seizing any assets or commissions the debtor might owe to third parties and demanding payment. Sworn Examination: Sworn examinations can be conducted to obtain information about the debtor's assets, income, job, and bank accounts.

Additionally, the judgment may need to be renewed every 5 to 10 years to maintain its enforceability.

Conclusion

Suing for unpaid loans can be a complex process, but understanding the steps involved can help ensure that your rights are protected. Whether you pursue legal action, take collection measures, or use a combination of both, it is crucial to follow the correct procedures to recover your debt.