Solutions to past due debt

Question: How can you help? I have a huge amount of past due debt that I cannot pay in full as of the moment. Collectors are calling daily and causing me enormous stress. Asked at “Ask a Friend, Ask Efren” FREE service at www.personalfinance.ph, SMS and Facebook.

Answer: Why not try the following steps.

Negotiate for a restructuring of your debts with your current creditors. Refinancing with new creditors is possible only if you have the capacity to repay and your name is not yet in the negative file information system (NFIS) of financial institutions. If you have credit card debts, please also check out https://www.ccap.net.ph/?p=617 for the Interbank Debt Reduction Program of the Credit Card Association of the Philippines.

When it comes to restructuring, request for an amortization that is lower than what you can truly afford. This will allow you leeway in negotiating. Expect creditors to initially deny your request. Just write them again. Write to both your lenders and their collection agencies. Make sure they receive your letters. Do not rely on SMS or voice conversations. You need to build documentary evidence that you are not running away from your obligations. Always follow up on your request if you have not received a reply within a week.

Pay more than the agreed amortization so that you can quickly zero out your debt. Please do not recast future amortizations any further when you accelerate your payments. Ask for a copy of the new promissory note on your restructured debt.

Sell some assets to help reduce your debt obligation.

Do not deal with your collectors in anger. But neither should you be afraid of them and collection agencies. Behind these institutions are people who are just doing their job. Even if they are nasty to you, forgive them before talking to them. Talk to them calmly about your proposal and tell them with all sincerity that your proposal is all you can offer.

Know that lenders will use the courts only as a last resort, especially if your loans are sizeable. But be aware also of the Small Claims Court where cases against nonpayment of amounts up to P400,000 may be filed.

Filing for insolvency should be your last resort as it is expensive, time consuming and does not guarantee that you will be rid of your debts.

If collectors persistently threaten, insult or deceive you, you may report them to the Bangko Sentral ng Pilipinas’ (BSP) Financial Consumer Protection Department ([email protected]) if your creditors are supervised by the BSP like banks and credit card companies.

You may also report harassment by your lenders not covered by the BSP, like internet online lenders and other microfinance firms to the Securities and Exchange Commission (SEC), details for which are in https://www.sec.gov.ph/lending-companies-and-financing-companies/complaints/.

If you feel that your personal data have been misused, maliciously disclosed, or improperly disposed, you may also file a complaint with the National Privacy Commission, steps for which are outlined in https://www.privacy.gov.ph/ mechanics-for-complaints/ #complain2.

Unfair debt collection practices include sending violent threats, using harsh words, disclosing the name and other personal information of the borrower in public, and messaging or calling the people on the contact list of the borrower without his/her consent.

Full details are in SEC Memorandum Circular 18, series of 2019 and can be found in the following link: https://www.sec.gov.ph/wp-content/uploads/2019/08/ 2019MCNo18.pdf.

Tell collectors calmly when they text, call, email or visit again that you will be reporting their illegal collection practices and that they will just get their copy of your complaint in the mail. Then politely say “good day.”

Filing for insolvency is a long, painful and also expensive process that can further drain your resources. This should be your last resort.

And remember that there is always hope, especially if you let Him work through you, your creditors and collectors.