How Loans Become Time-barred and What Rights Debtors Have
If you have an old loan and are contacted by the bank or the National Bureau of Enforcement demanding payment, it is essential to understand the legal mechanisms you can use to protect your rights.
This article aims to explain when a loan becomes time-barred, how creditors may attempt to revive it, and the steps debtors can take to avoid paying a time-barred loan.
What is Limitation Period?
The Limitation Period is the timeframe during which a creditor can enforce a demand for payment. Once this period expires, the right to demand payment still exists, but the creditor cannot compel payment if the debtor refuses to fulfill the obligation.
The period of limitation on contractual claims shall be three years. Aforementioned period of limitation shall commence from the moment at which the claim arises. The claim shall be deemed to have arisen from the moment at which the person became or ought to have become aware of the violation of the right. The creditor can then either file a lawsuit or apply to the National Bureau of Enforcement to demand payment.
The purpose of establishing a Limitation Period is to prevent abuse of the right to demand payment and to protect defendants from old lawsuits.
When Does a Loan Become Time-barred?
After the Limitation Period expires, a loan does not automatically become limited. This means that a creditor can still pursue payment or file a lawsuit after three years. In this scenario, the debtor can refuse to fulfill the obligation; however, an oral statement is insufficient - an application to the court is necessary to declare the loan as time-barred.
The demand of the loan can be transferred to the National Bureau of Enforcement. This means that National Bureau of Enforcement acquires the creditor’s right to demand payment. This legal action qualifies as an alienation of demand, making the National Bureau of Enforcement the new creditor entitled to collect the loan.
If a bank or the National Bureau of Enforcement files a lawsuit, the court will set a deadline for submitting a statement of defense. It is crucial to file this defense on time and mention the Limitation Period to avoid payment.
Remember, the court will only consider the limitation period if raised by the debtor.
How Can a Loan Be Revived?
The running of the period of limitation of loan shall be interrupted if the obligor acknowledges the claim towards the oblige by paying an advance or interest, by providing security, or otherwise.
Often, banks or the National bureau of Enforcement will offer debtors a chance to pay a reduced amount. Any payment to the creditor resets the Limitation Period, allowing the creditor to demand the full amount owed.
Keep in mind that any agreement regarding loan installments, payments of certain amounts, or written confirmation of the loan without mentioning the limitation period is considered an acknowledgment of the obligation, resulting in the revival of the loan.
Does the Limitation Period Affect Penalties?
The limitation applies not only to the principal obligation but also to any additional claims, including penalties.
The period of limitation on additional claims shall be deemed to expire simultaneously upon the lapse of the period of limitation on the principal claim, even if the period of limitation on additional claims has not elapsed yet.
Remember, If the loan is deemed limited, the creditor will lack legal grounds to enforce payment of any penalties stipulated in the contract.
What Should You Consider?
If a creditor applies to the court to declare the loan obligation, the Limitation Period can be extended to ten years.
The period of limitation on a claim confirmed by a court decision that has entered into legal force shall be ten years, even if the claim is subject to a lesser limitation.
Remember, it is crucial to file a timely statement of defense if the bank or National Bureau of Enforcement submits a lawsuit, highlighting the Limitation Period. Otherwise, the court may grant the creditor's demand, permitting compulsory enforcement for up to ten years, rather than the typical three-year limitation period.
Remember, managing expired loans requires proper legal actions, which is best ensured through qualified legal services.
Author of the article: Leila Liparteliani
