What Happen If You Can’t Pay Your Debt In The Philippines?

Legal Action

• Civil Case for Sum of Money: The lender can file a civil lawsuit against you to recover the outstanding debt. The court can issue a judgment ordering you to repay.
• Wage Garnishment: In some cases, the courts might issue an order for your employer to deduct a portion of your salary and directly pay it to your creditor until your debt is settled.
• Foreclosure (for Secured Loans): If you have a secured loan (mortgage, car loan), the lender may have the right to seize the collateral you put up (your house, car, etc.) to recover their losses.

Financial Consequences

• Late Payment Fees and Penalties: You’ll likely incur fees and penalties on your unpaid debt, making it harder to repay.
• Negative Credit Score: Unpaid loans will significantly damage your credit score, making it difficult to get loans or credit cards in the future.
• Collection Agencies: Lenders often hire collection agencies to pursue unpaid debts. These agencies might employ persistent and sometimes aggressive tactics to collect payments.

Other Implications

• Harassment: While there are laws against it, some unethical lenders and collection agencies might resort to harassment tactics like threats, public shaming, or contacting your family and employer.
• Stress and Anxiety: Dealing with debt can cause significant emotional stress and anxiety.

What You Can Do

• Don’t Ignore the Problem: The longer you avoid facing the debt, the worse it will get.
• Contact the Lender: Try contacting your lender and explain your situation. Explore options like negotiating a repayment plan, a possible settlement for a lower amount, or extending the payment terms.
• Seek Help: Consider getting financial advice from a credit counselor or debt management expert.
• Know Your Rights: Familiarize yourself with Philippine laws that protect you from unfair debt collection practices and harassment. You can find information on the websites of the Securities and Exchange Commission (SEC), Bangko Sentral ng Pilipinas (BSP), and the National Privacy Commission.

Important Note: The specific consequences may vary depending on the type of debt, the loan agreement terms, and the lender’s policies.