# Legal ramifications & penalties if you refuse to pay an unsecurerd personal loan



## NorthDrum (2 Jun 2009)

Just wondering what legal ramifications and penalties can be imposed on a person who refuses to pay back an unsecured personal loan.

Had an interesting discussion with a couple of friends over the weekend and nobody really knew what would happen if they just said to the banks "Im not paying" (on personal loans, not mortgages)

I know their credit rating would be shot to hell but are there any other pitfalls to basically saying "Im not paying" to a bank.

Can the banks go after your own valuable possessions for payment or is it their tough that they didnt look for collateral.

What if you dont have anything to give, could you go to Jail!


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## dinjoecurry (2 Jun 2009)

*Re: Default on Personal loan . .*

if you default on a personal loan the lender can get a judgment against you and the sheriff can seize goods to the value


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## NorthDrum (2 Jun 2009)

*Re: Default on Personal loan . .*



dinjoecurry said:


> if you default on a personal loan the lender can get a judgment against you and the sheriff can seize goods to the value


 
And if you dont have anything to give I assume theres nothing the bank can do . .


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## Cayne (2 Jun 2009)

*Re: Default on Personal loan . .*

removed


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## NorthDrum (2 Jun 2009)

*Re: Default on Personal loan . .*



Cayne said:


> Interesting query from a financial advisor - considering adding this option to your portfolio?


 
Certainly no harm in knowing the answer.

As a financial Advisor people ask all sorts of questions ,  I would prefer to at least have some sort of understanding of ones I would rather not have discuss.

I would of thought that if a bank doesnt look for some sort of security for a loan its really tough for them to get the money back if you say "get lost". Seems like its only when you takeout loans of 100mil plus can you get away with this kind of audacious behaviour as I havent heard of too many builders on the streets . .


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## Mpsox (2 Jun 2009)

*Re: Default on Personal loan . .*

Yes they can look to have you jailed, they can also register a judgement against you or sell the debt to a debt collecting service

My ex flatmate ran up significant unsecured personal debts with various banks years ago. They sold the debt to a debt collecting service. (standard practise in the UK) The guys who came knocking on my door (after we'd thrown my ex flatmate out) were very nice and polite to us, however they struck me as the kind of guys I would not want coming after me for money.


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## mf1 (2 Jun 2009)

*Re: Default on Personal loan . .*

"Just wondering what legal ramifications and penalties can be imposed on a person who 
refuses to pay back an unsecured personal loan . ."

As already posted, probably the most significant issue is the loss of a clean credit rating. You might not need to borrow money now, but you're likely to do so in the future. I have a number of clients who are bitterly regretting some youthful judgment indiscretions in the not too distant past. 

Other than that, get a judgment, register the judgment ( possibly affecting new utility connections/credit cards/ laser cards in the future), seek an instalment order ( possibly linked to an attachment of earnings from their employer - very embarrasssing), ultimately  imprisonment for non payment, bankruptcy.  

Its worrying that people would think like this - I reckon that sooner or later, everything comes around and the only way is to keep things straight. 

mf


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## Bronte (2 Jun 2009)

*Re: Default on Personal loan . .*

About a month ago there was a story of a lady who owed I think 1500 Euro and she was jailed for a while for the non payment of the debt.  

I thought the story amazing at the time because the debt was so trifling.  You need to do it big if you're going to make it worthwhile.  Then it seems you get the 'stay out of jail card.'


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## ivor james (2 Jun 2009)

*Re: Default on Personal loan . .*

No-one goes to jail for default on a loan ,but you may if you are in contempt of a court order,for example not meeting an installment plan layed out by the judge,it is important at all times to communicate and do not ignore as then you are in a real dangerous situation.


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## McCrack (4 Jun 2009)

*Re: Default on Personal loan . .*

Correct ivor james. Anybody who says otherwise doesnt understand and is subscribing to popular belief. It pretty shameful the way some media protray defaulters imprisonment such as:

"poor Mary seperated mother of six jailed for 5K debt to Credit Union"

In reality efforts and corrspondance were made by the creditor over a number of months (which are normally ignored by Mary) to get a repayment plan set up. Eventually it goes legal and a Summons is issued.

Again this Mary ignores this, judgment is filed in default , examination is ordered, an Installment Order is made by the Judge (which Mary again ignores) so eventually a Committal Order is made by the Judge which basically puts Mary in prison for up to 3 months until she purges her contempt (ie. make efforts to repay the money as ordered by the court)

Thats how it works.


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## NorthDrum (4 Jun 2009)

*Re: Default on Personal loan . .*



McCrack said:


> Correct ivor james. Anybody who says otherwise doesnt understand and is subscribing to popular belief. It pretty shameful the way some media protray defaulters imprisonment such as:
> 
> "poor Mary seperated mother of six jailed for 5K debt to Credit Union"
> 
> ...


 
Yep, thats pretty much how the media operates. 

Its also why there are so many uneducated people in this country. They work off "facts" they receive off media outlets . .


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## Vanilla (4 Jun 2009)

*Re: Default on Personal loan . .*

Although if that was the story I read about it turned out that Mary had a severe learning difficulty which might explain why she didn't respond to correspondence.


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## Bronte (4 Jun 2009)

*Re: Default on Personal loan . .*



ivor james said:


> No-one goes to jail for default on a loan ,but you may if you are in contempt of a court order,for example not meeting an installment plan layed out by the judge,it is important at all times to communicate and do not ignore as then you are in a real dangerous situation.


 
Ok people don't go to jail for defaulting on a loan you go to jail for ignoring the courts but if you didn't have a defaulting loan in the first place you wouldn't go to jail.  

There is something seriously wrong with a system that jails poor, illiterate or mentally ill (woman who applied for loan from psychiatric hospital) people for defaulting on loans.  What is the point of jailing them, does it make them pay up?  Why do poor illiterate people with relatively tiny loans go to jail while seriously wealthy people who overborrow (developers) and those who give these loans (bankers) get off scott free and get rolled over interest, golden handshakes and pension funds worth millions despite Irish taxpayers having to pay for their mess.  I find this mentally challenging.


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## McCrack (4 Jun 2009)

*Re: Default on Personal loan . .*

I wasnt referring to any particular case in my example but just explaining to people the process involved before a person is imprisoned for contempt.

People are jailed simply because they willfully ignore all attempts to restructure their payments, they simply bury their heads in the sand and choose to ignore it.

We live in a civilised society so basically the reason this happens is to allow creditors a mechanism to recover their money without resorting to vigilante tactics.


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## Bronte (4 Jun 2009)

*Re: Default on Personal loan . .*



McCrack said:


> We live in a civilised society so basically the reason this happens is to allow creditors a mechanism to recover their money without resorting to vigilante tactics.


 Did they get their money, if people go to jail it means they are not going to pay surely or am I missing something ?


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## McCrack (4 Jun 2009)

*Re: Default on Personal loan . .*

Again I'm not referring to any particular case and I'm not going to engage in a discussion about a recently publicised one where some people form their opinions and express them based on what the Evening Herald and the likes print.


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## MandaC (4 Jun 2009)

*Re: Default on Personal loan . .*

Know of someone who built up a massive amount of credit card bills and loans and then emigrated.  They never had any follow up.  It was shocking.


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## ajapale (4 Jun 2009)

*Askaboutlaw* is for legal issues not covered elsewhere.

Moved to  Banking, Borrowing, Budgeting and Credit Cards which is where personal loans and the ramifications of defaulting are discussed.


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