Can you have your property seized if you pay your mortgage? 3 concepts to master

Is it possible to have your property seized if you pay your mortgage? It's unlikely, but it's not impossible.

To understand this, you need to understand the concept of forfeiture of term. Recovery may precede or follow the debt. The possibility of other creditors will then be analysed.

Collection of unpaid instalments without accelerated payment

The recovery of a mortgage is often associated with the forfeiture of term. The credit institution may declare that the term of the loan has lapsed if any instalments remain unpaid. This allows the bank to claim payment of the outstanding capital.

The debtor must then pay the outstanding instalments and all future instalments. If 100 instalments of €1,000 remain to be paid, the total outstanding capital would be €100,000.

In addition, there are various penalties.

This implies two things.

The first is that the bank cannot be sure of being paid if its claim exceeds the value of the property. The effect of accelerating the loan is to expose it to the risk of non-payment.

The second is that unpaid debts result in the debtor being registered in the payment incident file (the FICP). Once registered, the borrower no longer has access to the credit market. This prevents them from refinancing and, consequently, from repaying the bank with a loan.

To avoid such an outcome, the bank may choose not to accelerate the loan. It may then proceed to collect only the unpaid instalments.

Naturally, this solution can only be considered if the outstanding payments are limited to a few instalments. Beyond that, other considerations will come into play. In particular, the bank will have to deal with the risk of its claims becoming time-barred. This will eventually force it to take action.

Cancellation of the term and recovery of the outstanding capital

If the debtor does not manage to re-establish payment of the instalments, the bank will declare that the term has expired. The outstanding capital will then become due and payable.

La foreclosure will not be liable in all cases. A mortgage that has reached the end of its repayment period, for example, will not necessarily result in the service of a summons to pay in lieu of seizure of property. The bank may, in fact, consider other recovery solutions, such as the attachment.

If payment of the instalments is resumed after the expiry of the term, the debtor will find himself in a more difficult situation. Many borrowers consider that if they resume payment of the instalments, the loan is reinstated.

This is totally untrue.

If the term has been accelerated, the loan contract has been terminated. This means that the payments made will not be analysed as loan instalments. They will be treated as monthly payments intended to clear a debt. In particular, the bank will retain the option of pursuing a foreclosure on the property.

If it does so, it may then serve a summons to pay, despite the payments that have been made. This will be followed by a summons to appear at the orientation hearing, setting the upset price for the property. In the meantime, a bailiff will be called in to draw up a description of the seized property.

In this scenario, paying the loan will probably not prevent the property from being seized. This is because the bank will no longer demand payment of the outstanding instalments, but of a much larger sum. This will include the unpaid instalments and the outstanding capital, the payment indemnity and interest. This interest will be calculated partly on the unpaid instalments and partly on the outstanding capital.

At this stage, the debtor has only three options:

• Negotiate the assumption of the loan, or a protocol organising the repayment of the debt in the form of a repayment schedule. The debtor can try to prove his financial situation, by demonstrating that he has serious repayment capacity. If this is not the case, it is best to apply to the debt commission.
• Find a solution to block the seizure of the property.
• Try to cancel the acceleration of the term. Recent case law on unfair terms comes to mind.

In some cases, the debtor will have to take the matter to court. Involvement of a lawyer is highly recommended. These are technical issues, and the slightest slip-up could result in the property being auctioned off. These topics are covered in a dedicated publication, in which we attempt to answer the question: how can I avoid having my property seized?

The presence of other creditors

Lastly, the debtor may be up to date with the payment of his loan, but be exposed to a property seizure because of other unpaid debts. This does not happen very often. The three most common creditors - the co-owners' association, the tax authorities and the bank - are often unpaid at the same time.

However, this is not impossible. The debtor must understand one thing: a home loan is an earmarked loan. This means that it is used to pay for a specific purchase. This is the opposite of consumer credit, which the debtor can use as he wishes.

Affected credit therefore has a purpose. If this purpose disappears, the mortgage also disappears and the outstanding capital becomes due and payable. In other words, the sale of the property terminates the loan, and the bank will demand immediate repayment.

If another creditor initiates a property seizure, the debtor will have no way of maintaining the loan. The bank will intervene at the time of the seizure to claim all the sums due under the loan.

The debtor will have no way of avoiding this unfortunate outcome.

The bank will be informed of the seizure shortly after publication of the summons at the Land Registry (formerly the Mortgage Office). The creditor must inform the registered creditors shortly after the debtor has been served with the summons for the orientation hearing. This summons is served within 2 months of publication in the land registry.

Can you have your property seized if you pay your mortgage? Yes !

A debtor can be subject to a seizure of property even if he or she is paying the instalments on his or her loan. All that is needed is a debt owed to the bank or another creditor. The bank's position will depend on whether or not it decides to accelerate the loan.

Whatever the case, the involvement of a lawyer can be useful at this stage, to make a diagnosis and quickly negotiate with the bank. As we have seen, it is difficult to remedy a default once it has been declared.