The impossible negotiation
We are often asked whether it is possible to negotiate with the creditor. It rarely is.
If the creditor is a syndicate of co-owners, its debt will always be established in a court decision. This means that it will never be possible to challenge the principle or the amount of the debt.
If the creditor is a bank, it will rarely agree to recommence the mortgage. The unpaid instalments will have led the creditor to declare that the loan has lapsed, i.e. to terminate the contract. This means that all future instalments of the loan fall due.
This means that the bank can very quickly claim several tens or even hundreds of thousands of euros. The sums involved can quickly become staggering.
- See also : What is a forfeiture of term?
In this situation, the debtor's settlement offer will rarely be attractive. As a general rule, the debtor will only be able to offer to repay the outstanding instalments and resume the course of the loan.
The bank will then be faced with an alternative. It could take over a sometimes very long repayment schedule. Alternatively, it can continue with the sale and obtain repayment of its debt in around 24 to 36 months.
Impossible refinancing
We are also asked if it is possible to refinance. This is only possible if there is no bank debt. In fact, if you need to pay off a debt for condominium charges or taxes, a loan can sometimes be considered.
This situation has little to do with reality. In practice, unpaid debts are often the result of an accident in life (loss of employment, illness, etc.). This means that they generally come as a whole and are not limited to one or other of the usual creditors (bank, tax or co-ownership).
When a bank is in arrears, it is obliged to report the incident to the Banque de France. The Banque de France then registers the debtor in the Fichier des incidents de remboursement des crédits aux particuliers (FICP). This obligation arises from the provisions of Article L. 752-1 of the French Consumer Code.
It makes sense: banks are penalised when they expose their customers to the risk of over-indebtedness. In such cases, they are said to have failed in their duty to warn. Conversely, they have a duty to report payment incidents.
When a loan is being considered, they consult this file, and if they find a payment incident, they will refuse to lend. This is part of the logic that they must not aggravate the debtor's situation.
However, this means that the debtor will not be able to borrow to pay off his debts. This is sometimes regrettable. We are regularly confronted with customers who have had their mortgage cancelled due to temporary non-payment. These customers would have ample capacity to borrow, but are unable to do so because they are registered with the FICP.
However, these considerations do not change the reality of the situation: once you are registered on the FICP, you can no longer borrow. Refinancing is therefore impossible.
This means that criticising a procedural defect must have a clear objective. Generally, the aim is to try to obtain a prescription of the claim. This is not always easy, and the chances of success must be weighed against the risk of failure... and its potential cost.
The few solutions that can be implemented
In this context, the debtor has few options for breaking the deadlock.
When it comes to refinancing, there are generally only two solutions: repurchase agreements and the involvement of foreign banks.
This involves selling the property to an institution specialising in this type of activity. The seller has the right to buy back the property and may continue to occupy it, subject to payment of an occupancy indemnity. This is a costly solution, which is why it gets a bad press.
In the case of foreign banks, those that are unable to consult the FICP sometimes agree to finance, provided that the debtor is able to provide extremely strong guarantees. Drastic ratios will generally be imposed between the amount financed and the assets likely to be pledged as collateral. For example, an institution may require the debtor to own property worth 5 times the amount financed...
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