Dealing with Debts

Debt is an amount of money borrowed by one party from another with an arrangement that gives the borrower permission to borrow money subject to contractual terms regarding the amount and timing of repayments of principal and interest.

Debt should be taken with a clear intention of paying it back.  Debtors are legally responsible for paying the debts they legitimately owe.

If I do not pay off my debts, am I going to go to jail?dealing-with-debt_2

You cannot be sent to jail, or even be arrested for owing a debt, regardless of the amount involved. However, you could face court action over unpaid debts.

Can a creditor take legal action against a debtor without a written contract?

A loan of money for a sum exceeding 2,000 baht in capital is not enforceable by action unless there is written evidence of the loan signed by the borrower.

No repayment of a loan of money evidenced by writing may be proved unless there is written evidence signed by the lender, or the document evidencing the loan has been surrendered to the borrower or cancelled.

Can a creditor force entry into my property?

A creditor has no right to forcibly enter your property to take control of your goods or to seize anything as a repayment of the debt.   

To collect an unsecured debt, the general rule is that most creditors must first file a lawsuit against the debtor and win the court judgment.

Will I be responsible for my fiancée’s debts after we get married?

If your fiancée is personally liable for a debt incurred before or during your marriage, it shall first be settled out of her personal assets; however, if her personal assets are not sufficient to settle the debt in full, it shall be satisfied out of her portion of your joint assets.

What will happen if my relative has stopped paying for the loan that I signed as a guarantor?

Debt-BurdenAs soon as the debtor is in default, the creditor is entitled to demand settlement from the guarantor by sending a letter of notice to the guarantor within 60 days commencing from the date of default.  A creditor cannot request a guarantor to settle the debts of the debtor unless the notice has been duly received.      

When the creditor demands settlement of the debt from the guarantor, the guarantor may require that the debtor be first called upon to settle unless the debtor has been adjudged bankrupt, or his whereabouts in Thailand are unknown.

If the guarantor can prove that the debtor has the means to perform and that execution would not be difficult, the creditor must first make execution against the property of the debtor.

Will I be liable to pay for my dead parents’ debts?

In most cases you are not liable for another person’s debt when they die, unless you are a guarantor or co-borrower on the account.  If there are any assets left, they must be used to cover the debts left by the deceased before distributing anything to the heirs.  Creditors may claim repayment of the loan against the guarantor only within one year after the death of the borrower.

What is the maximum interest rate a creditor can legally charge?

Interest shall not exceed 15 percent per year; when a higher rate of interest is fixed by the contract, it shall be reduced to 15 percent per year.

Interest shall not bear interest. The parties to a loan of money may, however, agree that the interest due for not less than one year shall be added to the capital, and that the whole shall bear interest. Any such agreement must be made in writing and signed by both parties.

If it is agreed in a contract that interest is payable, but no rate is specified, the court will order, as prescribe the law that the parties agree to the rate of 7.5 percent per year.

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