What Punishment Is Given To A Personal Loan Defaulter By Court?

The CPC specifies the manner of filing a money recovery suit. Moreover, the defaulter may face punishment under section 403 or 420 of the Indian Penal Code. But, the lender also needs to bear expenses of the default during such period.. Thus, the civil suit way is rarely taken by the lenders/creditors. To avoid civil law suits, banks and other lenders may take any of the following routes: Debt rescheduling This method may be useful if the Bank finds the quantum of EMIs as the reason for non-payment. In this case they can reschedule the amount of EMI payable. This will reduce the monthly installment. Deferring the payment There may be situations where the default in loan repayment is temporary. This may be due to any reason. For example, loss of job or any other unforeseen expense. In this case, bank may opt to recover the debt later. The defaulter will get some relaxation for a particular time-frame. Loan restructuring If you have a home loan then you can use this method to avoid defaulting in loan repayment. Under this method, you can extend the loan repayment period for up to 1 year. Loan conversion In case of unsecured loan, the bank can convert it into a secured loan. This will result in easing the burden of EMIs on the borrower. One time settlement If the borrower has some capital then they can settle the loan at terms that suit both parties. Yet, there might be cases when none of the above methods prove useful. In such a case, the bank can also repossess the assets of the borrower and then auction then. These assets can be movable as well as immovable. But, recovery agents cannot harass, abuse or threaten a defaulter. RBI guidelines prevent them from doing so in clear terms. But, awareness of legal rights will protect you from unethical and sometimes illegal practices adopted by agents.