What Are the Legal Consequences of Failing to Settle a Personal Loan With a Closed Bank That Has Been Absorbed by a New Bank in the Philippines?

Question:

A person has an outstanding personal loan with a bank that has since closed and been absorbed by a new bank. There has been no communication with the bank lender. What are the criminal or civil consequences of this situation in the Philippines? Can the new bank garnish savings or encumber property titles?

Answer:

Criminal Consequences:

In the Philippines, mere failure to pay a personal loan is generally not a criminal offense. However, issuing bouncing checks to repay the loan can lead to criminal liability under the Batas Pambansa Blg. 22, or the "Bouncing Checks Law."

Civil Consequences:

Accumulated Interest and Penalties: The loan will continue to accrue interest and late-payment penalties as per the original loan agreement.
Legal Action: The new bank that absorbed the closed bank generally assumes all assets and liabilities, including existing loans. They can file a civil case to recover the amount due.
Credit Score: Defaulting on your loan can negatively affect your credit score, which can make it difficult to obtain loans or credit in the future.

Garnishment and Encumbrance:

Garnishment of Savings: The new bank may petition the court for a garnishment order to directly take money from your savings account to settle the debt. However, this would typically require a court judgment confirming that you owe the bank money.
Encumbering Titles: If the loan was secured by collateral such as property, the bank can also file for the foreclosure or encumbrance of the said property. This would also typically require a court judgment.

Lack of Communication:

Failure to communicate with the lender can result in "acceleration clauses" in the loan agreement being triggered, making the full amount of the loan due immediately. It also closes doors for potential restructuring or settlement options.

Summary:

Failure to settle a personal loan from a bank that has been absorbed by a new institution can lead to various civil consequences including legal action, accumulated interest, and potential garnishment or encumbrance of assets. Criminal consequences may also arise if bouncing checks were issued for repayment. The lack of communication with the lender can exacerbate the situation. Consultation with a qualified attorney is strongly advised for personalized guidance.

Note: This article is for informational purposes only and does not constitute legal advice. Always consult with a qualified attorney for advice regarding your individual situation.