What Happens to a Person’s Credit Debt When They Go to Prison?
Paying a person’s credit debt can become complicated when they go to prison. The payment obligation varies depending on factors such as the type of debt, bank policies, and the person’s economic situation. In this article, we will discuss what happens to the credit debts of people who go to prison and the legal processes.
1. Credit Debt Does Not End, The Obligation Continues
A person who goes to prison is legally obliged to pay the credit debt. Imprisonment does not eliminate this obligation.
Example: Mr. Mehmet used a consumer loan from the bank but was sentenced to prison after a while. Mr. Mehmet’s debt does not end with his imprisonment, the debt continues in the same way.
2. Legal Proceedings Are Initiated If Payment Is Not Made
If the debt installments are not paid, the bank first tries to collect the debt by charging late payment interests.
If payments are still not made, the legal prosecution process is initiated and may go as far as foreclosure proceedings.
Example: Hande Hanım could not pay her loan debt because she went to prison. The bank may seize Hande Hanım’s salary or the real estate she owns after a while.
3. Family Members and the Status of Guarantors
If there is a guarantor in the loan agreement, the bank can first apply to the guarantor and demand the payment of the debt.
If there is no guarantor, the bank cannot directly apply to the family members of the debtor; however, the heirs will step in in the event of the debtor’s death.
Example: Before going to prison, Ali Bey used a housing loan and nominated his brother Ahmet as a guarantor. Since he could not pay the debt after going to prison, the bank can send a legal notice directly to Ahmet Bey to pay the debt.
4. Loan Restructuring Possibility
Some banks can restructure the loan debt if the debtor documents the difficulty in paying. This means reducing the monthly installments or extending the maturity period.
Restructuring can be done even if the person is in prison, but an application must usually be made through an attorney for this.
Example: Before going to prison, Zeynep Hanım contacted the bank official and instructed her attorney to restructure her debt. In this way, the payments were reduced and spread over a longer period.
5. Seizure Process and Debtor’s Assets
If there are movable or immovable assets belonging to the debtor, the bank can initiate the seizure process through legal means. This process is usually the last resort for unpaid credit debts.
Example: Mr. Can has a plot of land registered in his name. Since he went to prison, the bank can seize this plot of land due to the credit debt he did not pay and try to collect the debt by selling it.
6. Debt Postponement Request and Legal Rights
In some cases, if documents are presented showing that the debtor is in prison, a temporary postponement of the debt can be requested. However, this is at the discretion of the banks and not every application is accepted.
Example: During his prison sentence, Kerem Bey documented that he did not have the ability to pay and applied to the bank to postpone his debt. The bank froze the debt for the duration of the sentence by offering a temporary postponement.
7. Debts Passing to Heirs in Case of Death
If the debtor dies in prison, the loan debt passes to the legal heirs. However, the heirs have the right to reject the inheritance.
Example: Mr. Cenk died during his prison sentence and could not pay the loan debt. Mr. Cenk’s family was relieved of the debt obligation by exercising their right to reject the inheritance.
8. Special Case: Mortgage Loans
In mortgage loans, the bank has the authority to sell the mortgaged asset in order to collect the debt. The person being in prison does not stop this process.
Example: Ms. Burcu used a mortgaged housing loan and was then sentenced to prison. Since she could not pay her debt, the bank may put Burcu’s house up for sale through foreclosure.
9. Appointing a Deputy for Debt Management While in Prison
It is possible for a person who is in prison to appoint a deputy to manage their debts and contact banks when necessary.
The deputy can contact the bank on the person’s behalf and provide arrangements regarding debt restructuring or payments.
Example: Before going to prison, Hasan Bey appointed a power of attorney through his lawyer and gave power of attorney to a close friend to pay his loan debt regularly.
