Cannot pay the loan: restructuring or deferral: what to do under Georgian law

What to do

1. Legal framework: the rules on claims do not cover refusal of a product that an organisation is not obliged to provide, and there is no duty to restructure a loan (NBG Consumer Protection Rules, Art. 13). Restructuring is a matter of negotiation: ask before the loan falls into arrears, in writing, with documents proving loss of income or illness.
2. What is at stake in arrears (calculate before negotiating): for arrears, penalties and any other sanctions may not exceed 0.27% of the outstanding principal per day (Civil Code of Georgia (CC), Art. 625), and in total for a single arrears period may not exceed 1.5 times the outstanding principal (CC, Art. 625). Collectors: in arrears, it is prohibited to pressure the borrower with false information or with actions that damage their reputation (NBG Consumer Protection Rules, Art. 12).
3. Submitting the request: banks and MFOs must accept an application orally, in writing or electronically (NBG Consumer Protection Rules, Art. 13); the reply to a written claim is due no later than 1 month and, where possible, should include a proposal for settlement terms (Art. 13). A refusal or silence can be challenged with a complaint to the National Bank (which supervises banks and MFOs), and then in court. Argument: where circumstances have materially changed, you may demand that the contract be adjusted (CC, Art. 398); the parties must first try to agree on adjusting the contract (CC, Art. 398).
4. Data for the calculation: on request and free of charge, you can obtain the outstanding balance, the next payment and the terms of any grace period (NBG Consumer Protection Rules, Art. 9). Check your contract and any insurance (job loss, illness).
5. Restructuring terms in arrears: an increase in debt from restructuring in arrears does not increase the base for the penalty cap (CC, Art. 625); restructuring does not “wipe out” the arrears until the sanctions are paid (CC, Art. 625). Alternatives: refinancing at another bank, where the early repayment fee may not exceed 2% of the outstanding principal (CC, Art. 625). Mortgage: before the auction you can repay the claim and avoid the sale (CC, Art. 304).
6. Where to apply: the bank or MFO (written application, claim), then the National Bank of Georgia (საქართველოს ეროვნული ბანკი), then the court.
7. Evidence: the contract and payment schedule, a statement of the outstanding balance, documents on loss of income or illness, a copy of the application with a receipt mark, the creditor's reply, the insurance policy.
8. Pitfalls: waiting for arrears before writing to the creditor, when sanctions are already accruing; an oral agreement by phone without written confirmation of the new terms; signing a restructuring without checking the new amount and the capitalisation of penalties; stopping payments altogether in the expectation of a “mandatory” restructuring.

Be sure to check

• the law does not oblige a bank or MFO to restructure a loan: it is a negotiation, so ask in writing and in advance
• the creditor must accept the request and reply in time; a complaint to the National Bank
• free information on the outstanding balance and grace-period terms; check your insurance
• the statutory caps on penalties in arrears, and that restructuring does not reset them
• alternatives: refinancing (the early repayment fee is capped), amendment of the contract because of changed circumstances