Trust is important, but when entering into a creditor-debtor relationship with other parties, we must be cautious and not avoid the document creation. This is done for one simple reason – these documents might be presented in court to protect our rights. That is why, we’ve included 5 ways to help ourselves (and our attorney) to ensure protection and efficiency when collecting our money back in this publication.
1. Create a written document.
When you go to the bank with a loan request, they will make you sign a lengthy contract without which they won’t grant the loan. Even though the case might not be on the same scale, do as the bank does – draft a written document.
Drafting a written document for the money lent is a fundamental rule for protecting your property rights. The document might be a written contract, a promissory note, or a receipt. In it, the debtor undertakes to repay the debt. Even if handwritten on a paper or the back of another document, it will be binding for the parties.
We understand that it’s not always possible to use qualified legal assistance. Because of this, even if you are guided by the text below, it will still be helpful:
“Today………., the undersigned Dimitar Dimitrov Dimitrov, personal ID number 0987654321, with a permanent address in Sofia, str. ……….. № …, received a loan from Ivan Ivanov Ivanov, personal ID number 1234567890, with a permanent address in Sofia, str. ……….. № …, amounting to 1000 BGN (one thousand leva), which I undertake to repay within three months / by …….2022. Lender: (signature) Borrower: (signature) (three names) (three names)
When drafting this document, it is important:
- to clearly write down the names, personal ID numbers, and addresses of the parties as per their ID cards. This relates both to the identification of the parties to the contract – so there is no doubt who they are and regarding the taking of legal action. These are actually all the necessary details for your attorney so that your case can proceed without wasting time.
- to clearly write down the amount of the loan, the period in which the debtor will use it, and if agreed, what compensatory interest you are entitled to receive at the end.
The fewer details there are in the contract regarding the loan, the more your debtor (through their attorney) might misinterpret this contract against you. For example, they may claim that the amount was not given as a loan at all but for another reason (ex returning a loan, donation, reimbursement for a service, work, compensation, or settling other relations).
If no deadline for repayment of the amount exist, it will be necessary to send invitations, including notarial ones and notify the debtor that you would like to receive the payment and start accruing statutory interest for the payment delay. All of this can be avoided if you are precise and detailed when drafting the document.
2.Notarize the signatures.
You should also know about the option to sign the loan agreement with notarized signatures. In general, notarization is not mandatory for contracts to be valid. In the case of the loan agreement, it is only optional but provides an important advantage, which we will discuss below. The main function of a notarized signature is to ensure unequivocal identification of the person who signs it. In this case, your debtor would find it difficult to argue that he did not conclude the contract since the signature is not his, for example.
Useful: You can calculate the notarial fee for certification according to the material interest of the contract (the loan amount) on LegalMasters.bg’s calculators by choosing the option “Contracts not subject to registration.” You can do this here.
There is another important reason to make a notarized certification. By it, you ensure speed in the court procedure against the debtor by initiating special enforcement proceedings under Art. 417 of the Civil Procedural Code. It immediately provides you with a receiving order.
This is important because otherwise, to collect your money, you would first have to go through a general claim process in at least one court instance. Only after winning the case will you get a receiving order and be able to take real action to collect. There are, of course, options for preliminary securing of property, but this does not ensure quick collection of the debt.
3. Transfer the loan amount through a bank.
It is good to transfer the amount to the borrower’s bank account after signing the loan agreement.
Even if you don’t create a written document, transferring the money through a bank or another payment institution is highly recommended. This ensures the traceability of the transfer.
A bank transfer will always ensure an official record that you have transferred a certain amount to a certain person. In this case, the advantage is also the complete freedom to specify the purpose of the transfer, namely, that it is a loan. For example, you can write “loan granted,” or “loan until 01.01.2022”
Even if you lose the payment document, you can always go back to the respective bank and have it reissued.
4. Collateral – Property, Real Estate, or Guarantor
If you have reasons to doubt your borrower or the amount is substantial, it is always good to consider collateral. In this case, you may arrange for a valuable item to be left in your possession, establish a mortgage on real estate, or have another person act as a guarantor. In such cases, we recommend consulting with an attorney.
5. Witness
If you have circumstances where you do not have a written contract or bank transfer for the money you have borrowed, you should know that for contracts up to £5,000 you can rely on the testimony of a third party in court. He or she must have been present at your oral agreement with the borrower. This option is risky for you and should only be relied on as a last resort.
The attorneys at LegalMasters.bg regularly assist our clients in collecting debts and conducting thorough checks on debtors, which can be requested online here. If you need consultation, creation of a loan agreement, or would like more information about our services, you can contact us through our Facebook page, email us at contact@legalmasters.bg, or call us at 0893050449.
Dear Readers, All materials published on LegalMasters.bg are for informational purposes only. These materials reflect the personal views and professional opinions of the respective attorneys from the team. They should not be perceived as particular legal advice.