1. Management of Hardcore Delinquent Accounts
LEGAL ACTIONS Practical Approaches in Litigation

2. Objectives
Understand how to deal with delinquent Accounts when it comes to legal actions
Realize when and how to take actions on cases

3. WHY SUE?
Recovery
Set Example

4. RECOVERY:WHERE ARE YOUR HARDCORE ACCOUNTS?
Loans Receivable - Past Due
Loans Receivable – Restructured
Loans Receivable – Items in Litigation
Written-off Accounts
Identifying where the hardcore delinquent accounts could be in the bank’s books

5. STEPS IN RECOVERY: Continued Visit by Supervisor &/or Manager
Demand letter from the bank’s lawyer
Letter of complaint before a Barangay Court*
FILE A CASE IN THE PROPER COURT
It should be made clear that the Barangay Court, by law, has absolutely no jurisdiction over actions involving juridical persons. This is a “dirty” tactic that the bank can resort to to embarrass the client and could compel him to pay. The key point here is to provide a copy of the complaint to the client so he would know that his unwillingness to pay his debt was already made public.

6. Exemplary Principles
Teaching a lesson and giving example to other clients
“Maintain Bank’s image…
Image in the community
Image with other clients
Image within the industry
…that it is serious in its business of banking.
Picked up from the principle “exemplary damages” as awarded to litigants who suffered from infringement rights.

7. Agreement to Surrender Personal Properties
If a client is now willing to settle but is not capable at this time;
If the client has some movable properties e.g. appliances – that he is willing to “pawn”.
Banks reposes properties without the banks knowing what to do with the repossessed properties; This can be handled by the bank’s remedial management team

8. Agreement to Surrender Personal Properties
A document signifying the intent of the borrower to surrender any of his/her valuable item(s) on a specified period in case he/she fails to forward the full payment of the loan on an agreed date. The bank can sell the item(s) in case the borrower fails to pay the loan 5-10 days after surrendering the item(s).
Banks cannot just pull-out personal belongings from the client. Banks should not ask the client to sign such agreement on the time the loan is being applied for.

9. Agreement to Surrender Personal Properties
Not the usual procedure but nonetheless a binding legal document.
Surrendering the item(s) does not extinguish the loan; loan is considered paid once the bank receives cash from the proceeds of the sale in payment for the loan.
The essence of securing payment through this technique lies on the Authority to Sell that the client signs;
Take note that the owner should present a certificate of ownership or official receipt of purchase

10. Agreement to Surrender Personal Properties
Keep visiting the clients to collect and remind him to pay the loan;
Loan payment is effected once the bank receives cash.

11. Are you serious in taking this step?
Filing in Court:
Are you serious in taking this step?

12. Filing in Court : What Cases?
“Sum of Money”
Court action to recover the loan
“Estafa” thru violation of Batas Pambansa Bilang 22
Court action under the circumstances where the borrower issues a bouncing check

13. Filing in Court : Where to file?
Sum of Money – Metropolitan/Municipal Trial Court for Cases below PhP 300K
Violation of BP 22 – Metropolitan/Municipal Trial Court for all BP 22 Cases; Preliminary step involves filing of “Information” before the Prosecutors Office of proper jurisdiction
BP 22 is only applicable to banks who require their clients to issue post-dated checks One unfunded (bounced) check is equivalent to one (1) count in violation of the law;

14. Filing in Court : How much?
Sum of Money
For claims ranging from PhP 20K – PhP 100K
Estimate : PhP 2,620.00, exclusive of Lawyers Acceptance Fee which ranges from PhP 20,000 – PhP 50,000* + PhP 2,000 per appearance (if the bank has not retained legal services)
Details : Docket Fee PhP 875
Per defendant PhP 230
Legal Research PhP 10
Compensation Fund PhP
Mediation Fee PhP 500
Sheriff Trust Fund PhP 1,000
Discuss mediation

15. Filing in Court : How much?
BP 22
For amounts below PhP 100K
Estimate : PhP 1,535.00, exclusive of Lawyers Acceptance Fee which ranges from PhP 20,000 – PhP 50,000* + PhP2,000 per appearance (public prosecutor can pursue the case even without private lawyers)
Details : Filing Fee-Prosecutor PhP 150
Docket Fee PhP 875
Legal Research PhP 10
Mediation Fee PhP 500

16. Filing in Court : How long would it last?
…It depends on the load of cases of the court where your case was filed!
BP 22 – minimum of two (2) years
Sum of Money – minimum of two (2) years
Ask banks on their experience

17. TO SUMMARIZE LEGAL ACTIONS Practical Approaches in Litigation
Read the slide.

18. Reasons why the Account is Delinquent :
The client forgot to pay
Frequent reminder
Frequent visit
Principle of “TDK”
The client is unable to pay
Debt Recovery Program
The client is unwilling to pay

19. Reasons why the Account is Delinquent :
The client is unwilling to pay
LEGAL ACTION
Add another slide on presence practices on difficulties in filing legal cases- client cannot be found, takes time to file the case-lost of momentum/aggressiveness (pre-signed demand letters), it would pay to have a friendly lawyer to handle the facilitation of the case – cutting through the procedure. Once summons is ready – ask for deputization to serve summons;

20. Some Tips on How to Speed up Your Filing of the Case :
File complaints only, against clients/co-makers that have the following characteristics:
Can still be located or residing at their given address
Has the capacity to pay
Has permanent sources of income
Has leviable properties
Ask your lawyers for the following:
Bank staff prepares and files the ‘Complaint’ formats;
Let your legal consultants (lawyers) sign the complaints as notaries, or any other person authorized to notarize legal documents;
After filing the ‘Complaint’, request for a deputization of bank staff in facilitating the service of summons to client-defendants.
Keep constant follow up of your court cases schedules with the courts
Add another slide on presence practices on difficulties in filing legal cases- client cannot be found, takes time to file the case-lost of momentum/aggressiveness (pre-signed demand letters), it would pay to have a friendly lawyer to handle the facilitation of the case – cutting through the procedure. Once summons is ready – ask for deputization to serve summons;

21. Thank you.