Financial Problems - Terminology
What should you do to prevent falling into debt?
General recommendations:
- Buy with money that you have saved. If you need to take a loan, get all the needed information from your bank and compare the loan conditions of various other banks.
- Keep track of your regular income and expenses and make sure they are balanced. If possible, have financial backups for unexpected expenses.
- Keep proof of all payments and receipts. Never give out the original contracts.
- Never sign a loan agreement that you do not fully understand! Bring an interpreter or take the agreement home and read it thoroughly. Do not sign a contract if it has tens of pages, if it contains any incomprehensible abbreviations or if it is written in fine print! These contracts are typical for loans provided by non-bank financial institutions. Their conditions may sound better, but they can be risky in the end.
- Do not borrow money to pay off your debts. If you are having financial problems you may tend to except unfavorable conditions and you will have difficulties in paying off yet more loans. Some banks can arrange debt consolidation, which means they will group several loans into one and extend your payment plan.
- Always take your time to make a decision; do not let anybody force you to make a quick decision when you want to make a purchase or take a loan.
- There are companies in the Czech Republic that take advantage of people in financial distress. Providing loans and collecting debts, even relatively small ones, is a source of easy profit for some companies, regardless of your income!
- If you have financial problems do not bury your head in the sand. Try to negotiate with the creditors. You still have some options and possibilities to solve your problems before court proceedings and collection actions begin. Once a court gets involved and makes a decision you will have to accept the decision and the final effect will be much tougher on you.
- Penalties, fees, fines, court fees or collection fees are often quite high and can be more than the original debt itself. If you pay your debt with only the minimum required payments, the payments first cover penalties and fines, while delayed payment charges keep increasing and the total debt is not decreasing, or is even increasing.
- Official notice: even if it is not delivered to you (if you do not pick it up or if you refuse to accept it) it is considered as being delivered and the countdown to when the decision comes into effect starts!
Dictionary – how to understand the terminology of financial distress
Debtor (dlužník): A person who has borrowed cash or purchased something on credit, or a person who has and unfilled obligation to pay.
Collection Action, Execution (exekuce): Enforcement of a Final Verdict which has become enforceable (výkon pravomocného rozhodnutí). Examples of enforcement are the attachment and auction or forced sale of your property, repossession, confiscation of cash and income deductions.
Warrant of execution (exekuční příkaz): An order to carry out the execution. If you are confronted by an executor he/she must present an execution order (with an official round stamp) and the court‘s decision to carry out the execution.
Enforcement title (exekuční titul): A Final Judgment of a court which can be put into effect (enforced). The collection action is based on this judgment; also a finding of state administration or municipal authorities, decisions about tax arrears (deficits) or health and social insurance premiums arrears. The execution (collection) is carried out of based on the enforcement title.
Mortgage (hypotéka): A long term bank loan which is used to purchase real estate or to rebuild a house or flat. The loan is secured by a lien; the bank has the right to take or sell the property if an obligation is not met.
Authorized overdraft (kontokorent): A short term loan offered by the bank as a part of an account. The client can take a loan (kontokorentní úvìr) by overdrawing the balance on her/his account (the bank loans the money) up to an agreed limit. See also payment cards.
Usury (lichva): Providing loans at excessive interest rates. According to the Czech law usury is a crime.
Countercheck (odpor): Type of a legal request to change the decision of the court to issue a court ordered payment.
Personal bankruptcy (osobní bankrot): Elimination of unsecured debt. It must be approved by a court and the debtor has to file for bankruptcy in court.
Payment cards, bank cards (platební karty)
Debit card (debetní platební karta): Debit cards provide access to money in your personal bank account. They do not allow you overdrafts.
Credit card (kreditní platební karta): Payment cards which create a revolving account – this account grants its owner a line of credit which can be used up to an agreed limit and must be paid back by a due date.
Court fees (Náklady řízení): The costs of the legal proceedings. The court decides who must pay the costs, usually the debtor. Check the decision of the court to know if and when you can appeal the decision about the costs of the legal proceedings, if you think that the costs are too high.
Penalty, late fee (penále): This is similar to interest on late payments, it is calculated as a percentage of the debt on a per day basis. The term “penalty” is usually used by state institutions such as health insurance companies, tax collection authorities or the social security administration. You can apply for a late fees pardon after you pay your debt. The institutions will take your reasons into consideration and may waive the late fees.
Court ordered payment (platební rozkaz): The decision of a court made in a simplified proceedings. It is issued without the participation of the debtor. The debtor is ordered to pay the debt and legal fees within 15 days of the rendering of the decision. The debtor may file a countercheck (odpor) against the decision.
Outstanding debt (pohledávka): The amount which is owed by the debtor and claimed by the creditor. It includes the loan itself, interest, penalties and the creditor´s eligible collection costs.
Judgement Creditor (oprávnìný): A term used for the creditor in court decisions.
Judgment Debtor (povinný): The term for the debtor used in legal proceedings. It is the party that is obligated to pay.
Delay in payment (prodlení): A situation when the debtor does not pay by the agreed due date, see late payment interest (úrok z prodlení).
Final debt-collection letter (předžalobní upomínka): A notice in which the debtor is reminded that he/she has past-due payments (is late with payments) and which informs her/him that if she/he does not pay a lawsuit will follow.
Additional fees (pøíslušenství, „částka…Kč s příslušenstvím“): This is the way the debt is summed up in the court decision. It includes the interest, late payment interest, late fees and the creditor´s attorney´s fee. This is may not be a final amount; it will keep increasing until the debt is paid off. It does not include the execution (collection) costs, which are dealt with separately.
Registry of debtors, credit reporting agency (registr dlužníků, centrální registr dlužníků): It registers paid and unpaid debts and provides information about the debtors.
Annual percentage rate (RPSN, roèní procentní sazba nákladù): Sum of all the costs and expenses which the debtor must pay on a particular loan.
Guarantor (ručitel): A person who contractually binds herself/himself to assume and pay the debtor´s debt in case the debtor is unable to repay or stops repaying.
Promissory note, I.O.U. (směnka): Commercial, negotiable paper wherein one party makes an unconditional promise in writing to pay a sum of money. Upon negotiating a loan you may be asked to sign a promissory note guarantee (záruka smìnkou) in case you are not able to pay off the loan. Signing a promissory note is very tricky - if the creditor submits the promissory note in court, the court immediately decides in the creditor´s favor. In such case the court does not consider your rights as they pertain to the loan; it only examines the validity of the promissory note as such.
Payment plan (splátkový kalendář): You can apply for a payment plan in case you have problems repaying the debt. You can negotiate an agreement with the creditor about the installments and their due dates. This agreement may differ from the original contract.
Income deductions, wage garnishment (Srážky ze mzdy): Your employer makes income deductions based on the decision of a court, a forensic executor or a tax authority. The income deductions can reach an amount where the debtor is left with only what is known as an “unseizable minimum“, which is defined by the law.
Co-debtor (spoludlužník): A person who shares the liability for a debt. She/he is in the same position as the debtor. The creditor can claim payment from the co-debtor without having to try to claim it from the debtor first (which would be the case with a guarantor).
Consumer financing (spotřebitelský úvěr): Financing provided to private persons and households for the purchase of consumer goods or services. It is usually for loans over 5,000 CZK.
Loan repayment (umoření): Paying the debt totally or partially, a reduction of the debt.
Debt collection letter (upomínka): A reminder to the debtor that she/he did not pay their debt and an appeal to pay.
Interest Rate on a Loan ( úrok z půjčky): Percentage of how much more is needed to repay the loan. For the lender it is the income from money lent, for the borrower the pay for using of someone else´s money.
Late Payment Interest (úroky z prodlení): A type of penalty incurred for not making payments on time when due. The interest on late payments is higher than the interest on the loan. The higher rate is usually a part of the loan agreement. It is calculated as a percentage of the principal for every day that the debt is past due. If the late payment interest is not a part of the loan agreement the creditor will use a rate defined by law.
Bank loan (úvěr): Funds provided by the creditor to the debtor. The debtor is obligated to repay the loan by the due date. This due date is specified in advance. There are many types of bank loans defined by law - consumer financing, mortgages, business loans, etc.
Creditor (věřitel): The lender or lending entity. It can be a private person, a bank or a non-bank financial institution.
The Enforcement of the Verdict (výkon rozhodnutí): Execution (see above).
Exclusion complaint (vylučovací žaloba): If the collector includes in the list of collected items some assets which do not belong to the debtor, but to his/her relatives or other person, the real owner of such assets can file a complaint to exclude these assets from the collection (vylučovací žaloba); this must be done within 30 days from the time this person learned about the collection.
Call-up, Payment Notice (výzva): A letter that reminds the debtor to pay the debt or fulfill his/her obligations. It is similar to the debt-collection letter.
Collateral (zástava): Property which is used to secure the loan in case the debtor fails to pay the debt. It can be real estate or other assets.
If you find yourself in financial distress please contact the counseling centers of Centrum pro integraci cizinců or specialized counseling centers for people in financial distress:
Občanské poradny – http://dluhy.obcanskeporadny.cz/ . Občanské poradny helped us to create this text.
Poradna při finanční tísni – www.financnitisen.cz
