How to write off a loan of money correctly?

One of the most common instruments for financing businesses is a loan. The nuances of a loan agreement are described in detail by the legislator in Chapter 71 of the Civil Code of Ukraine (hereinafter – the CCU). In accordance with Article 1046, under a loan agreement the lender transfers a certain amount of money into the ownership of the borrower. These may also be other items determined by generic characteristics. The borrower is obliged to return to the lender the loan amount specified in the agreement or the corresponding quantity of items of the same kind. However, this is not always possible. In this article, we will consider a topical issue: how to properly write off a monetary loan?

Loan agreement: what should be considered when concluding it?

A loan agreement may be concluded either orally or in writing. If the lender is a legal entity, the agreement must be concluded exclusively in writing. The oral form of the agreement entails certain risks for the borrower; therefore, it is recommended to conclude a written agreement.

The document must обязательно include:

1. Place/date of execution.
2. Contact details of the parties (i.e., the lender and the borrower).
3. The amount granted as a loan (the currency must be specified).
4. The procedure for repayment of funds (deadlines, cash or non-cash).

In addition, an important place in the loan agreement is given to the clause “Rights and obligations of the parties.” A monetary loan may be granted either with interest or interest-free. If the loan is granted with interest, this must be expressly stated in the agreement.

Important: a notarized loan agreement allows the parties to protect themselves from unpleasant consequences.

What to do if the borrower does not repay the debt?

In accordance with current legislation, if the borrower does not repay the debt, there are two ways to resolve the issue:

• Out-of-court.
• Court proceedings.

The simplest option is when the agreement is notarized: it is necessary to apply to a notary with a request to issue an enforcement endorsement for debt recovery under the loan agreement. This will be sufficient to initiate enforcement proceedings.

Without notarization, one may start by sending a claim to the borrower, which must include:

1. The grounds for submitting the claim.
2. Documents confirming these circumstances.
3. Claims with references to regulatory legal acts.

Sending a claim is not a mandatory requirement. It is a form of out-of-court dispute resolution. If no response is received from the borrower, the next step is to apply to the court.

Is it possible to write off a loan?

Loan write-off is a legally and financially complex process that requires a special approach. It is not possible in all cases; however, under certain conditions, the debtor has lawful mechanisms for full or partial release from debt obligations.

First of all, it is necessary to determine the grounds for the occurrence of the debt. If the loan was executed with violations of the law (absence of a written agreement, signature, or essential terms), this may serve as an argument for declaring the obligation invalid in court. The statute of limitations also plays an important role. In Ukraine, it generally amounts to three years from the moment when the creditor learned or should have learned about the violation of their right. If this period has expired, the debtor has the right to declare this in court.

Another way to write off a loan is to conclude a settlement agreement with the creditor. Creditors are often willing to compromise by agreeing to reduce the amount of debt, write off penalties or fines, or restructure payments. This helps to avoid court costs and lengthy disputes.

Special attention should be paid to the procedure of personal bankruptcy. It is applied in cases where the debtor has no real ability to fulfill financial obligations. After completing the procedure established by law, part or all of the debts may be written off, except for certain categories of obligations.

It is equally important to properly execute all documents and record interactions with the creditor. Correspondence, payment documents, and agreements may become key evidence in the event of a dispute. Independent actions without legal assessment sometimes worsen the situation; therefore, it is advisable to seek consultation from a lawyer or attorney.

Thus, the proper write-off of a monetary loan is not an evasion of responsibility, but the use of mechanisms provided by current legislation to protect one’s rights in a difficult financial situation.

Writing off a monetary loan independently is not an easy task. It is better to rely on the support of professional lawyers. Specialists of our law firm “Prykhodko & Partners” will help you properly write off a monetary loan in compliance with all legal requirements.

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