The most common reason for execution is non-performing loans. Unpaid fines for black driving are only in second place.
One of the most common reasons for distraint is loans. Be it from bank loans or even non-bank loans. Immediately on the ground of execution are unpaid fines from public transport or various arrears for gas, electricity or television fees. Last year alone (2011), more than 1 million executions were ordered in the Czech Republic. According to current figures, it seems that in 2012 the total number of executions will be at least as high.
Are you taking a loan? Beware of execution!
It is the loans that people do not manage to repay, which are among the most common reasons for execution. There are two main problems. The first is the case where people have more loans or loans that they no longer manage to repay.
And so they try to borrow more money just to have the repayments on another loan. But this is a vicious circle, which sooner or later leads only to people being unable to repay anything. Then they only await execution or personal bankruptcy.
Beware of loan guarantees
Another problem may be when you borrow money for someone else or when you guarantee a loan. A request from someone you know, or from a family, “I just need you to guarantee me” can be very dangerous. There is no such thing as a “guarantee only”.
If you act as guarantor for a loan, you assume all responsibility for the loan. If the principal borrower is unable to pay its obligation, the bank (or non-bank company) will automatically request the full amount from you. You do not have to know at all that your friend has stopped paying the loan and the bailiff will knock on your door, or you will be blocked from your bank account or you will be charged with execution.
Execution can make the loan more expensive
If you take out a loan and stop repaying it, it can cost you a lot. As soon as you stop paying your regular payments, your bank will usually start sending you reminders. Sending a reminder (first or second) often costs 300 or 500 USD. The bank may charge you additional fees when it prompts you to pay the full amount of your loan immediately.
If your bailiff takes over your loan, the total debt increases by additional charges – bailiff costs, lawyers’ fees, court fees, and more. The loaned amount of USD 50000 can thus quickly become a debt of USD 100,000 or more.
How to avoid execution?
Perhaps there is no clear advice. However, the experts on financial issues generally agree that before making a loan, every person should calculate whether they can afford to repay. If you live from paycheck to paycheck, without a financial reserve, it is definitely not recommended to borrow money for expenses such as holidays or buying gifts. If you have no financial reserve, you should limit yourself to your expenses.
When you have to borrow money, it should be for something that doesn’t lose its value – a car, a house, an apartment. You can always sell a car or an apartment when you get into repayment problems in the future. If you spend money on vacation, there is no longer a way back and you only have to pay back.