Debts and Loans

• The following are the main methods of debt consolidation. (1) Voluntary arrangement (2) Bankruptcy proceedings (3) Individual rehabilitation proceedings (4) Special conciliation

(Explanation)
・The term “multiple debt” refers to a situation in which someone takes more loans to repay previous debts. If you are in a situation like this and it is impossible for you to repay your debts, you need to arrange a debt consolidation plan as soon as possible.
・Debt consolidation is a process of reorganizing debts and rebuilding the debtor’s financial situation by using the Interest Rate Restriction Act and laws regarding procedures (such as the Bankruptcy Act) to reduce, waive, or postpone payment of debts.
(1) Voluntary arrangement: This is a method whereby a debtor asks a specialist such as a lawyer or judicial scrivener to negotiate with their creditors, fix the amount of the debt (if high interest rates have been charged, the amount can be reduced considerably or money can be recovered), and reach an agreement on a monthly payment amount that can be paid.
(2) Bankruptcy proceedings: These are court proceedings for the purpose of having debts discharged when the debtor is unable to pay them.
(3) Individual rehabilitation proceedings: These are court proceedings in which a person who is having difficulty repaying their debts is exempted from the remaining debts after repaying a certain amount.
(4) Special conciliation: This is a court procedure in which the court intervenes between the creditor and the debtor to fix the amount of the debt and reach an agreement on a monthly payment amount that can be paid.
・The descriptions given of these procedures are only outlines and not a strict definition. Each procedure has its own advantages and disadvantages, so it is advisable to compare the procedures and discuss your concerns with a lawyer, judicial scrivener, or other specialist to determine which is best for you.

00790

• Personal bankruptcy is bankruptcy proceedings initiated upon petition by an individual who is unable to repay their debts.
• When an individual debtor files a petition to initiate bankruptcy proceedings, they are deemed to have filed a petition for grant of discharge at the same time.

(Explanation)
・If the person in bankruptcy has no assets (bankruptcy estate) at the time bankruptcy proceedings are initiated and it is clear that there are no grounds to deny grant of discharge, the bankruptcy proceedings will be terminated as soon as the decision to initiate bankruptcy proceedings is made, and the case will move on to the discharge procedure.
・If the value of the assets belonging to the bankruptcy estate is expected to exceed the cost of the proceedings, or if there are suspected grounds for denying grant of discharge, the court will appoint a bankruptcy trustee at its discretion.
・A case in which a bankruptcy trustee is appointed is terminated when the court decides to conclude the bankruptcy proceedings after the trustee realizes and distributes the assets belonging to the bankruptcy estate and reports to the creditors’ meeting.
・Up to 990,000 yen of cash belonging to the bankruptcy estate can be disposed of freely by the person in bankruptcy (free assets).
・If there are grounds for denying grant of discharge, discharge cannot be obtained. However, the court may grant a discharge even if there are grounds for denial, taking into consideration the circumstances that led to the decision to initiate bankruptcy proceedings and all other circumstances.
・Grounds for denying discharge include gambling, wasteful spending on entertainment, receiving loans through fraudulent means, submitting false documents to the court, etc.
・Once a grant of discharge is approved, the person in bankruptcy will not have to repay any debts after the initiation of bankruptcy proceedings, with exceptions such as child support, taxes, and fines. In addition, they will be released from any legal restrictions on eligibility.
・For more information, consult with a lawyer, judicial scrivener, or other specialist. (You can also check with the district court regarding the necessary documents and procedures for filing a petition.)

00793

• Under the Bankruptcy Act, as a rule, if seven years have not passed since your last discharge, you will not be able to obtain a discharge.
• However, even if seven years have not passed, there are cases where the court will grant a discharge after considering all the circumstances.

(Explanation)
・The Bankruptcy Act allows for the granting of a discharge as long as the grounds for denying grant of discharge are not met.
・Having received a discharge within the last seven years constitutes grounds for denying grant of discharge. Therefore, as a rule, discharge will not be granted in such circumstances.
・However, even in cases where there are grounds for denying grant of discharge, the court may grant a discharge at its discretion if it finds it appropriate to do so in consideration of all circumstances, including the circumstances that led to the second bankruptcy.
・In this way, even if you have received a discharge within the last seven years, you may be able to receive a discretionary discharge in exceptional cases. Please consult with a lawyer to determine the likelihood of receiving a discretionary discharge.

00795

• A voluntary arrangement is a procedure in which the parties involved privately discuss and consolidate the debts without using a public institution such as a court.

(Explanation)
・A voluntary arrangement involves requesting a lawyer or certified judicial scrivener to issue a notice to the lender (financing company) and request disclosure of the relevant transaction history. In many cases, an agreement can then be reached to repay the remaining principal, recalculated at an interest rate prescribed by the Interest Rate Restriction Act, in installments over a period of three to five years.
・Making a voluntary arrangement does not incur the various legal restrictions on eligibility that a personal bankruptcy does.
・Creditors are not obliged to agree to this discussion.

01424

• Based on your current financial situation (balance between income and expenses) and how much you can afford to pay back, you may choose to pursue personal bankruptcy, civil rehabilitation, another voluntary arrangement, or special conciliation.

(Explanation)
・If your financial situation at the time you chose voluntary arrangement has subsequently deteriorated, you will need to consider debt consolidation procedures based on your new financial situation.
・If there is some amount of money that you are able to pay, and if it is possible to discuss with the creditor to revise the repayment plan, it may be possible to make another voluntary arrangement or file for conciliation.
・If it would be possible to pay the debt if it were significantly reduced, you may consider filing a petition for civil rehabilitation.
・If you have no or very little money to pay, you may consider filing a petition for personal bankruptcy.
・For more information, consult with a lawyer, judicial scrivener, or other specialist.

01941

• This is a civil rehabilitation procedure used by individuals who are having difficulty paying their debts.

(Explanation)
・The individual rehabilitation proceedings are a procedure in which a person who is having difficulty repaying debts makes a rehabilitation plan to reduce the total amount of debt to be repaid and to repay the reduced amount in installments over a period of usually three years, and if the court approves the plan after hearing the opinions of the creditors, the remaining debt (except for some debts such as child support and taxes) will be discharged by making repayments in line with the plan.
・Individual rehabilitation proceedings include the following

1. Rehabilitation for individuals with small-scale debts
   In order to use this procedure, the following conditions must be met.
   ・The total amount of debt (excluding mortgages) must be less than 50 million yen
   ・The applicant must have the prospect of earning continuous income in the future
2. Rehabilitation for salaried workers
   This procedure is mainly aimed at salaried workers. In order to use this procedure, the following conditions must be met in addition to the conditions in 1.
   ・The applicant’s income must be a stable amount, paid in the form of salary, etc.

・For those who have mortgage debts in addition to debts from consumer finance companies, etc., special provisions can be added for mortgages. However, unlike other debts, the total repayment amount for mortgages cannot be reduced.
・The minimum amount of money that must be paid back to creditors is as follows (the minimum amount of money that must be paid back may vary depending on the applicant’s financial situation, etc.).

1. For rehabilitation for individuals with small-scale debts:
   As a rough guide, if the total amount of debt (excluding mortgages) is
   Less than 1 million yen: Full amount of the debt
   1 million yen up to and including 5 million yen: 1 million yen
   More than 5 million yen up to and including 15 million yen: 1/5 of the total debt
   More than 15 million yen up to and including 30 million yen: 3 million yen
   More than 30 million yen up to and including 50 million yen: 1/10 of the total debt
2. For rehabilitation for salaried workers
   The larger amount after comparing the amount calculated in 1 with the amount of the applicant’s disposable income (total of applicant’s income minus taxes and minimum living expenses) for two years
   *If using the special provisions for mortgage loans, the mortgage portion must be paid separately from the above payment.

・Please consult with a lawyer or other specialist about whether to use the rehabilitation for individuals with small-scale debts or rehabilitation for salaried workers, and what the actual repayment amount will be if you use either.
・From the initiation of rehabilitation proceedings to the approval of the rehabilitation plan, it is necessary to follow a prescribed schedule for the proceedings. Also, please note that if you are unable to make payments during the repayment period, the rehabilitation plan may be revoked and you may have to pay the original debt in full.

00802

• As a general rule, a debt is extinguished by prescription after five years have passed from the due date (the date of payment of the debt and interest).
  However, just because the time limit has passed, it does not mean that the debt and interest (liabilities) are automatically extinguished. In order to extinguish a debt, it is necessary for the debtor to express their intent to invoke extinctive prescription (to assert a certain fact for their own benefit) after the period of prescription has passed.
  [For liabilities (debts and interest) incurred before the effective date of the amendment to the Civil Code (April 1, 2020),] debt and its interest from individuals and credit unions that are not organized as companies will be extinguished by prescription after 10 years. (However, even in this case, if the borrower is a merchant, the prescription period will be five years.）

(Explanation)
・The right to demand payment of money (monetary claim) is extinguished by prescription when “five years have passed from the time when the creditor became aware that the right could be exercised” or “ten years have passed from the time when the creditor was able to exercise the right,” unless otherwise specified in the Civil Code or other laws.
・Under a loan agreement, the lender can demand payment of the debt and interest from the borrower when the due date arrives. Therefore, the extinctive prescription will be completed when five years have passed from the time when the lender knew that the due date had arrived, or when ten years have passed from the due date.
・However, if the borrower pays a portion of the debt after the due date has arrived, for example, the prescription period will revert to zero and a new prescription will run again. This is referred to as “renewal of prescription.”
・Also, for example, if the lender files a lawsuit for payment of the debt and interest after the due date has arrived, the completion of the prescription will be postponed until the judgment is finalized. In addition, if a court judgment approving the lender’s claim is finalized, the prescription will be renewed. In such cases, the prescription period will be 10 years from the time the judgment is finalized.
・The issue of prescription requires particularly careful legal judgment. For more information, consult with a lawyer, judicial scrivener, or other specialist.

00773

• You can view this information at the credit bureau that the financial institution you are doing business with is a member of.

(Explanation)
・Credit bureaus have been established and are used by the credit card, banking, and consumer finance industries.
・You can check your registered information at any of these bureaus, but the means and procedures for doing so differ from one bureau to another.
・For more information on the procedures, please check with the bureau concerned.

00764

• Interest to be paid (15–20% per annum) is calculated based on the Interest Rate Restriction Act, and if you have overpaid, you can recover that amount.

(Explanation)
・The Interest Rate Restriction Act sets the following upper limits on loan interest.
1. Principal of less than 100,000 yen: 20% per annum
2. Principal of 100,000 yen or more but less than 1 million yen: 18% per annum
3. Principal of 1 million yen or more: 15% per annum
・Even if you promise to pay interest in excess of this limit, any promise regarding the excess amount is invalid.
・If you do pay interest on the excess amount, the excess amount will be applied to the principal in turn. As a result, the principal will be reduced.
・Money that the borrower has continued to pay even after the principal has been reduced to zero is considered to have been gained by the lender (financing company) without any legal basis (unjust enrichment), and the borrower can demand the return of the overpayment.
・However, if, prior to June 17, 2010, a lender (financing company) provided a loan at an interest rate of 29.2% or less per annum, the loan was in accordance with the procedures set forth in the Money Lending Business Act, and the borrower agreed to pay the promised interest rate without being coerced, then the interest must be paid (deemed repayment provision). However, the deemed payment provision was abolished on June 18, 2010.

00820

• There is no legal requirement to return the money.
• Take legal action and do not contact them again. If you gave out the phone numbers of your workplace, relatives, etc. when borrowing the money, you should inform them in advance that they should take firm action against any harassment from the loan shark and should never pay any money back.
• If harsh collections continue, consult with the police, a lawyer, or a judicial scrivener.

(Explanation)
・“Loan sharks” are criminals that lend money at, demand payment of, and receive interest at rates exceeding 20% per annum (29.2% per annum before June 17, 2010) as regulated by the Act Regulating the Receipt of Contributions, the Receipt of Deposits, and Interest Rates. This is criminal behavior for which severe penalties are imposed.
・Money lending by loan sharks can be viewed as simply an opportunity to demand excessive interest under the pretext of a loan. The “clean hands doctrine,” by which the law does not lend its power to those who break the law is reflected in the provisions regarding performance for illegal causes (Article 708 of the Civil Code), which states that a person who has tendered performance of an obligation for an illegal cause may not demand the return of the thing tendered, and it is therefore considered that there is no legal obligation of return.
・There are many cases where loan sharks will ask for the phone numbers of employers, relatives, etc. when lending money, and then attempt to compel payment by harassment in the event of non-payment or legal action. Collecting money early in the morning or late at night, or requesting money from people who are not obliged to pay is prohibited by the Money Lending Business Act, and is socially unacceptable behavior for which penalties have been prescribed.
・Giving in to loan sharks’ threats, or failing to take firm action against them, will make it impossible to sever the relationship. Take firm legal action and avoid any further involvement with them.

00783

• A joint guarantor is liable for the immediate repayment of all debts if the principal debtor fails to repay them when due.

(Explanation)
・A joint guarantee refers to a guarantee in which the debt is borne jointly and severally with the principal debtor.
・A guarantor is responsible for repaying not only the principal debt, but also interest, penalties, and damages associated with the principal debt.
・However, if the guarantee liability is greater than the principal obligation, it will be reduced to the limit of the principal debt. In other words, it cannot become greater than the principal debt.
・Furthermore, the guarantor’s liability will not be increased even if the principal debt increases after the conclusion of the guarantee contract.
・A joint guarantee is also a guarantee, but the most significant difference compared to an ordinary guarantee is that there is no right to defense of demand or reference.
・The right to defense of demand is the right to ask, in the event that the creditor suddenly makes a claim for repayment from the guarantor without making one to the principal debtor, that the creditor first makes such claim to the principal debtor.
・The right of defense of reference is the right to ask, even after the creditor has made a claim for repayment from the guarantor, that the creditor first execute on the assets of the principal debtor by showing that the principal debtor has the financial means to pay and that execution of the principal debtor’s assets would be easily performed.
・Because a joint guarantor does not have the right to defense of demand or reference, a sudden claim for repayment on the due date may not be refused regardless of whether a claim has been made against the principal debtor or the status of execution.
・When becoming a guarantor, it is common for there to be a special provision to become a joint guarantor.

00737

• Simply being a member of a debtor’s family does not incur the obligation to pay.

(Explanation)
・If you are the guarantor of a loan agreement, you will be obliged to pay. In addition, the guarantee contract will not be effective unless it is in writing.
・Since married couples are jointly and severally liable for daily household debts (payment for family meals and drinks, clothing, rent for the home, electricity, gas, water bills, etc.), as a general rule, even if only one member of the couple signs a contract, the other cannot refuse to pay. However, in cases where the couple has been living separately for a long period of time and have separate living expenses, such that their joint livelihood has broken down, there is a possibility that this principle will not apply.
・Family members are not obliged to repay debts on another family member’s behalf, even if the debt may have been caused by an addiction to gambling, alcohol, or drugs. Making such payments on a family member’s behalf may lead to the problem taking longer to resolve. It is important to eliminate the root cause of the debt by discussing it with the individual concerned and receiving treatment for addiction at a specialized medical institution.
・For information on addiction treatment and support for recovery from addiction, please contact your local public health center or mental health welfare center.
・If you are suffering as a result of being asked to repay debts owned by family members, consult with a lawyer, judicial scrivener, or other specialist.

00771

• There is a way to give notice to the debtor by content-certified mail.
• If the debtor does not respond to the notice, you can use legal procedures such as a demand for payment, civil conciliation, a civil lawsuit, or the small claims court to seek payment.

(Explanation)
・In order to seize the other party’s assets, a document that officially recognizes your rights (title of obligation) is required, such as a judgment or court settlement statement, or a notarized document that contains provisions to authorize compulsory execution.
・For more information, consult with a lawyer, judicial scrivener, or other specialist.

00867

• The agreement is valid. An agreement to lend or borrow money (a loan agreement) can be concluded even if no written agreement is drawn up.

(Explanation)
・In order to seek repayment through legal procedures, it is necessary to prove that a promise to repay money was made or that money was delivered.
・It is customary to use an IOU to prove this.
・After the agreement is made, if the borrower does not repay the loan or denies the agreement itself, evidence of the conclusion of the agreement is required in order to get the money back. In such cases, an IOU can serve as strong evidence, so it is advisable to prepare an IOU when making a loan agreement.
・If there is no direct evidence of the loan, indirect evidence proving the existence of the loan must be used in order to seek repayment of the loan in court.
・For more information, consult with a lawyer or other specialist.

00864

• The following information is generally included in an IOU.

1. Names of both the lender and the borrower
2. Amount of the loan
3. Due date for repayment
4. If interest is charged, the interest rate
5. Date of the agreement
6. Signature and seal of the lender and the borrower

(Explanation)
・An agreement to lend or borrow money is called a loan agreement, and the document that proves this is generally called an IOU.
・By putting the details of a loan agreement in writing, such as an IOU, it is possible to prove that both the borrower and the lender have agreed on when the loan was made, in what amount, and how much is to be paid back by when.
・In principle, a loan agreement is concluded by delivering the object of the loan, such as money, to the borrower. However, in the case of a written agreement for a loan-for-consumption, such as an IOU, the agreement becomes effective when the lender promises to deliver money, etc. to the borrower and the borrower promises to return the same kind, quality and quantity of that thing to the lender, even if there is no actual delivery of money, etc.

00862

• Foreign nationals who have lived in Japan for more than one year by January 1 of the current year and have an address or are classified as a resident are required to pay resident tax.
• If you fail to pay, you will be charged a late payment fee. If you are having difficulty paying your taxes, please consult with the municipal office. Some municipalities have systems for paying resident tax in installments, so please inquire at the counter.

(Explanation)
・These taxes are calculated based on the previous year’s income, so no resident tax is paid in the year a foreign national first enters Japan. However, if you leave Japan before the end of December, you will need to pay any unpaid taxes by then. Foreign nationals who stay in Japan for less than one year and are classified as non-residents are exempt from taxation and do not have to pay resident tax.

03819