TEMPORARY RELIEF FROM LOAN REPAYMENT FOR BORROWERS WHO LOST PROPERTY DUE TO MILITARY ACTIONS

To support borrowers whose property was destroyed or significantly damaged as a result of the russian federation’s armed aggression against Ukraine, the Verkhovna Rada adopted and sent to the President for signing a law amending the Tax Code of Ukraine and certain legislative acts.

This law provides that during the period of martial law in Ukraine and for 90 days after its termination or cancellation, a borrower has the right to apply to the lender or a new creditor with a request to suspend repayment of monetary obligations (principal, interest, commissions, and other payments) under a consumer loan agreement and certain other agreements, the collateral for which is real estate that meets at least one of the following criteria:

Located in temporarily occupied territories or in areas where hostilities are ongoing;

Damaged due to the russian federation’s armed aggression.

Note: property is considered damaged if it can only be restored through major repairs or reconstruction.

Destroyed due to the russian federation’s armed aggression.

Based on the above, the lender relieves the borrower from the obligation to pay the monetary obligation the next working day after receiving the application along with supporting documents.

At the same time, the borrower’s obligation to repay the monetary obligation is resumed from the day:

– compensation is received from the state for real estate damaged or destroyed by the russian federation’s armed aggression, which was the collateral under the agreement,

or

– such property is restored at the expense of the state.

In both cases, however, this obligation must be resumed no later than 180 days after the termination or cancellation of martial law in Ukraine.

In addition to the application to suspend repayment, the law also provides the possibility to submit, within 90 days after the termination or cancellation of martial law, an application to cancel debt under a consumer loan agreement, provided that the application simultaneously meets the following conditions:

1. The collateral under the agreement is:

– real estate destroyed by the russian federation’s armed aggression that is or would have been the borrower’s only place of residence;

or

– a car destroyed by the russian federation’s armed aggression that was the borrower’s only vehicle as of February 23, 2022.

2. As of February 23, 2022, the debt under the agreement was not overdue by more than 7 days.

3. The purpose of the loan under the agreement was:

– the acquisition, reconstruction, or construction of such residential real estate or property rights thereto; or

– the purchase of a car.

In this case, upon receiving the application with supporting documents, the lender cancels the debt and gains the right to receive compensation from the state.

The amount of such compensation cannot exceed the principal amount of the loan.

Other lender expenses (losses), such as unpaid interest, commissions, and other income incurred due to the debt cancellation, are considered lost profits and may be compensated in accordance with the law at the expense of the aggressor state.

Thus, with the adoption of this law, it is expected to protect the most vulnerable category of borrowers with consumer loans secured by a sole residence or a single car, and to relieve from debt those who lost property due to the russian federation’s war against Ukraine.

10.08.2022