Health and Safety Support Information Settling Your Debts

When you’re in debt, it can be easy to forget everything else and work so hard that you put your health in second place. Knowing what options are available to you in settling your debts can prevent a lot of worrying. Both the Japan Legal Support Center and local bar associations offer FREE legal consultations, so if you’re concerned about a debt, please come talk to us:
◆Japan Legal Support Center (Hō Terasu):
http://www.houterasu.or.jp/en/index.html
◆Japan Federation of Bar Associations (Nichibenren):
http://www.nichibenren.or.jp/en/

If my debt comes from an illegal (black-market) loan, is it really okay if I don’t pay it back?
To give an example, a black-market loan is a loan where the annual interest goes over legal limits (set at 20% by the Investment Law) and where the creditor (person lending you money) runs the business via cell phone. Many people are unaware of this, but the contract on which this kind of loan is based is invalid. Because it’s illegal, there are cases where you don’t have to pay the loan back – this means not just the interest but the original loan as well. However, if you took out the loan with the original intention of not paying it back, that can also be seen as fraud, which is a crime. You should never take out a loan that you have no intention of paying back.

I’m being bullied and harassed by my creditor. What should I do?
If you’re the target of bullying, harassment, or other threatening means by loan collectors, you should contact the police. You can press charges if:

• the annual interest exceeds legal limits (violation of the Investment Law)
• you are threatened (extortion)
• you’re telephoned at work (forcible obstruction of business – note: calling you at work may not be a crime, depending on whether the loan collector follows certain procedures or not)

If you think you might press charges, you can prepare for this by audio recording your conversations. Then, you can ask a lawyer or legal clerk to file a report for you. Once this report has been filed, legally, the creditor can only get in contact with you through a lawyer or legal clerk.

If the debt belongs to a family member, do I have to help with payments?
No. Unless you’re the guarantor, you don’t have any legal obligation to help with payments. If your husband or wife is getting a loan and you don’t think it’s a good idea, the best thing to do is to not become his/her guarantor.

Can you tell us about how to settle a debt?
There are four ways to go about settling a debt. The first is called “voluntary liquidation” (nin’i sēri). This involves calculating the entire debt first and then negotiating with the creditor on a monthly payment plan. In some cases, the negotiations don’t get anywhere without the involvement of a lawyer or a legal clerk. Second, even if you don’t have the money to pay a lawyer or legal clerk, you can go to court yourself. For people who are comfortable with this, you can use the “special mediation” (tokutei chōtei) method and have a mediation team act as intermediaries (middle-men) between you and the creditor to help determine a monthly payment plan. The court will charge you arbitration fees of ¥2,000-3,000 per creditor. Third, you can declare personal bankruptcy (jiko hasan). When a court decides that you are unable to pay your debt and declares you bankrupt, your debt disappears. Fourth, you can use the “rehabilitation procedure for individuals” (kojin saisei tetsuzuki) method. Declaring personal bankruptcy isn’t always an option, especially when you’re in debt due to gambling losses. With the rehabilitation method, however, you can make monthly payments without losing your home, so it’s actually better than declaring bankruptcy. The court intervenes to lower your overall debt and then you make payments in regular installments. However, to be eligible for this method, your debt must be less than 50 million yen and you need to prove that you have a steady income.

Will people find out that I declared bankruptcy? And what are the disadvantages of doing this?
If you declare personal bankruptcy, it’s not listed on either your household register or on your certificate of residency. No notice is sent to your workplace or to your family members either. However, if you’re an older employee who might retire soon, it’s possible that your company’s financial office will be asked about your (expected) retirement money – at that point your bankruptcy might become known to them. Your name will also be listed under bankruptcies filed in the government’s Official Gazette, so we can’t say that there’s no possibility of anyone finding out. However, the list of bankrupt persons kept by each local government is not available to the public. The people who can see these lists are restricted and government employees have an obligation of confidentiality to keep. Your guarantor on the loan, however, will know that you declared personal bankruptcy. If you live together with other people, they might also notice your correspondence with the court. In addition, if you declare personal bankruptcy, you’re not allowed to move or go on overseas trips without permission from the court until the legal procedures of your bankraptcy is completed. These are some of the disadvantages of declaring personal bankruptcy. The biggest disadvantage, however, is that your credit agency will know about how you settled your debt (this is true whether you file bankruptcy or use another method). Often, this means you can’t apply for new credit cards or become a guarantor.

Compiled by Akiyoshi Miwa, a lawyer at the Hiroyuki Mori Law Firm