Reducing Credit Debt – A Real Way Out of Financial Crisis

Many Ukrainians today face the problem of overwhelming credit obligations. Job loss, reduced income, or additional expenses can make regular loan servicing nearly impossible. Payment delays automatically trigger penalties and fines, which only increase the total debt and create the risk of lawsuits and forced collection. At the same time, Ukrainian legislation offers several legal mechanisms that allow debtors to reduce their financial burden and gradually restore stability.

The first step is always negotiating with the creditor. In many cases, banks are willing to meet borrowers halfway by granting payment holidays, restructuring, or even partial debt write-offs. This can be mutually beneficial: the borrower gets relief, while the bank preserves a chance to recover funds. If no compromise is reached, legal tools come into play. The law allows the debtor to invoke the statute of limitations if the creditor missed the deadline to file a lawsuit.

Courts can also reduce excessive penalties, recognizing them as disproportionate. If a loan agreement was concluded with significant violations, it may be declared invalid, releasing the borrower from paying accrued interest and commissions. Another option is a settlement agreement during court proceedings, where the parties agree to reduce the debt or cancel penalties in exchange for partial repayment. For borrowers facing critical difficulties, the procedure of personal bankruptcy is available, which may result in the discharge of a significant portion of debt.

These mechanisms bring both advantages and drawbacks. On the positive side, they reduce monthly payments, eliminate constant pressure from collectors, and gradually improve credit history. On the negative side, restructuring often extends the loan term, leading to a higher total repayment, while debt write-offs may harm the borrower’s ability to obtain new loans in the future. In the case of bankruptcy, legal restrictions apply: a temporary ban on repeating the procedure, limitations on new borrowings, and potential loss of assets.

During martial law, lawmakers introduced additional protections for borrowers. Law No. 2120-IX prohibits the accrual of penalties and fines starting from February 24, 2022, and any previously accrued sanctions must be written off. Military personnel are granted special protection: they are exempt from paying interest, fines, and penalties during service and must only repay the principal after demobilization.

Another provision regulates the cancellation of mortgage debt for destroyed housing — provided it was the borrower’s only residence and there were no arrears as of February 2022.

Thus, even in times of crisis, there are legal ways to reduce credit burdens. It is important not to postpone action but to choose the mechanism that best fits the specific situation. For some, restructuring may be the optimal solution; for others — legal challenges against unlawful charges or bankruptcy. The key is to act within the law and use the available tools to regain control over personal finances and avoid the status of a chronic debtor