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Understanding Substantial Loss [Banks & Banking]: Legal Definitions and Implications
Definition & Meaning
In the context of banking and finance, "substantial loss" refers to significant financial obligations that a borrower fails to meet. Specifically, it includes:
An obligation that is overdue for ninety days or more, with an outstanding balance exceeding $50,000.
An unpaid final judgment over $50,000, regardless of any potential forgiveness in bankruptcy.
A deficiency balance from a foreclosure that exceeds $50,000, irrespective of bankruptcy forgiveness.
Any loss greater than $50,000 reported on an IRS Form 1099-C, which indicates the discharge of indebtedness.
Table of content
Legal Use & context
The term "substantial loss" is primarily used in banking regulations and financial law. It plays a crucial role in assessing a borrower's creditworthiness and the risk level associated with lending. Legal practitioners often encounter this term in contexts such as:
Banking and finance law
Bankruptcy proceedings
Real estate law, particularly in foreclosure cases
Users may find it beneficial to utilize legal templates from US Legal Forms to navigate related forms and procedures effectively.
Key legal elements
Real-world examples
Here are a couple of examples of abatement:
Here are a couple of examples illustrating substantial loss:
A homeowner fails to make mortgage payments for over ninety days, resulting in a remaining balance of $75,000. This situation qualifies as a substantial loss.
A business receives a final judgment of $60,000 due to unpaid debts. This judgment constitutes a substantial loss, regardless of any bankruptcy proceedings. (hypothetical example)
Relevant laws & statutes
Substantial loss is defined under 12 CFR 347.202, which outlines the criteria for financial obligations in the banking sector. This regulation helps financial institutions assess risk and manage lending practices.
Comparison with related terms
Term
Definition
Difference
Substantial Loss
Significant financial obligations that are overdue or unpaid.
Specifically refers to amounts over $50,000 and certain conditions.
Default
Failure to fulfill a financial obligation.
Can occur with any amount, not limited to $50,000.
Judgment
A formal decision by a court regarding a legal matter.
Can be part of a substantial loss but is a broader legal term.
Common misunderstandings
What to do if this term applies to you
If you believe you are facing a substantial loss, consider the following steps:
Review your financial obligations and identify any that meet the substantial loss criteria.
Consult with a financial advisor or attorney to understand your options.
Explore legal templates on US Legal Forms to manage your situation effectively.
If your case is complex, seek professional legal assistance.
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