With the onset of war, many people in Ukraine have faced financial hardship, unemployment, and loss of housing. Loan repayment, as a result, has become a complex and multifaceted issue. Martial law significantly changes the typical conditions of lending, creating legal uncertainty and raising numerous questions for both borrowers and lenders.

It’s important to understand how the law regulates loan obligations, what rights and responsibilities both parties have, and what consequences may arise if a loan is not repaid.

This raises many questions: Is it worth taking out new loans under such conditions? What should those with existing or previously repaid loans do? Banks continue to demand repayment.

Is It Legal to Not Pay a Loan During Wartime?

In 2023, the Verkhovna Rada adopted Draft Law No. 12148, which provides for the exemption of certain categories of borrowers from the obligation to repay loans or mortgages during martial law and for one year after it ends.

The law focuses on supporting businesses whose property has been located in occupied territory or in active combat zones since the start of the full-scale war.

However, this law does not fully exempt borrowers from loan repayment; rather, it softens the conditions. The key points are:

• Banks are not allowed to charge penalties, fines, or other sanctions for late payments.
  • This means the borrower is protected from additional financial pressure due to delays in payment.
• The principal amount and accrued interest remain valid. After martial law ends, the borrower must repay the full loan.
• Restructuring is possible: Borrowers may request changes to repayment terms, such as deferral of payments, reduced monthly installments, or an extended loan term.
• The borrower is not relieved of repayment obligations, but benefits from more flexible conditions. Supporting documents are required to apply for such adjustments.
• Maintaining communication with the bank is essential. Negotiating repayment is advised. Otherwise, courts may rule for forced recovery of assets.

In short, it is not legal to simply stop paying a loan during martial law. Obligations are only softened, not eliminated.

Consequences and Risks of Non-Payment During Wartime

Financial crises can strike unexpectedly due to force majeure events, disrupting personal budgets and plans. Borrowers often ask: What happens if I stop paying my loan?

If a payment is missed, the bank will usually contact the borrower to find out the reason for the default. Without valid justification and corrective action, the bank may demand full repayment.

In extreme cases, nonpayment may lead to legal action. While criminal liability for nonpayment of loans does not exist in Ukraine (unless fraud is involved), civil consequences are serious.

Potential Consequences of Loan Delinquency:

• Fines – Fixed sums stated in the loan agreement imposed on the borrower.
• Late fees – Daily charges for each overdue payment.
• Blacklisting – The borrower may be barred from receiving future bank loans.

Penalty sanctions can be triggered by even a single day of delay. However, if the situation is resolved quickly, these penalties may be waived and lending terms continued.

If the borrower systematically ignores bank demands and takes no steps to resolve the debt, the bank can take the case to court. In that case, forced collection of the debt becomes possible, including the principal and any additional charges.

Court decisions concern only financial obligations. Imprisonment for loan nonpayment does not apply, except in cases of fraud (e.g., submitting fake documents to obtain a loan).

It’s worth emphasizing that nonpayment of a loan is not a criminal offense in Ukraine unless linked to fraudulent actions.

As previously mentioned, during martial law, banks cannot impose fines, penalties, or sanctions for missed payments. However, the debt remains, and borrowers are obligated to repay the full amount once martial law ends. The consequences are not canceled — they are only temporarily eased under wartime legislation.

Enforced Loan Recovery During Wartime

If a borrower consistently avoids repaying a loan, the bank has the right to file a lawsuit. If the court determines that the borrower deliberately evaded repayment without a valid reason, it may impose enforced debt recovery measures.

The court’s decision is binding and will be forwarded to the Enforcement Service, which oversees the execution of court rulings and takes measures in case of non-compliance.

If the debtor is an individual, enforcement measures will be applied under Article 68 of the Law of Ukraine “On Enforcement Proceedings” regarding wage garnishment, pension, scholarship, or other income seizure.

Article 68 States:

Recovery from wages, pensions, scholarships, and other incomes is applied if the debtor has no funds/electronic money in bank accounts or with other financial institutions, non-bank payment service providers, or on e-wallets. It also applies when the debtor lacks sufficient assets to cover the debt. Recovery may also be enforced for periodic payment obligations.

For other enforcement documents, recovery can proceed without seizing the debtor’s assets, upon a written request from the creditor or if the total claim amount does not exceed five minimum wages.

The enforcement order for recovering from income is issued by the executor and directed to the company, institution, organization, or individual paying the debtor.

Procedures for legal entities are outlined in Section VIII of the Instruction on Enforced Execution of Court Decisions.

How Are Loan Interest Rates Applied During Wartime?

During martial law in Ukraine, loan interest rates remain regulated, but some adjustments apply:

• Banks are allowed to continue accruing interest according to the original loan agreement.
• Penalties and fines for late payments are prohibited.
• Many banks offer “loan holidays,” temporarily suspending principal payments. However, interest typically continues to accrue.

Legally, interest rate increases are prohibited, except in cases allowed by the Civil Code of Ukraine.

After martial law ends, borrowers are required to repay all accrued interest. To avoid accumulating large debts, it is recommended to maintain regular payments if possible and stay in contact with your bank for updated relief programs.

Direct communication with the bank is key, as regulations and conditions may change.

How to Write Off Debt During Wartime

To have a loan written off during wartime, the borrower must:

• Submit a formal request to the bank for loan cancellation;
• Provide documents proving destruction or damage of collateral (e.g., home or vehicle);
• Confirm that the loan was used for its stated purpose and that there were no outstanding debts before the war began.

Only after receiving a complete package of supporting documents can the bank cancel the debt. The bank may then seek compensation from the state.

Alternative Ways to Write Off Debt

If repaying the loan is no longer possible, even after reviewing your budget, there are several alternatives:

1. Insurance:

Many borrowers purchase insurance policies when taking out loans. These policies can cover events such as disability, health issues, or damage to pledged assets (like property or vehicles). If a covered event occurs, insurance payouts can go toward repaying the loan.

2. Bankruptcy:

If the borrower has no property or savings, they may file for bankruptcy through the court to discharge debts. This is a last resort and does not cancel obligations like alimony.

3. Incapacity/Disability:

Borrowers who acquire a disability that prevents them from working may qualify for debt cancellation.

4. Closure of a Legal Entity:

If the loan was issued to a legal entity that has since gone bankrupt, closing the business may eliminate the debt.

5. Death of the Borrower:

Debts can be canceled if the borrower has passed away.

6. Statute of Limitations:

Under the Civil Code of Ukraine, the statute of limitations is 3 years. If no payments have been made during this time, the debt (including interest and penalties) may be written off. This only applies if the borrower has made no payments at all for three years.

Who May Qualify for Debt Write-Off?

Banks and financial institutions act primarily in their own interest, even in times of war. However, in some cases, they may agree to cancel a debt:

Common scenarios include:

• The 3-year statute of limitations has expired;
• The borrower is officially declared insolvent or disabled;
• The debtor refuses to pay and declines options like deferment, refinancing, or restructuring.

Each case is unique, but legal and financial advice is recommended to understand your rights and options fully.

How to Deal with Debt Collectors During a Crisis

According to data from “UkrBorg,” a major player in the debt collection industry, the volume of problematic loans transferred to collectors in Ukraine has exceeded 100 billion UAH. Debt collection agencies in Ukraine typically operate in two main ways:

1. Under Contract with the Bank:

• Collectors act as intermediaries, providing debt recovery services such as phone calls, in-person visits, data collection, and legal support.
• The debt remains on the bank’s balance sheet, and collectors receive a commission (typically 20–30%) based on the amount recovered.

2. Purchasing Non-Performing Loans:

• Collectors buy bad debts from banks at a significant discount and become the new creditors.
• Banks often sell debts after 60–90 days of delinquency to avoid reputational risks and enforcement costs.
• Some large banks prefer to sell debt claims to financial companies instead of using collection agencies.

Defending Yourself from Collectors Requires Knowledge and Action

Start by gathering information:

• Identify who is contacting you.
• Demand documentation verifying the debt and the collector’s authority.
• Verify the legitimacy of the agency.

Prefer written communication. Record phone calls when legally permissible. Stay calm but assertive. Limit contact, protect your personal space, and shield your family members.

If your rights are violated, contact a lawyer, the National Bank of Ukraine (NBU), or the police. Be aware of the statute of limitations. Explore restructuring options, and as a last resort, consider filing for bankruptcy.

Don’t give in to intimidation. Save all correspondence and documents. Know your rights and assert them when necessary.

Legal Ways to Protect Yourself from Pressure

To protect your rights, you can:

• Officially request an end to collector calls.
• Avoid disclosing personal information online to prevent misuse.
• Consult a lawyer if needed.

Filing Complaints About Misconduct

To file a complaint against collectors, you must have evidence. This can be:

• Oral (e.g., recorded phone calls);
• Written (e.g., messages, emails).

If collectors contact you outside of allowed hours, reveal confidential information, or issue threats — document every instance of misconduct.

Seek legal advice. If violations continue, contact a qualified attorney who can help you file a complaint with law enforcement or initiate a court case.

In cases involving threats or psychological pressure, your first step should be reporting the issue to the police. Always submit complaints to the appropriate authorities.

Which Banks Continue Issuing Loans During Wartime?

Due to the war, many Ukrainian citizens have lost their financial solvency, which has significantly increased the risk of loan defaults. As a result, many banks have revised their lending policies.

Despite the difficult situation, loan issuance continues to operate to support the economy and meet citizens’ financial needs.

Which banks issue loans during wartime?

When it comes to credit cards or installment loans, the best-known providers are:

• PrivatBank (issues cards with limits up to UAH 100,000);
• Monobank (provides credit limits on existing cards).

State-supported lending programs

A key example is the “YeOselya” mortgage program, aimed at providing affordable home loans.

• Interest rate: From 3% to 7% annually, significantly lower than market rates.
• Term: From 1 to 25 years.
• Loan amount: From UAH 100,000 to UAH 12 million.
• Eligible groups: Military personnel, doctors, teachers, and critical infrastructure workers.

This program is implemented through Oschadbank, PrivatBank, Ukrgasbank, and others.

Microfinance Organizations (MFIs)

Today, MFIs are becoming one of the most accessible loan options during emergencies.

Why are microloans convenient?

• Online access: Applications can be submitted anytime and anywhere via a website or mobile app.
• No income proof or perfect credit history required, unlike traditional banks.
• Fast approval and disbursement: Applications take about 30 minutes to complete, with funds transferred almost instantly after approval.

Typical loan conditions:

• Loan amount: Usually up to UAH 30,000.
• Term: 7 to 30 days, with an option to extend.
• Interest rate: On average 1% to 2% per day (equivalent to 365–730% annually).
• Example: Borrowing UAH 5,000 for 10 days at 1.5% per day results in a repayment of UAH 5,750 (UAH 5,000 principal + UAH 750 interest).

Despite wartime difficulties, lending in Ukraine remains active, offering financial support to individuals and businesses. Government programs, consumer loans, and microloans help Ukrainians overcome financial challenges. However, before applying for a loan, it’s important to carefully review the terms, assess potential risks, and responsibly plan your financial obligations.

Legal Assistance with Loan Debt

Legal assistance for credit debt is a comprehensive set of measures aimed at protecting borrowers’ rights in dealings with banks, MFIs, or debt collectors.

Loan disputes require special attention, as they often involve large sums and serious financial consequences. A qualified lawyer who understands the intricacies of credit law can provide invaluable help in such situations.

Initial Legal Support

The first step is to consult a legal specialist (lawyer, attorney). The expert will:

• Analyze the loan agreement,
• Identify possible violations,
• Assess risks,
• Develop a legal defense strategy.

This may involve reviewing how interest, fees, and penalties were calculated and evaluating whether debt collection practices comply with the law.

Negotiation and Legal Action

In most cases, the lawyer will negotiate with creditors to:

• Restructure the debt,
• Postpone payments,
• Reduce or write off part of the debt.

If creditors refuse compromise, the lawyer will represent the client in court.

Protection Against Collectors

Collectors often act outside legal boundaries. A lawyer can:

• Stop illegal debt collection tactics,
• File complaints with regulatory bodies,
• Take the matter to court if necessary.

Severe Cases: Bankruptcy and Debt Relief

In complex cases where repayment is impossible, a lawyer may initiate personal bankruptcy procedures. Though a last resort, this can eliminate debt and offer a financial reset.

Why Legal Help Is Crucial During Wartime

During wartime, laws are changing rapidly. A lawyer helps navigate new rules and protect the borrower’s rights amid legal uncertainty.

Qualified legal support can be found in:

• Law firms,
• Attorney bureaus,
• Free legal aid centers,
• Online legal platforms.

Timely legal assistance ensures effective resolution of debt issues and protects your rights.