Selling a house that is collateral with bank to clear debts?

761 views 6 replies

Hello guys, I wasn't sure where to post this so went ahead with the 'Others' section. Mods can shift or ask me to shift it to any appropriate section they deem fit.

So, my uncle's business has completely stopped ever since the pandemic started. He was struggling for a few years before it, but since March 2020, apart from a few months, there is no business coming in and the cost of running the house and taking care of the business is proving to be too much.

He has an 'overdraft' facility with his bank to the tune of Rs. 28.5 Lacs. For this purpose, he had listed his house as collateral. Now he's accepted the fact that he needs to sell the house to pay off the debts but knows that the bank will pay a 'Distress' price which will be much lower than market price.

Got me wondering if we can sell the house outside of the bank (at near-market rates) and use that money to pay-off the bank dues and other debts.

Any help will be appreciated. Thanks.

Replies (6)

There is another way, if the buyer has the same bank account as your ur collateral account, you might  transfer the overdraft to them and take extra cash. 

Or deal with bank directly and they will accept. Then check rbi rules for collateral.

Finally, there is no law in accounting which prohibits this transaction if there is bankers acceptance 

How can the transaction be done ?

I’m not sure because the bank could have securitised your collateral until the maturity period. I a man also not sure how they will bring it out of securitisation if you clear your debt before maturity. I read from the Internet that some can transfer OD. So, better to contact the bank. The bank recognises your collateral as asset. You will disclose it. Now, during shutting down, follow insolvency steps.

But at the end, the asset will be seized if the account holder fails to pay the loan right?

Yes that will happen when loan is not cleared. 

There's no way a person can get away with not getting their asset seized by the bank right?

Leave a Reply

Your are not logged in . Please login to post replies

Click here to Login / Register  

Company
06 July 2026
C.A./CA Inter OR pursuing C.A./GST/Accounts/Audit/IT - Head

Arvindkumar Maniar & Co.

Rajkot

CA

View Details
Company
24 June 2026
Senior Account (VA Client Operations)

Karbon Business

Bengaluru

CA Inter

View Details
Company
10 June 2026
Senior Account Executive

JDS Advisory LLP

Ahmedabad

CA Inter

View Details
Company
05 July 2026
Financial Controller

NovumLake Partners

Mumbai

CA

View Details
Company
09 June 2026
Accounts Associate

S Madan and CO

New Delhi

Graduate (Any)

View Details
Company
ARTICLESHIP 30 June 2026
2 posts Article assistant and Articleship completed students

Chirag N Shah & Associates

Mumbai

CA Inter

View Details
Company
ARTICLESHIP 28 June 2026
Article Assistant

Sharma Chetan And Company

Gurgaon

CA Inter

View Details
Company
ARTICLESHIP 07 July 2026
Articleship

Jawahar and Associates Chartered Accountants

Hyderabad

CA Inter

View Details