What Is Dation in Payment? | The Legal Way to Return Your Home to the Bank

In this economic situation.
Real estate is considered an asset with low liquidity.

When we start struggling to pay our home installments.
Selling the house on our own won’t work.
If we sell cheap.
It won’t cover the debt we owe.
If we sell high.
No one will buy.

So people start asking.
Can I return my house like returning a car?
Is there a way for the debtor to lose as little as possible?
The answer is, yes there is.

Before actually returning the house.
You should try negotiating or finding other options.
Because returning the house.
Can affect your credit score.
And your future financial status.

1. Refinance / Retention.
   Move to another bank or negotiate with the current bank for a lower interest rate.

2. Debt moratorium / Debt restructuring.
   The bank may allow you to postpone payments, reduce installments, or extend the loan term.

But if these methods.
Still don’t solve your problem.
Because you just want to return the house.
And end the burden.
#DationInPayment.
Is the answer.

Dation in Payment, or in Latin “Datio in Solutum.”
Is a legal and financial method.
Often used by those paying off a house or condo.
Especially when they can no longer afford it.
And need to close the debt with the bank.

Dation in Payment.
Means that the debtor.
Transfers the mortgaged property.
Such as a house, condo, or land.
To the creditor, usually the bank.
To settle the debt in full or in part.
Instead of paying cash.
Simply put — #GivingYourHouseToClearTheDebt.

According to the Civil and Commercial Code, Section 340.
“If a debtor agrees to deliver another thing instead of payment.
The creditor must also consent for the obligation to be extinguished.”

Therefore, Dation in Payment.
Requires mutual consent between both parties (debtor and creditor).
The debtor cannot just transfer ownership alone and have the debt disappear.

The value of the dation.
Comes from the bank’s appraisal of the house.
To determine its current market price.
And the bank will value the dation at.
Around 70% #ofTheBankAppraisedValue.

If the dation value is higher than the debt.
#TheBankWillNotReturnTheDifferenceToTheDebtor.

Because by law (Civil and Commercial Code, Section 340).
It is considered “consent to deliver property instead of payment.”
Not a sale.
The bank is not regarded as the “buyer.”
Therefore, it has no duty to return the surplus to the debtor.

If the dation value is lower than the debt.
#YouMustPayTheDifference.

The bank will call you in for discussion.
About how to handle the remaining balance.
Whether to pay it all at once, in installments, or in a number of payments.
Depending on what you can afford.

The remaining difference.
Becomes a loan debt.
That the debtor still owes to the bank.
And therefore accrues interest.

The bank has the right to charge interest according to the original loan rate.
MMR/MLR/MOR + spread.
(Usually around 6–7% per year).
As stated in the original loan agreement.

At this stage.
The debtor can negotiate with the bank.
They may agree to:

1. Request a full haircut (debt write-off).

2. Request an additional 5–10 years to repay.

3. Pay part and get a partial haircut.
   All of this is called “debt restructuring.”

#IfNegotiationFails.
The remaining debt continues to accrue interest as usual.
And if unpaid.
The bank can sue and enforce judgment.
If the debt difference exceeds 1 million baht.
The bank may also file for bankruptcy.

#IfNegotiationSucceeds.
Some banks may agree to “write off the debt.”
Or waive the interest.
Allowing the debtor to pay only the remaining principal.

Example 1.
Remaining home debt: 3 million.
Appraised value: 4 million.
In this case.
The transfer clears the debt.
But the 1 million surplus is not refunded.

Example 2.
Remaining debt: 3 million.
Appraised value: 2.2 million.
The bank applies 2.2 million to the debt.
Leaving 800,000 baht remaining.
That the debtor must still pay.
With 6–7% annual interest.

All types of debt.
Whether credit cards, cash cards, personal loans.
Secured or unsecured.
If the debt is within the financial system (bank or institution as creditor).
All can be negotiated.

If the debtor genuinely intends to reduce the burden.
It is recommended to negotiate directly with the creditor.
Silence, avoidance, or inaction.
May only tighten the knot.
Until negotiation is no longer possible.

In the next article.
We will summarize all the steps.
Once you decide.
That you choose to “return the house through Dation in Payment.”
To release yourself from debt with the bank.

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