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

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)
Quick Summary
This discussion explores the possibility of selling a house that has been used as collateral for a bank overdraft to cover business debts. The owner is concerned about the bank offering a distress price if they seize the property. The thread discusses potential methods for selling the house privately at a better price to clear the bank dues and other debts, including options like transferring the overdraft to a buyer or dealing directly with the bank. Advice is given to consult the bank and research RBI rules regarding collateral and securitisation.

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?

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