Despite amendments to the Civil Code last year to prevent children from inheriting debt, the Taiwan Fund for Families and Children (TFCF) found that more than 90 percent of children born into debt continued to suffer.In 2007 the TFCF had predicted the laws, revised late in 2007, did not go far enough:
“We had hoped that children would be spared the burden of inherited debt from deceased family members when the limited inheritance clause was added to the Civil Code on Jan. 4 last year,” TFCF executive director Miguel Wang (王明仁) told a news conference in Taipei yesterday. “A year has passed and sadly most children born into debt are still suffering from it.”
The amendment stipulates that an inheritor may apply for a waiver within three months of a family member’s death if the deceased had more debt than assets. He or she can also only pay off a debt equivalent to the inherited assets.
More than 70 percent of people would still be living with inherited debt even if a proposed amendment to the Civil Code is passed, members of Taiwan Fund for Children and Families (TFCF) said during a press conference in Taipei yesterday.The revisions, passed in Dec of 2007, permitted limited relief, but were not made retroactive for persons whose family members had served as guarantors of debt. In an extreme case profiled in the article above, a Tsinghua student discovered in 2007 that he was liable for a debt contracted by his uncle in 1976, now worth over $50 million NT on 30 years of interest, because his father had stood as guarantor. Taiwan Review discussed the changes:
According to an amendment to the Civil Code that passed its first reading at the legislature last week, people under the age of 20 will be automatically entitled to "limited debt inheritance" -- meaning that they would only have to repay any debts they have inherited by using the assets they have inherited, not from their own pocket.
The proposed amendment to the code also applies for three years retroactively.
The Civil Code allows "limited debt inheritance," but only if the person inheriting the debt makes a request within three months of the benefactor's death.
"However, most people are ignorant of the law and they only find out they are in debt when they are pursued by creditors," TFCF social works division director Chou Hui-hsiang (周慧香) told the news conference.
A survey of more than 1,700 households by the organization showed that 24.6 percent of children under 18 are more than NT$500,000 in debt and almost 80 percent of those indebted children are currently attending junior high school or younger.
Despite all the reforms, crushing debt remains. An underreported issue is the connivance of banks: a few years ago the mother of a student of mine stole her ID and chop and went to five different banks and contracted for five credit cards, which she promptly maxed out, leaving her daughter deeply in debt. Hard to imagine how this woman, obviously much older than the ID, was permitted to contract for debt in her daughter's name, without the active cooperation of bank officials. In this case, the banks fought even these milquetoast revisions.....
Previously, the Civil Code stipulated that an heir must assume all rights and obligations pertaining to the property of the deceased. Activist groups and legislators claim it is unfair for people to be responsible for a debt that they did not incur, resulting in the creation of social injustice. The problem is that if heirs were not notified of the death, or did not know they had to take certain legal actions to waive the debts, they would be unwittingly responsible. This usually happens to economically disadvantaged women and their children, Legislator Huang Sue-ying pointed out in a Nov. 7 news conference, calling attention to this issue. Lin Lu-hong, the president of Taiwan Women's Link quoted an example of a 6-year-old boy sued by a bank that lent about US$10,000 to his recently deceased mother. Research conducted by the TFCF in November this year showed that one in five economically disadvantaged families have fallen victim to inherited debts.
Another beneficial amendment stipulates that if one had been guarantor of others' debts, his or her heir only has to satisfy creditors to the value of the property acquired in the inheritance. According to the previous Civil Code, if a parent acted as the guarantor of a friend's debt, but the friend fled abroad to avoid repayment, the child would bear full responsibility. However, the new amendments do not apply if the debtor evades the debt while the guarantor is still alive.