TRW & Co · Banking, Finance & Debt Recovery
Loan Settlement Lawyer in Chittagong (Chattogram): Rescheduling, Exit and Borrower Defence
A loan settlement lawyer in Chittagong helps borrowers, guarantors and mortgagors negotiate rescheduling, restructuring or a negotiated exit with their bank, while protecting them in the Money Loan Court. With Bangladesh Bank repeatedly changing its special facilities since 2025, timing, accurate figures and a proposal the bank can actually approve decide the result.
Key pointSettle before decree where you can: once the Money Loan Court passes a decree, a borrower must deposit half the decretal amount in cash to appeal, and the bank loses most of its reason to compromise.
At a glance
Deposits after decree
The Artha Rin Adalat Ain 2003 requires a 50 per cent cash deposit to appeal and 10 per cent to reopen an ex parte decree.
Settlement built into law
The Act provides for settlement conference and mediation during the suit, at execution under section 38 and at appeal under section 44A.
Ten-year rescheduling
Bangladesh Bank's 2025 special policy support allowed rescheduling of defaulted loans for up to ten years, including a two-year grace period.
Rules keep changing
Down payment terms and deadlines were revised in February and May 2026, so the current circular must be checked before any application.
Wilful defaulters excluded
Borrowers listed as wilful defaulters cannot obtain rescheduling or interest waivers under the amended Bank Company Act 1991.
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What a loan settlement lawyer in Chittagong does
A loan settlement lawyer in Chittagong acts for borrowers, guarantors and mortgagors who owe money to a bank or finance company and need a workable way out: rescheduling, restructuring, a negotiated one-time settlement, an exit arrangement, or a defence strong enough to bring the bank to the table. The same skills serve lenders that want a realistic recovery rather than years of execution proceedings.
Chattogram has more at stake here than most cities. Its trading houses, steel re-rollers, ship-recycling yards, edible-oil refiners, garment exporters and transport operators borrow heavily, often on the security of family land and the personal guarantees of several relatives. When a business cycle turns, the debt quickly touches homes, inheritances and reputations as well as balance sheets.
Settlement is not a soft option. It is a negotiation conducted against the shadow of the Artha Rin Adalat Ain 2003, which gives banks powerful tools and makes borrowers pay heavily to challenge decrees. Understanding those tools, and the Bangladesh Bank rules that limit what a bank can agree, is the core of the job.
Why loan settlement matters more in 2026
Bangladesh's banking sector is working through an unusually large stock of bad loans. Classified loans reached a reported Tk 6.44 trillion, about 36 per cent of total loans, by the end of September 2025. Bangladesh Bank has pushed banks to bring that ratio down, and banks are under pressure both to recover and to regularise.
That pressure cuts both ways. Banks are more willing to accept structured settlements that improve their numbers, and Bangladesh Bank has issued a series of special facilities for distressed borrowers. At the same time, the 2023 amendment to the Bank Company Act 1991 created a wilful defaulter regime, and the Bank Resolution Ordinance 2025 has moved several banks' loan books into new hands. A loan settlement lawyer in Chittagong has to read all of this before making the first offer.
A settlement offer is only as good as the bank's ability to approve it. The best proposals are built around the bank's regulatory constraints, not just the borrower's cash flow.
The legal framework behind every negotiation
The Artha Rin Adalat Ain 2003
The Artha Rin Adalat Ain 2003 (Money Loan Courts Act) gives special courts exclusive jurisdiction over recovery suits by banks and financial institutions. Several of its provisions shape every settlement discussion:
- Section 12. A bank holding a mortgage with a power of sale can auction the property without first obtaining a decree. The threat of a section 12 sale is often what brings borrowers to negotiate.
- Settlement and mediation. The Act builds in alternative dispute resolution: settlement conference and mediation during the suit, renewed attempts at settlement, and approval rules for higher-value settlements (sections 22 to 25), mediation at the execution stage (section 38) and at the appeal or revision stage (section 44A).
- Section 19. To set aside an ex parte decree, a defendant must deposit 10 per cent of the decretal amount.
- Section 41. To appeal a decree, a defendant must deposit in cash an amount equal to 50 per cent of the decretal amount.
Those deposit rules are the reason settlement is usually best pursued before decree. Once a decree is passed, a borrower who wants to fight on must find large sums of cash just to be heard. The Code of Civil Procedure 1908 fills gaps where the special Act is silent.
Bangladesh Bank rescheduling and exit rules
Bangladesh Bank sets the rules on loan classification, provisioning, rescheduling, restructuring, exit and write-off. Banks cannot simply agree any deal they like; a settlement that breaches those rules can be reversed or penalised on inspection.
In 2025 Bangladesh Bank introduced special policy support for distressed borrowers. As reported at the time, it allowed defaulted loans to be rescheduled for up to ten years, including a two-year grace period, with low minimum down payments, required banks to decide applications within set periods and to suspend related lawsuits once a facility was granted, and excluded loans created by fraud. Facilities for borrowers with exposure to several banks needed the consent of the lead bank or all the banks involved.
The rules then changed several times. In February 2026 Bangladesh Bank allowed banks to accept part of the down payment upfront and the balance over the following six months. In May 2026 it extended the application window to 30 June 2026, required down payments to be realised before an application takes effect, marked loans under exit facilities as "exit" with restrictions on fresh borrowing, and withdrew a requirement for selection committee approval for the largest borrowers. Further changes are likely, so the current circular must always be checked.
Other laws that shape the deal
Cheque prosecutions under the Negotiable Instruments Act 1881 often run alongside recovery suits and can be withdrawn as part of a settlement. Guarantees are governed by the Contract Act 1872, mortgages by the Transfer of Property Act 1882, and limitation by the Limitation Act 1908 as modified by the special Act. Where a borrower company is insolvent, winding up under the Companies Act 1994 in the High Court Division may become part of the picture.
Settlement options compared
There is no single "loan settlement". A loan settlement lawyer in Chittagong will normally compare several structures and test each against the bank's approval process and the borrower's real capacity to pay.
| Option | What it involves | When it fits | Key cautions |
|---|---|---|---|
| Rescheduling | New repayment schedule for a classified or stressed loan, usually against a down payment | Viable business with a temporary cash-flow problem | Breach usually revives the full claim; repeated rescheduling attracts stricter terms |
| Restructuring | Wider change: tenure, interest, conversion of facilities, sometimes new security | Larger groups with several facilities or banks | Needs board-level approval and, for multi-bank debts, coordination |
| One-time settlement or exit | Agreed lump sum or short schedule to close the account, often with waiver of part of the interest | Borrowers who can sell assets or refinance | Must fit Bangladesh Bank exit and waiver rules; wilful defaulters excluded from waivers |
| Settlement in court | Compromise during the suit, mediation, execution or appeal, recorded by the court | Cases already filed in the Money Loan Court | Terms should be embodied in a consent decree or court-recorded settlement |
| Sale of security by agreement | Borrower sells mortgaged property with the bank's consent and pays from proceeds | Where auction would destroy value | Bank must release the mortgage at completion; buyers need clean title |
| Contested defence | Challenge the claim, interest or security in court | Where the bank's figures or documents are genuinely flawed | Deposit requirements after decree; cost and delay |
For many borrowers the right answer combines these: a defence that exposes weaknesses in the bank's claim, used to negotiate a rescheduling or exit on better terms. Our Money Loan Court practice handles the litigation side, and our guide to borrower defences in the Money Loan Court explains the main arguments.
How a loan settlement is negotiated, step by step
- Diagnose the debt. We collect every sanction letter, security document, statement of account and notice, and reconcile principal, interest, penal interest and charges. Errors in the bank's figures are common and valuable.
- Map exposure and leverage. We identify every guarantor, mortgaged property, cheque and pending case, and assess the bank's realistic recovery if it enforces, including the time and cost of auction and execution in Chattogram.
- Check the regulatory window. We confirm which Bangladesh Bank facilities are open for the loan's classification date, whether any wilful defaulter or fraud allegation blocks them, and who in the bank can approve what.
- Build a credible proposal. We prepare a written proposal with a down payment, schedule, source of funds and, where relevant, sale of specific assets, supported by financial information the bank can put before its credit committee.
- Negotiate at the right level. Branch, regional office and head office each play a role. We negotiate with the people who can recommend and approve, and keep litigation positions protected meanwhile.
- Record and implement. We document the settlement in a rescheduling agreement, settlement letter or consent decree, ensure suspension or withdrawal of cases, and track payments.
- Close cleanly. On completion we obtain release of mortgages, return of cheques and title deeds, withdrawal of cases and correction of the borrower's Credit Information Bureau status.
Under the 2026 changes, a rescheduling application does not take effect until the down payment has actually been realised, and banks' processing periods run from that point. Borrowers who submit an application with a post-dated cheque, or without funds in place, may find the window closes before the bank acts.
How settlements work in Chattogram in practice
Chattogram's Money Loan Courts sit within the district court complex, and court information is published by the Chattogram district judiciary. The courts carry heavy caseloads, which means contested suits take time and both sides have an incentive to settle. The local court has also shown willingness to use strong tools: in March 2023, for example, the Chattogram Money Loan Court ordered travel bans against Chattogram businesspeople over a reported Tk 175 crore default.
Most large Chattogram borrowers bank with branches in Agrabad or Khatunganj, but approvals for significant settlements are given by head office credit committees and boards in Dhaka. A loan settlement lawyer in Chittagong must therefore negotiate on two levels: locally with the relationship and recovery teams who know the business, and centrally with the people who sign off. TRW & Co's Dhaka office supports that second stage.
Family structures also matter. Many Chattogram businesses are owned by brothers or cousins, and mortgaged land is often inherited property with several co-sharers. A settlement that one family member signs but others dispute can unravel. We work with our inheritance and property teams to make sure the people who own the security are part of the deal.
Documents to prepare before negotiating
- All sanction letters, renewals, enhancements and earlier rescheduling letters
- Complete statements of account from first disbursement, with interest and charge breakdowns
- Mortgage deeds, powers of attorney given to the bank, title deeds and land records for each property
- Guarantees and the identity and current position of each guarantor
- CIB reports and the bank's classification letters
- Every demand notice, section 12 sale notice, auction advertisement and court paper
- Audited or management accounts, cash-flow projections and evidence of the source of the down payment
- Valuations of mortgaged property and any offers from prospective buyers
A loan settlement lawyer in Chittagong will use these documents to test the bank's claim line by line. In practice, disputes over penal interest, charges debited after classification, unadjusted sale proceeds of pledged goods and the dates on which interest was suspended are among the most common sources of disagreement. Resolving them before negotiation starts narrows the gap between the parties and makes any proposal more credible.
Lenders benefit from the same exercise. A bank that presents a reconciled, documented claim is far better placed to resist delay tactics, and a loan settlement lawyer in Chittagong acting for a lender can use the reconciliation to set a realistic floor for any compromise.
Risks and common mistakes
Waiting until the decree
Borrowers often hope that delay will help. Under the Artha Rin Adalat Ain 2003 it usually does the opposite. Once a decree is passed, appealing requires a cash deposit equal to half the decretal amount, and reopening an ex parte decree requires 10 per cent. Interest continues to run, execution can lead to auction, attachment and even civil detention, and the bank's incentive to compromise falls. The strongest negotiating position is almost always before decree, when both sides face risk and cost.
Relying on an oral promise from the branch
Branch officers may genuinely support a proposal, but they rarely have authority to approve it. Many settlements fail because the borrower paid a down payment on the strength of an oral assurance that head office later rejected. Insist on written confirmation of the terms and of the approval, and make any payment against that confirmation. Where a case is pending, ensure the settlement is placed before the court and recorded.
Ignoring the guarantors and co-owners
A settlement between the bank and the borrower company does not automatically release guarantors or third-party mortgagors, and a guarantor who was not consulted may challenge it. Equally, a guarantor who settles separately may still face claims if the main deal fails. Every person with liability or with an interest in the security should understand and, where needed, sign the settlement. That is especially important for NRB family members who may have guaranteed loans years ago.
Missing the regulatory deadline
Bangladesh Bank's special facilities have had firm application and implementation deadlines, extended several times but not indefinitely. Borrowers who assume another extension will come may find the window closed. Some facilities also depend on the loan's classification status at a particular date. Check the current circular, confirm eligibility in writing with the bank, and file a complete application with funds ready well before the cut-off.
Defaulting again after rescheduling
A rescheduled loan that falls back into default is treated harshly. The bank can cancel the facility and resume recovery for the full amount, further rescheduling becomes harder and more expensive, and the borrower's credibility with every bank suffers. Agree only a schedule the business can genuinely meet, build in realistic seasonal patterns for trading businesses, and raise problems with the bank early rather than after the next instalment is missed.
NRB and cross-border angles
Many Chattogram families have members in the UK, the Gulf and Singapore who guaranteed loans or own shares in mortgaged property. They are often the source of the down payment and the people most exposed if a settlement fails. We advise them on their personal liability, act for them through powers of attorney, and coordinate inward remittances for settlement payments so that the funds are properly documented. See our NRB practice for more.
For a family abroad, the most useful first step is usually a short written review from a loan settlement lawyer in Chittagong setting out who is liable for what, which properties are at risk and what the bank can realistically accept.
Foreign creditors, suppliers and investors in Chattogram companies face the reverse question: how a domestic bank settlement affects their own claims and security. TRW & Co's offices in Dhaka, Singapore, Dubai and London help coordinate these matters across time zones.
How a loan settlement lawyer in Chittagong at TRW & Co helps
Our Chattogram office at Room 4022, Annex 2, District and Sessions Judge Court Building, Court Hill (Porir Pahar), Kotwali, Chattogram 4000, advises borrowers, guarantors and lenders. The firm's Bangladesh advocates appear in the Chattogram courts, including the Money Loan Courts, and our Dhaka team handles High Court Division matters.
Debt diagnosis
We reconcile the bank's claim against the documents, identify errors in interest and charges, and give a clear view of total exposure across all banks, guarantors and properties.
Settlement proposals
We prepare rescheduling, restructuring and exit proposals that fit the current Bangladesh Bank rules and give the bank's credit committee what it needs to approve them.
Court protection
We defend Money Loan Court suits, challenge irregular section 12 auctions and handle parallel cheque cases, so that negotiations happen from a protected position.
Clean closure
We document settlements, secure consent decrees or withdrawals, obtain mortgage releases and title deeds, and follow up CIB corrections so the matter is truly closed.
We do not promise particular outcomes or waivers. We give candid advice on what is achievable and what is not. To discuss your position, visit our contact page, read about our banking practice, or see all our practices and the Chattogram office overview. Lenders seeking recovery should see our debt recovery page, and our article on loan rescheduling rules explains the regulatory background.
Checklist before you approach the bank
- Have you reconciled the full account, including penal interest and charges?
- Do you know every case, notice and auction step already taken?
- Which Bangladesh Bank facility applies to your loan today, and when does it close?
- Has the bank alleged fraud or wilful default that could block rescheduling or waivers?
- Is the down payment available in cleared funds, with a documented source?
- Are all guarantors and co-owners of the security aligned with the proposal?
- Who in the bank can approve the deal, and have you reached them?
- How will the settlement be recorded, and how will cases, security and CIB status be cleared?
If you cannot answer most of those questions confidently, speak to a loan settlement lawyer in Chittagong before making an offer. The first proposal often sets the frame for everything that follows.
Frequently asked questions
01Can I settle my bank loan after a case has been filed in the Money Loan Court?
Yes. The Artha Rin Adalat Ain 2003 actively encourages settlement, with settlement conference and mediation stages during the suit and further mediation provisions at the execution stage and at appeal or revision. A settlement reached while the case is pending should be placed before the court and recorded, usually as a consent decree or a court-recorded compromise, so that it binds both sides. It is generally easier to settle before decree, because deposit rules make post-decree challenges expensive.
02How much down payment does a bank need for rescheduling?
It depends on the Bangladesh Bank circular in force, the type of facility and the loan's history. Under the special support introduced in 2025, minimum down payments were set low for distressed borrowers, and in February 2026 banks were allowed to take part upfront and the rest over six months. Ordinary rescheduling rules differ, and loans rescheduled several times before face stricter terms. Ask the bank for the applicable circular and confirm the figure in writing before paying.
03Will rescheduling stop the bank from auctioning my property?
A properly approved rescheduling normally regularises the loan, and under the 2025 special facility banks were expected to suspend related lawsuits once the facility was granted. But a rescheduling does not automatically cancel a section 12 sale notice or a pending case; the agreement should say so expressly, and the bank should withdraw or suspend the steps it has taken. If you default again, the bank can usually revive enforcement for the full amount.
04Does a settlement release the guarantors?
Not automatically. Guarantors and third-party mortgagors remain liable unless the settlement releases them or the guarantee is discharged by law. Often the bank will keep the guarantees in place until the settlement is fully paid. Every guarantor should see the proposed terms, understand their continuing exposure and, where appropriate, sign the agreement. Guarantors living abroad can act through a power of attorney.
05Can the bank waive interest as part of a settlement?
Banks can agree interest waivers within the limits of Bangladesh Bank's rules and their own board policies, and waivers are common in one-time settlements and exit arrangements. They are not available to borrowers classified as wilful defaulters. Any waiver must be approved at the right level within the bank and recorded in writing; a branch-level assurance is not enough. Make sure the waived amount is stated in figures, so that it cannot be revived later.
06What happens to my CIB record after settlement?
Once the loan is regularised or fully settled, the bank must update its reporting to the Credit Information Bureau. A rescheduled loan may still be flagged as rescheduled, and an exit loan may be marked accordingly, which can affect fresh borrowing. After final payment, ask the bank for a written closure or no-dues letter and check that your CIB report reflects the change, because an outdated classification can block new credit with any bank.
07I live abroad and guaranteed a family business loan in Chattogram. What should I do?
Act promptly. Obtain copies of the guarantee, the facility documents and any notices, and appoint a trusted representative in Bangladesh through a properly executed power of attorney. Your liability usually runs alongside the borrower company, so a settlement negotiated without you may still leave you exposed. TRW & Co can review your position, represent you in Chattogram and coordinate from our offices in London, Dubai and Singapore.
Sources and official materials
- Artha Rin Adalat Ain 2003 (Bangladesh Laws) — Money Loan Courts Act: settlement, deposits and execution
- Bangladesh Bank — Rescheduling, exit, classification and write-off circulars
- Code of Civil Procedure 1908 — Applies where the special law is silent
- Limitation Act 1908 — General limitation rules
- Supreme Court of Bangladesh — High Court Division appeals, revisions and writs
- Chattogram District Judiciary — Chattogram courts and cause lists
General information only, current as at 2 November 2026. It is not legal advice and does not create an advocate–client relationship. It reflects the law of Bangladesh unless stated otherwise, and the law, court practice and official fees change frequently. Check current official sources and take advice on the facts of your matter.
