Abstract

This article discusses the issue how to discharge an obligation for payment of statutory default interest, where a borrower pays an amount that is not enough to cover both the principal and the interest. There are two standpoints set up in the Bulgarian case law. The first one says that statutory interest and principal shall be paid under Art. 76(1) of the Contracts and Obligations Act (COA), i.e. both obligations should be paid by order of their burden for the borrower, i.e. the time of their occurrence, accordingly. The other standpoint says that statutory default interest should be paid under Art. 76(2) COA, i.e. in this order of priority – expenses, interests, principal. The author stands for and speaks in favour of the second assumption. The main argument in support of his thesis is the fact that it is not justified to treat the default borrower favourably rather than the innocent borrower, who owes the rewarding interest.