There are only so many times a creditor (¹) can unsuccessfully call upon his debtor asking him to render payment of a due debt in an amicable and informal manner before he seeks a more formal and serious approach. There are a number of options which can be utilised when it comes to debt collection depending on the nature of the situation.
The first step would be for the creditor to consult a legal professional in order to set up a plan of action to collect the debt based upon the creditor’s budget and/or level of urgency, regarding the matter.
Once it has been established that the debtor has not been compliant to the creditor’s calls to make payment, the first step, for the creditor’s legal team, is to send the debtor a legal letter requesting him to pay what is due to the creditor. Such letter would typically describe the debt and issue the debtor a time limit, following which legal action would be taken. The intention of a legal letter is to show the debtor the seriousness of the situation with the hope of reaching an amicable and out-of-court settlement.
When the former debt collection approach is unsuccessful in eliciting a positive response from the debtor, the creditor may opt to serve the debtor with a judicial letter. A judicial letter is essentially a final demand, issued through the courts, and gives the debtor thirty (30) days in order to respond. If the debtor remains unresponsive or responds by denying that he owes the debt, the creditor shall progress by filing a case before the competent court. (²)
When a debt happens to be below the sum of €25,000 and the debt is certain, liquid and due, the creditor may take advantage of the provisions of article 166A of the Code of Organisation and Civil Procedure (COCP). As per this article, should the debtor not respond to the judicial letter within 30 days from the date of service, the creditor shall attain an executive title and can proceed to enforce his claim against the his debtor’s property without having to file judicial proceedings.
When the debt is certain, liquid and due and the creditor does not think that the debtor has a valid defence, he may opt to issue special summary proceedings. During the first sitting, the court will give the debtor a chance to prove a prima facie defence. If this is provided to the satisfaction of the court, the case shall be heard normally, however, if the defence fails to do so, the court shall issue a judgement in favour of the creditor during the first sitting and thus not drawing out the proceedings.
Should none of the aforementioned solutions of debt collection prove to be a viable and/or successful debt collection method, the creditor must resort to traditional judicial proceedings. Unfortunately, this tends to be a long and drawn out process and is not typically favoured by creditors.
Due to the fact that these proceeding can take a long time, it is advisable for the creditor to secure his debt by requesting the court to issue precautionary warrants in order to secure the assets of the debtor until the case is resolved. These warrants are threefold:
- A garnishee order – in order to freeze liquid funds amounting to the value of the debt + interest;
- A warrant of seizure – this is to secure the debtors movable assets amounting to the value of the debt.
- A warrant of prohibitory injunction – which prohibits the debtor from alienating a particular immovable/s.
Once the creditor has attained a positive judgement, he must take all the necessary action in order to be placed in funds. Should the creditor already have a precautionary warrant in his favour, he must file an application to the court in order for the security to be transferred over to him or sold by judicial auction with the proceeds then deposited to him. When no such warrant exists, the creditor must request the court to issue an executive warrant against the property of the debtor. Once attained this would empower the Court Executing Officer to execute the warrant, in line with the provisions of the COCP, by seizing any available property necessary to cover the value of the debt.
Should the debtor turn out to be insolvent (³), the creditor may proceed to the have the individual be declared bankrupt or if the creditor is a company, file for the dissolution of the company and thus initiating liquidation proceedings. If such proceedings have already been initiated the creditor must make himself known to the liquidator. However, in such situations, due to the ranking of creditors rule and the pari-passu principle, the creditor may still fail to recover any portion of his debt.
Lastly, it is in the best interest of both parties to work towards an out of court settlement of the debt collection, so as to avoid the added inconvenience caused by lengthy court proceedings and court fees. However, when opting for such a solution, it is still advisable for a creditor to consult a lawyer in order to be made aware of his rights at law and to avoid any future claim from becoming time-barred.
SMM Legal
At SMM Advocates we provide legal advice depending on the subject matter, file a relevant application before the competent Court and do all as required in order for the issue to be resolved in the shortest time possible. Our legal advice and assistance further span over various Civil and Immigration matters, find out more on our expertise page or contact us directly with your particular query.
We are available for both face-to-face or online consultations, get in touch by filling in our contact form or call +356 2123 7167 for immediate assistance.
(¹) A creditor is anyone who the debtor owes money to. This could be the government (for tax purposes or administrative fines), a bank, a company or a private individual and could arise from a legal obligation, contractual obligation or from a court judgment Ie. In tort.
(²) For debts below €5,000 – before the small claims tribunal, for debts between €5,000 – €15,000 – before the inferior courts and for debts over €15,000 – before the First Hall of the Civil Court.
(³) Not have enough assets to cover the debt.