Debt collection services
Debt recovery is a set of procedures (searching for the debtor and their assets, analyzing the debtor’s financial situation, submitting claims, negotiations, pre-trial debt recovery, judicial debt recovery, writing off bad debts, debt purchasing, etc.), typically carried out in more complex situations. The goal of debt recovery is to recover the debt quickly, efficiently, and with minimal costs. There are two main stages of debt recovery: pre-trial and judicial.
Pre-Trial Debt Recovery
Pre-trial debt recovery is a set of actions aimed at returning the debt to the creditor in the shortest possible time without going to court. The purpose of pre-trial debt recovery is to ensure the repayment of debts through non-judicial means, without applying coercive measures. Various legal methods are used to enforce the creditor’s financial claim in good faith by the debtor.
Pre-trial debt recovery is an effective tool to compel the debtor to fulfill their financial obligations. It is the cheapest and fastest way for the creditor to recover their funds from the debtor.
Pre-trial debt collection is carried out through negotiations with debtors regarding the repayment procedure, deadlines, and conditions. During this process, information about the debtor is gathered; communication with the debtor takes place; the goal during negotiations is to recover the debt for the creditor without damaging friendly relations with partners or clients. For a debtor who misses the payment deadline, claims, demands, warnings, and notices are sent, and they are informed about possible legal consequences in case of refusal to repay the debt. The debtor’s financial situation is assessed; repayment deadlines are set and agreed upon; a debt repayment schedule and/or promissory note is signed; the fulfillment of obligations is monitored until full settlement or recommendations are made regarding further debt recovery steps; and bankruptcy proceedings may be initiated.
Judicial Debt Recovery in Lithuania
It is not always possible to recover debts through pre-trial means. Certain circumstances may influence this – lack of evidence, significant delay in fulfilling obligations, failure or improper fulfillment of the creditor’s own obligations, etc. If the debtor does not take the opportunity to repay their debt without court proceedings and the associated additional expenses, debt recovery is carried out through judicial means. In such cases, various enforcement measures are applied, such as recovery from the debtor’s funds or property and other coercive actions. Forced debt recovery is carried out based on enforceable documents issued by courts or other institutions (e.g., notaries).
Judicial debt recovery includes the preparation and submission of procedural documents (claims, counterclaims, responses, rejoinders, further replies, requests, separate appeals, applications for court orders, applications under documentary proceedings, settlement agreements, and other procedural documents) to the court; representation of the client and their interests in court; monitoring the enforcement of court decisions, rulings, resolutions, and orders in civil cases; preparation of appeals and representation in appellate courts; and initiation of bankruptcy proceedings.
If the debtor fails to make the agreed payment, the creditor may apply to the court to recover the debt. This can be done through an application for a court order or a claim, which may be considered either through documentary proceedings or regular litigation.
Application for the Issuance of a Court Order
Claims (monetary demands) arising from a breach of contract are examined by the court in accordance with the established procedure based on the creditor’s application. Before submitting an application to the court for the recovery of debt, the creditor must assess all the conditions that may justify the application being inadmissible for consideration under court order proceedings. For instance, such an application may be rejected if it should have been submitted as a claim under contentious proceedings or documentary proceedings. Therefore, the application is not considered under the court order procedure when:
- At the time of submitting the application for a court order, the creditor has not fulfilled their own obligation (or part thereof) for which payment is demanded, and the debtor requires its fulfilment;
- The obligation cannot be fulfilled in parts, but the creditor demands the fulfilment of only part of the obligation;
- The debtor resides abroad or their registered office is located abroad;
- The debtor’s place of residence and workplace are unknown.
If, after the court initiates proceedings based on the creditor’s request and issues a court order, it turns out that the debtor’s residence and workplace are unknown, the court shall annul the court order and leave the creditor’s application unexamined.
The application for a court order must include the following:
- The creditor’s full name, personal identification number, address, and if the creditor is a legal entity – its full name, registered office, company code, bank account number and banking details, as well as the name and address of the representative, if the application is submitted by a representative;
- The debtor’s full name, personal identification number (if known), address, workplace (if known), and if the debtor is a legal entity – its full name, registered office, company code, bank account number and banking details;
- The amount of the claim, and if recovery of a specific item is requested – the market value of the item, its name, and a detailed description;
- The demand and its factual basis;
- A reasoned request for the application of interim protective measures to the debtor, if such grounds exist, and information about the debtor’s assets;
- A confirmation that none of the above-mentioned grounds for inadmissibility exist;
- A list of documents attached to the application.
Once the issue of the application’s admissibility has been resolved, the court shall immediately, but no later than the next day, issue a court order to the creditor and decide on the application of interim protective measures against the debtor (if the creditor has requested such measures). If the court, upon the creditor’s request, applies interim protective measures, a copy of the court order is sent on the same day to a bailiff, property register administrator, or other enforcement authority, who, for example, may impose a seizure of property until the debt to the creditor is settled.
The court order becomes effective if, within twenty days from the date the notice is delivered to the debtor requiring payment of the awarded amount (including interest and litigation costs), the debtor does not raise any objections to the creditor’s application. If the debtor does not submit a response to the court within 20 days, the court order becomes enforceable, and upon the creditor’s request, a writ of execution is issued for compulsory enforcement by a bailiff.
Documentary Proceedings
A claim for the recovery of debt may also be examined under documentary proceedings. For a claim to be processed in this manner, it must be supported by written evidence. In this case, the dispute is examined on the basis of documents and conducted in writing, without summoning the parties to an oral hearing. If the court decides that the submitted written evidence substantiates the debt, it shall issue a preliminary decision within 14 days, which is sent to the defendant. If the defendant does not raise objections to the preliminary decision within 20 days, the decision becomes enforceable and a writ of execution is issued on its basis.
Contentious Proceedings
In addition to the above-mentioned simplified procedures, the debt claim may also be examined under the general rules of contentious proceedings. However, this is the lengthiest method of debt recovery. It is advisable to use it when the debt is difficult to substantiate with written evidence. Under the rules of contentious proceedings, a claim is submitted to the court, preparations for the hearing are made, and the parties exchange relevant procedural documents (statement of claim, statement of defense, reply, rejoinder). Additionally, up to two preparatory court hearings may be scheduled, followed by the main hearing for the examination of the case.