Opportunities, Benefits, and Risks
In the Republic of Lithuania, a debt can be recovered not only by contacting debt collection agencies but also by selling the debt to another person under an assignment of claim agreement. Selling debt is useful when a company urgently needs to recover at least part of the outstanding amount. The main advantage is that the company gets rid of overdue debts and unpaid invoices, turning them into real funds without incurring collection costs.
Debt sale is a good solution only when it is likely that the money will not be paid on time, and the creditor would have to initiate recovery actions. However, it should be noted that by selling a debt, only part of the amount is typically recovered (since the purchase price is lower than the debt amount), unlike collection, where the full amount may be recovered.
In Lithuania, debt sale is possible at any stage of the collection process and does not require waiting for the due date. The debtor must be informed about the change of creditor.
Satisfaction of Creditors’ Claims of Liquidated Companies
When bankruptcy proceedings are initiated in Lithuania, creditors have the right to submit their claims to the administrator along with supporting documents, and to indicate how the company has secured the fulfillment of these obligations. Whether the creditor recovers all or only part of the debt depends on the order in which their claim is ranked.
The first-ranking claims include employee-related claims; claims for compensation for injury or health damage, occupational diseases, or death caused by workplace accidents; and claims by natural or legal persons for purchased and processed agricultural products. Second-ranking claims include tax and other budgetary payments, mandatory social security and health insurance contributions, and loans obtained in the name of the state or with a state guarantee. All other claims are satisfied in the third ranking.
Claims of each subsequent group of creditors are satisfied only after full satisfaction of the previous group. If the funds are insufficient, the remaining money is distributed proportionally based on the size of the claim.
Assets and claims of a bankrupt or liquidated company in Lithuania, including rights of claim against its debtors, are assessed and sold. Unsold assets may be transferred to creditors. The use of such assets is decided by the creditors whose claims have not been fully satisfied.
Secured creditors (with collateral and/or mortgage) are satisfied first from the proceeds of the pledged property or by transferring such assets. If the sale of the pledged assets exceeds the amount of secured claims, the surplus is allocated to satisfy the claims of other creditors.