1. What does a debt collection process in Bulgaria look like?
1.1. Extrajudicial phase
When you have a claim against a debtor in Bulgaria, often the first step is to attempt an amicable solution. You may send a written invitation to the debtor, reminding the debtor of their obligation to pay you, stating your claim and warning that if payment does not ensue within a explicitly stated term, your claim will be lodged in court, which would further exacerbate the debtor’s situation, because they will likely have to pay also the costs for the court and enforcement procedure. Often those invitation letters are sent through a lawyer and/or notary office, which increases the chance of the debtor’s cooperation. If the invitation letter is successful, the debtor may pay you immediately, or, if they are not able to pay you the whole due amount, the debtor may propose a payment plan. If you are prepared to accept such extension of the debt, then it is advisable to sign a notary certified agreement with with the debtor, which should include the payment schedule and acceleration and penalties in case the payment schedule is not observed. When you are in possession of a notary certified stating your claim, it will be much easier to obtain an execution title and initiate enforcement (due to the possibility to make use of the expedited payment order procedure included in the Bulgarian civil procedure code).
The extrajudicial phase is not necessary, so if for some reason you do not want to contact the debtor, it is possible to directly address the court with your claim. Moreover, in some cases it is even advisable to forego the extrajudicial step and directly attempt to “freeze” or secure debtor’s assets in order to make sure that the debtor will not have time to dispose of their assets after they become aware that you are preparing to sue them. Your lawyer who is experienced in debt collection in Bulgaria will be able advise you which strategy to choose based on the information about the debtor’s behaviour and material situation.
1.2. Judicial phase
In the context of collecting a claim, the aim of the judicial phase is to obtain a writ of execution to be presented to the enforcement agent for the actual debt collection (in the enforcement phase). Depending on the claim, the creditor needs to follow either the normal court procedure (trial) or an expedited procedure for procuring a payment order.
The trial starts with lodging of the statement of claim, which should include the names and addresses of the parties, the value of the claim, , the facts of the dispute, the requested relief, evidence of paid court fee as well as all evidence which the claimant possesses. Following a formal examination of the claim by the judge, the documentation is served to the defendant, to has one month to respond to the claim with any objections, counter claims and evidence. Following the exchange of papers between claimant and defendant the judge schedules hearings for examination of the case, all evidence is collected, witnesses and expert witness statements are heard, the judge. And after the trial the first instance judgement is issued, which enters into force if it is not appealed within two weeks. In Bulgaria enforceable are both first instance judgments which have entered into force, as well as appellate judgments. Cassation appeal is very limited.
In certain cases, such as most claims for receivables of monetary amounts below 25 000 BGN and claims based on notary certified contract and promissory notes,the creditor may choose to lodge an application in court for issuing of an enforcement warrant. This procedure is much faster than the court trial, because it excludes the exchange of papers, trial and collection of evidence, witness and expert’s statements. The debtor is informed after the issuance of the payment order. In some cases the debtor may object, following which the court gives the creditor a one month term to lodge a claim and start the normal trial procedure as described in the preceding paragraph, In other cases, such as when the claim is based on a notary document, the payment order is enforceable immediately and the judge issues a writ of execution simultaneously with issuing the payment order.
1.3. Enforcement phase
According to the Bulgarian civil procedure code, subject to enforcement are:
- the court judgments which have entered into force and the appellate court judgments, the payment orders, the court agreement protocols, the judgments for which preliminary enforcement has been allowed, as well as the decisions of the arbitrary courts and the concluded before them agreements on arbitrary cases;
- the decisions, the acts and the court-agreement protocols of the foreign courts, which are subject to execution on the territory of the Republic of Bulgaria without special procedure – such as most EU court decisions;
- the decisions, the acts and the court-agreement protocols of the foreign courts, as well as the decisions of the foreign arbitrary courts and the concluded before them agreements on arbitrary cases, on which execution on the territory of the Republic of Bulgaria is admitted (following a special procedure at the Bulgarian court).
The Bulgarian court issues a writ of execution (enforcement title) based on any of the above documents.
Once you are in possession of an enforcement title, you need to approach an enforcement agent in order to initiate the debt collection procedure. In Bulgaria there are two types of enforcement agents – public and private bailiffs, and both types are empowered by the state to collect claims. Once presented with the creditor’s request and a valid enforcement title, the bailiff initiates an execution case, investigates the property status of the debtor – bailiffs may access to information about the debtor’s bank accounts, labour status etc. After the necessary information has been collected, the bailiff undertakes appropriate actions of enforcement as requested by the creditor – those may include collection of funds from bank accounts, selling of real estate or other property. The bailiff sends the debtor an invitation for voluntary payment before undertaking enforcement actions. For each type of enforcement there are specific rules and terms to which the bailiff must adhere.
2. Are there options to “freeze” or secure debtor’s redress objects?
It is often wise to attempt to freeze the debtor’s redress objects before lodging the claim. At the claimant’s request, the court may approve appropriate pre-action interim measures, including orders for freezing movable or immovable assets or bank account of the debtor. In order to achieve such pre-action interim measures, the claimant must support their request by convincing written evidence, and/or furnish the court with a guarantee for the debtor’s potential losses in case of not justified claim in an amount determined by the court (usually around 10% of the claim). When the request for pre-action interim measures is granted, the plaintiff is given a term to lodge the claim (usually a month).The request for interim measures may be included also in the statement of claim.
3. Do you need to be assisted by an attorney at law?
In Bulgaria the assistance of a lawyer is not required by law in neither of the claim collection phases, but we consider it essential.
4. What are the costs of the procedure and are they eligible for reimbursement ?
Depending on the procedure, payment order application or normal trial, the court fees in the judicial phase are 2% or 4% of the claimed amount, respectively. In case that the creditor applies for a payment order but the debtor objects, the court instructs the creditor to lodge a claim under the normal trial procedure, In this case only the difference between the fees for the two processes, i.e. 2%, needs to be paid.
In the enforcement phase, the bailiffs collect simple fees for each enforcement action they undertake, as well as proportional fee over the amount of the claim. The proportional fee in case of collection of monetary claims is calculated over the collected amount as follows:
Up to 100 BGN . – 10 BGN
From 100 to 1000 BGN – 10 BGN + 10 % of the amount over 100 BGN;
From 1000 to 10 000 BGN – 100 BGN + 8 % of the amount over 1000 BGN;
From 10 000 to 50 000 BGN – 820 BGN + 6 % of the amount over 10 000 BGN;
From 50 000 to 100 000 BGN – 3220 BGN + 4 % of the amount over 50 000 BGN;
Above 100 000 BGN – 5220 BGN + 2 % of the amount over 100 000 BGN.
The losing party has to cover the costs paid by the successful party. However the lawyer’s fees can be reimbursed in a diminished amount in case the court finds that the fees actually paid by the claimant are excessive. The recoverable amount of the costs and which party bears which costs is stated by the court in the judgement and included in the execution title.
5. What is the term of the procedure?
Depending on the complexity of the case, a regular case in the judicial phase normally lasts 1-3 year , while an expedited procedure (such as in case the claim is based on notarized document proving the existence of the debt or non-objection to the claim) takes 2-3 months.
In the enforcement stage, following the two-week period which the bailiff gives the debtor for voluntary payment, the rest of the timeline depends on the debtor’s material situation and whether the debtor objects to the actions of the bailiff. For example, in the most uncomplicated scenario, when the debtor has monetary funds in bank accounts, the collection takes under a month, but in case that real estate needs to be sold it takes several months.
For further information you can contact us at office@kotoff-law.com