Methods of debt recovery
According to Romanian legislation, if a debtor has failed to pay until the due date, the creditor may choose to recover the debt amicably or judicially. Taking legal action for the recovery of debt implies that the creditor may initiate a court proceeding against the debtor for the recovery of the debt within the three-year statute of limitations.
As briefly described above, the recovery of debt is done in two stages:
- AMICABLY (EXTRA-JUDICIAL SETTLEMENT).
The amicable settlement requires contacting the debtor in order to negotiate and set payment deadlines. This proceeding mainly focuses on amicable recovery and the written notification to the debtor informing him, as a final notice, of the outstanding debt, the legal actions to be taken and the costs involved.
2. JUDICIAL PROCEEDINGS FOR RECOVERY OF DEBTS
This procedure will be initiated if the amicable attempts to recover the debt are ineffective.
According to Romanian legislation, there are several judicial proceedings that may be initiated against the debtor:
- The proceeding for settlement of small claims (Small claims judicial proceeding)
This particular judicial proceeding is regulated in art. 1025 (and following) of the Civil procedure Code. This is an expedited procedure for claims recovery, derogatory from common law, that can be used by the creditor if its debtor has not paid its outstanding debt in due time.
It shall apply for the settlement of claims with a value of up to and including 10.000 lei.
One important aspect is the fact that this special proceeding is optional, with the plaintiff being able to choose either this or the common law proceeding.
A key prerequisite for this procedure is that the request should be of no more than 10.000 lei (approx. 2.000 Euro), without taking into account interest, legal fees and other accessories. If this condition is not met, the common law procedure shall apply.
The proceeding for settlement of small claims (Small claims judicial proceeding) is initiated by submitting an application before the competent court. The application will be submitted together with copies of the documents which the applicant intends to use to prove his claim.
In order to facilitate the work of the courts, this procedure is, in principle, written.
For further details on Small claims judicial proceeding please click here.
- “Summons to pay” judicial proceeding
This particular proceeding may be used in relation to a certain, liquid and payable claim (outstanding debt) consisting of an obligation to pay certain amounts of money as a result of a civil contract, including contracts established in written between a professional and a contracting authority, or determined in accordance with a statute, Regulation or other instrument, appropriated by the parties by signature or otherwise permitted by law.
The “Summons to pay” judicial proceeding is a special and urgent procedure which can only be used for the recovery of money claims, resulting from contracts or any other documents signed by both parties.
There is no threshold for the value of the debt, as in case of small claims judicial proceeding.
The creditor shall communicate to the debtor, through the court executor or by registered letter, with declared content and acknowledgment of receipt, an “summon to pay” order, which shall require him to pay the amount due within 15 days of its receipt.
If the debtor fails to pay within the time limit, the creditor may lodge the application for the payment order with the competent court to assess the substance of the matter at first instance.
The documents proving the amount due and any other supporting documents as well as proof of payment order shall be annexed to the application.
The creditor shall communicate to the debtor, through the court-appointed executor or by registered letter, with declared content and acknowledgment of receipt, an order, which shall require him to pay the amount due within 15 days of its receipt.
In addition to the amount due, the creditor may claim default interest for delayed payment and additional damages for all costs incurred in recovering the amounts resulting from the debtor’s failure to meet its obligations in due time.
In order to settle the application, the judge will order the parties to be summoned, in accordance with the provisions relating to urgent charges, in order to provide the necessary explanations and clarifications, and to insist that the amount due be paid by the debtor or to have the parties agree on certain payment arrangements.
If the court, following verification of the application on basis of the documents lodged and of the statements made by the parties, finds that the creditor’s claims are well founded, it shall issue a payment order specifying the amount and time limit for payment.
- The ordinary proceeding
This particular proceeding, is usually applied in case the creditor has not concluded a contract with his debtor, or another document accepted by the parties by way of signature or otherwise permitted by law (e.g. tax invoice).
It involves an application to be brought before the competent court, following which both parties will be summoned.
An advantage of this procedure would be the possibility of using other evidence, in addition to official documents: an expert study, the questioning of the debtor, the calling of witnesses.
As part of this proceeding, judicial and stamp fees are necessary to be paid, the amount of these fees being calculated by taking into account the value of the claim. The lengthy solving process may constitute another disadvantage of this procedure.
- European order for payment
European order for payment (EOP) applies in civil and commercial matters where at least one of the parties lives in an EU country other than the one where the application for an order is made.
The European order for payment is an urgent and short-term, non-concentrated procedure introduced by Regulation (EC) No 1896/2006 – creating a European order for payment procedure.
The European order for payment shall apply to civil and commercial matters in cases in which at least one of the parties is domiciled or habitually resident in a Member State other than the Member State of the court seised.
Thus, where contractual relations have been conducted between two entities, established in two different Member States, there is the possibility for the creditor of a certain, liquid and payable claim (outstanding debt), to bring the claim before the competent court (the court/tribunal, if the creditor is a company established in Romania) by submitting an application for the issuing of a European order for payment.
The Regulation includes a form (type A form in the Annex to the Regulation) to be used in order to submit an application for a European order for payment.
The European order for payment procedure shall be established for the collection of pecuniary claims for a specific amount that have fallen due at the time when the application for a European order for payment is submitted.
The court seised of an application for a European order for payment shall examine, as soon as possible, as to whether the conditions for admissibility are met and whether the application is well-founded.
The claimant is invited to accept or refuse a proposal for a European order for payment for the amount determined by the court within a specified time limit. The claimant must be informed of the consequences of his decision. The claimant shall submit its reply by means of a standard form.
If the claimant accepts the court’s proposal, it shall issue a European order for payment for the part of the claim that has been accepted. If the claimant refuses the proposal, the court shall reject the entire application for a European order for payment.
A European order for payment shall be served on the defendant in accordance with the national law of the country in which the service is effected. The Regulation lays down minimum procedural rules for service with or without acknowledgment of receipt from the defendant.
The defendant may lodge a statement of opposition with the court which issued the order for payment. The opposition must be sent within 30 days of the date of communication or service of the European order for payment.
When a defendant has lodged statement of opposition, the proceedings shall continue before the competent courts of the Member State of origin in accordance with the rules of ordinary civil procedure unless the claimant has explicitly requested that the proceedings be terminated in that event.
If no statement of opposition has been lodged, or the statement of opposition has been rejected by the Romanian court, the order becomes enforceable and will be lodged by the defendant’s court with the enforceable entry.
The payment order will then have to be enforced in the Member State where the defendant is established. To this end, the claimant (creditor) must submit it to the enforcement body (of the State where the defendant has its registered office).
For further information regarding this subject or any other legal issues, please feel free to contact us.
“Andreea Sersea” Law Office
Zefirului Street, No. 19, Sector 2, Bucharest.
+40 0773 340 401