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Effective Recovery of Judgment Debts

What should you do to get money from the debtor?

Andrey Tishkovsky

Andrey Tishkovsky
Former associate

So, here's what you've been waiting for so long. Finally you've got the execution document for recovery of a pretty big sum from debtor and you are looking forward to recover your hard-earned money. It's fine if your debtor has any and it's even better if he is willing to return it to you. It is no secret that the cases of speedy and easy debt recovery are extremely rare. It is more likely that by the day you get your execution document you have already tried lots of things. First, you addressed payment requests and personally talked to director of the company-debtor. Second, you sent him claims with notice of filing action and detailed description of legal effects of debt evasion. And finally, you brought a lawsuit, won it and received the decision. In addition, a significant period of time has passed since, in general typical receivables recovery cases last from half of a year to a year. As practice shows, in the majority of cases to win the lawsuit makes just half the battle which the recoverer is to stand. The enforcement of the court judgment makes the second half.

Where Should Be Produced Execution Document?

There are several options to submit an enforcement document for enforcement. In accordance with the Federal law On Execution Proceedings you have a right to submit an execution document to the district department of the Federal Court Bailiffs Service. It might be a department either of a debtors domicile (place of registration) or his place of stay (actual location) or whereabouts of his property.

Yet you can avoid court bailiffs and submit the execution document to the bank which provides services to the debtor. It is possible if you know the banking details of the debtor and it makes sense if there is any money on the debtor's account.

Finally, an execution document can be submitted to organization that is paying a periodic allowance to the debtor who is an individual person (salary, pension, scholarship). It can be a company where the debtor is employed, pension fund, educational institution, etc. The law allows such method of recovery in case if the amount of debt does not exceed 25 000 rubles or it is the compensation for bodily injury, alimony or other periodic allowance which is being recovered on the basis of execution document.

How to Draft Application to Court Bailiff Service?

In case if it is impossible to recover the debt through the agency of banks, employer and other organizations, you should apply to the Court Bailiff Service.

The court bailiff initiate the execution proceedings on the basis of application filed by recoverer or his representative. The original of the writ of execution and power of attorney authorizing the representatives (in case if he signs the application) should be attached to application to initiate execution proceedings.

Special consideration should be given to the power of attorney and more specifically to the authorities granted to representative. Both provisions for the right of an authorized person to present execution document and withdraw from execution proceedings should be made in the text of the power of attorney. Otherwise the court bailiff will issue an order to dismiss application to initiate execution proceedings and returns the execution document. Also you should know about other authorities of representative that are specially provided by the power of attorney. They are as follows: delegate the powers to other person (substitution), contest orders and actions (omissions) of court bailiff, receive awarded property, waive recovery on the basis of execution document, conclude settlement agreement. Therefore, when preparing the power of attorney you should check if the scope of authorities provided by the power of attorney corresponds to those powers which are actually necessary to represent the interests of the recoverer.

It is important to work thoroughly on the tenor of the application. Sometimes due to lack of information in the application the court bailiff carries out execution proceedings during several months although it could be done much faster. Such prolonged execution as a rule is due to necessity for bailiff to request state agencies for information. For instance, tax authority within a period of 1.5 to 3 months provides information if the debtor (individual entrepreneur or organization) has bank accounts. Moreover, the bailiff can request state agencies at the actual location of debtor although the debtor's records are kept in the state agencies at the place of his legal registration.

In order to avoid such instances we recommend to collect as much information about debtor as possible, including his physical and registered address, information about his property (bank accounts, real estate property, vehicles), contact details, etc. Information about the debtor's property should be better provided in the application requesting to seize the debtor's property as an injunctive relief measure. In case if it turns out that a debtor has several addresses, don't forget to mention it in the application and request the bailiff to file a letter of requesting to prove the property of debtor to all the relevant district departments of the Court Bailiff Service. If you have submitted an execution document either at the actual location of debtor (individual entrepreneur or organization) or whereabouts of his property, you should certainly request the bailiff to file request to the tax authority within which the debtor is registered.

What Must Creditor Undertake in Order to Make Recovery More Effective and Speedy?
Prepared documents you can either file by registered mail or give by personal service to the office of the Court Bailiff Service. When giving the documents by personal service to the office we recommend to immediately ask which bailiff-executor will handle the execution document, his office number and contact phone number.

Within 3 days recoverer's application and execution document are transferred from the office to court bailiff. It is important to control meeting of this deadline (you can call or come again). Practice knows instances when without any appropriate lawful reason the execution document may be left in the office for more than a year.

Within three days upon the execution document is transferred to him the court bailiff-executor issues either an order to initiate execution proceedings or an order to dismiss execution proceedings. This procedure also should not be disregarded, you should remind the bailiff of the deadline set by the law if necessary.

Upon initiating the execution proceedings the court bailiff files by mail requests to the Bureau of Technical Inventory, the Federal Service for Registration of Titles to Real Estate Property, the Federal Tax Service (in case if a debtor is a legal entity), the State Traffic Safety Inspectorate and the Pension Fund of the RF. As it was already mentioned, the bailiff receives responses to his requests within 1 -3 months. To save from one to two weeks you can reach an agreement with bailiff to deliver all the requests independently by personal service. It should be done immediately upon initiating the execution proceedings until the bailiff-executor did not file requests himself by mail.

If there is an urgent necessity to seize the debtor's property, you should agree on conjoint visit with the bailiff and provide him a vehicle. It is better to visit the debtors on the first days after execution proceedings are initiated, in other words, when a debtors is not yet informed that execution proceedings are initiated (the copy of the order to initiate execution proceedings is sent to debtor within 1 day upon the date the order is issued). In such case the debtor will fail to "execute the documents" evidencing, for example, that he does not owe any property and any property in his possession is being leased.

During the visit you should insist on drafting of inventory of property act, order of attachment of property and transfer of attached property to the debtor's safe custody. A debtor should be immediately given notice of criminal responsibility under the Art. 312 of the CC of the RF (Illegal Actions Against Property Subjected to Inventory or Attachment, or Confiscation). In case if the amount of debt exceeds 250 000 rubles you should remind the bailiff of giving a notice of criminal responsibility under the Art. 177 of the CC of the RF to debtor (Deliberate Evasion of the Repayment of Debts). Such actions may bring significant pressure on debtor and thus increase the probability for debt repayment in future.

According to the law, execution against the debtor's funds is of first-priority; therefore, until all the accounts of debtor are not worked out the attached property won't be put on sale. That's why it is important to know if the accounts of debtor were verified and if there are bank responses attached to the case.

In case if there is no available funds of debtor's accounts or they are insufficient, the bailiff transfer the documents to the department of realization of attached property. The relevant authorities appraise and put on sale the debtor's property.

Property exceeding in value 500 000 rubles, real estate property, securities, property rights and mortgaged property are sold through open bidding procedure (auction). After 1 more month the property which was not sold is offered to the recoverer provided that the value of such property is depreciated by 25 percent. In case if the recoverer does not accept the property, it is returned to the debtor.

Is It of Any Use to Contest Actions of Court Bailiff-Executor?

In accordance with the law the court bailiff must meet the requirements provided under the execution document within two months upon the date of initiating execution proceedings. It does not mean that after 2 months the debt will be recovered. Moreover, it does not mean that the court bailiff-executor will issue an order to terminate execution proceedings. Lapse of deadlines for execution actions to be carried out and application of compulsory execution measures does not entail such consequence as completion of execution proceedings. The execution document may stay of the bailiff's desk for years. Due to this reason failure to meet this deadline contesting the actions of court bailiff won't have any result. Superior official (senior court bailiff of the department) or court will deny such application.

In practice contesting actions of court bailiff result in excessive formalism in bailiff's work on your case. That's why it's better to be friends with the bailiff. We recommend to complaint to senior court bailiff, prosecutor's office or court only in case when at issue there is a substantial violation of your rights (for instance, the bailiffs acts illegally or there are information and facts evidencing that bailiff conspires with debtor, etc.) Preliminary you should give a notice of complaint to the bailiff. Possibly he will cure the errors committed and there won't be any need to complaint.

I am sure that practical implementation of the recommendations stated in this article will increase both effectiveness, speed and probability for debt recovery in general.

Business Transactions, Collection Services, Enforcement of Judgment

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