When we decide on a loan, we should always be sure that we can pay it back within the prescribed period. However, things are not always arranged as we would like. Delays in settling liabilities are only getting longer, and prompts and other requests for payment fill our mailbox. Failure to pay loans leads to a debt collection process that is difficult and complex. It is associated with strong emotions for both the debtor and creditor. How is this done?
Debt collection by law
The debt collection process according to the letter of the law is a set of legal, procedural and factual acts that lead to the performance of the debtor’s obligation to the creditor. Debt collection comes from the Latin word vindicatio and literally means redress. This concept was no longer unknown during the Roman Empire, in which even the rei vindicatio legal institution operated. Its main task was to seek to recover the property owned by an unauthorized person. Currently, there are also debt collection companies that deal with the recovery of debtor’s obligations, e.g. unpaid loans online.
Amendment to the law on debt collection law
The Ministry of Justice is currently at the stage of amending the Act on debt collection law. The planned changes will be beneficial for debtors who are not fully aware of their rights. It is mainly about the provision specifying the terms of limitation of debt. The ministry wants to avoid unnecessary court proceedings in which debtors’ cases are settled, who once owed the creditor several zlotys, but after years this amount increased to several thousand. Creditors and debt collectors use the unconscious of consumers who, in fear of the process, give away their entire liability together with very high interest rates – the refreshed act will end this practice. Soon the court will first have to determine ex officio whether the claim is time-barred and, if so, dismiss the action. The proposal for this change applies to both public and commercial proceedings. The draft provides for one more amendment, which should also please debtors. Limitation periods for property claims will be shortened. First of all, the basic limitation period will change – from 10 to 6 years.
Stages of recovery proceedings
Not so long ago, our website conducted an interview with Marco Mackies, who significantly familiarized our readers with the secrets of this difficult and demanding profession. He also suggested how the debtor should behave in specific debt recovery situations. This procedure can be divided into three basic stages:
- Amicable debt collection – includes negotiations with the debtor that will lead to repayment; for this purpose, the debt collection company sends various types of reminders to the indebted consumer, which are quite expensive – the debtor may receive letters, phone calls and even personal visits of the debt collector; professional representatives of this profession are able to enforce debt repayment at this stage; no conversations may result in entering debtors in the database – check if you are on it;
- Court debt collection – this process begins when the above-mentioned method did not bring the expected results and the debtor did not enter into negotiations with the debt collection company; the debt collector thanks to the court’s judgment obtains an enforcement order, which then carries an enforcement clause – it is the basis for initiating bailiff enforcement;
- Debt collection and post-debt collection – this stage covers all the bailiff’s activities – remember, the bailiff and the debt collector are not the same; the former undertakes such activities as: transfer of enforcement, its supervision, auctioning of movable property or real estate, searching for hidden assets of the debtor that would allow to satisfy the claim.
Soft debt collection and hard debt collection
When we are looking for information on the aforementioned process, we may come across terms such as soft and hard debt recovery. Soft debt collection is about negotiating both sides of the conflict that want to come to an agreement – it’s good to know the negotiation rules with the creditor, which will prove helpful in a difficult situation. This method resembles the initial stage of the debt collection process, i.e. amicable debt collection, but it is distinguished by the fact that debt collectors are more forgiving to their debtors. Soft debt collection is mainly used by business information bureaus – failure to respond to requests for payment will result in the debtor’s name being placed in the register, which in turn is one of the three most severe consequences of not repaying the loan on time. Debtors whose arrears are relatively small and have arisen recently will face this form of recovery.
However, hard debt collection is applied to people who avoid contact with the debt collector and do not want to enter into negotiations that could lead to an amicable settlement. In addition, their debts arose a long time ago, and they do not express a desire to improve their situation. Debt collection companies then resort to stricter methods than for soft debt collection. The debtor’s case is referred to the court in which enforcement or even criminal proceedings will be initiated. Some debt collectors do not use the division into soft and hard debt collection and we will meet with them traditional forms of the debt collection process, which we wrote about above.
How will bailiff execution be carried out?
There are three basic forms of bailiff’s execution:
- From a bank account
- With salary
- From movable or immovable property
The most frequently used by bailiffs is execution from a bank account. Most people store their money in a bank account because they are the safest there. When the bailiff receives permission to execute, he first contacts our bank, informs him of the situation, takes over our account and observes all transfers that are not received, which he also has the right to take over. Execution of remuneration is almost as popular and often used in debt collection. In this case, our workplace will be informed by the bailiff that part of our salary will be transferred to pay off debts. As for the enforcement of the debtor’s movable and immovable property, the case is more complicated and time-consuming – which is why it is the least-used form of enforcement. How is it going First, the debtor’s property is valued. If it is a real estate, then the land and mortgage register should include information about the initiation of enforcement. Then comes the auction and sale of property. The funds obtained in this way are allocated to settle the arrears.