Debt Collection In Turkey
Two methods can be used for debt collection under Turkish law. A creditor can either initiate litigation procedures by filing an action of debt before local courts or enforcement proceeding without judgement may be started before execution offices.
It must be emphasized that a foreign claimant filing an action of debt or a foreign creditor starting an enforcement proceeding without judgment must deposit security unless there is a legal or de facto reciprocity between the claimant/creditor’s country and Turkey. Legal reciprocity is the existence of a judicial assistance agreement or being a party to the related convention. De facto reciprocity is when there is a similarity in terms of implementations with regards to security exemption between the claimant’s country and Turkey. Therefore, the claimant/creditor shall be required to deposit a security for an amount that will be determined upon discretion of the judge/bailiff unless there is a legal or de facto reciprocity.
- Enforcement Proceeding Without Judgment
Under the executive enforcement proceeding a creditor shall submit a debt collection request to the debtor via the execution office. Following claimant’s request upon 7 days’ written notice for payment of debt the debtor may object to the payment order sent by the execution office by objecting to the signature and/or the debt and/or the authority of the execution office.
The execution proceeding will stop in the event of the debtor objecting to the payment order with the reasons set out above. Therefore, the creditor will either file an action for revocation of objection or an action for the abolition of objection.
Action for revocation of objection can be filed at the enforcement court by the creditor within 1 year after the debtor’s objection and the enforcement of the debt collection will become final if the creditor wins this case. The debtor may receive a penalty to pay compensation for repudiation which will be a minimum of 20% of the total amount of debt and the court costs and expenses that were incurred by the creditor as part of the proceeding including the attorney fees. Upon winning the lawsuit the creditor will be able to continue the enforcement proceeding and seize the moveable or immovable assets of the debtor including bank accounts, receivables from third parties.
If the creditor loses the lawsuit, the debt enforcement proceeding shall be revoked and as a result the creditor may receive a penalty to pay compensation for bad faith which will be a minimum of 20% of the total due debt.
The creditor can file an action for abolition of the objection if the creditor is in possession of the documents set out under Article 68 of the Bankruptcy and Enforcement Law. This lawsuit can be brought within 6 months starting from the date of objection of the debtor.
- Action for Debt
The court of jurisdiction for action of debt varies according to the sort of debt. In the event of a commercial relationship the relevant court shall be the commercial courts of first instance. In case of an employment debt the relevant court shall be the employment courts. If the action of debt results in favor of the claimant, the verdict shall be able to be enforced directly over the debtor. In the event of non-performance of the paying the debt, the claimant shall be entitled to initiate an executive enforcement procedure with judgement before the relevant execution office. The debtor can object to the payment order by either claiming that the debt was paid, postponed or statue of limitation applies to the claimed debt. This objection can be made through the enforcement court and the debtor is required to be able to prove his objection by certain documents set out under the Article 33 of the Bankruptcy and Enforcement Law.
- Mandatory Mediation
Turkey imposes mandatory mediation as a precondition for commercial and employment disputes before pursuing the dispute before the Turkish courts. Therefore, the claimant will apply to mediation before filing an action of debt or in the case of an objection to payment order before filing an action for revocation of objection.
If this article has been of interest and want to know more about cross border debt collection, we suggest you to read the following article published on our Spanish colleagues from ILP Abogados: Order for Payment Procedure /European Order for Payment