Debt collection in Malta

The procedure for debt collection in Malta should begin with a legal and financial assessment of the debtor, the basis of the debt and the evidence available to the creditor. At this stage, it is important to verify the debtor’s exact legal name, registered office or residential address in Malta, business activity, asset indicators, pending court cases, existing enforcement proceedings, and whether the debt is supported by contracts, invoices, delivery documents, account statements, correspondence or an express acknowledgement of liability. This assessment determines which recovery route is appropriate and whether the claim may qualify for ordinary court proceedings, special summary proceedings, a judicial letter under Article 166A, Small Claims Tribunal proceedings or later enforcement measures.

If the debtor is present in Malta, continues to carry out commercial activity and there are no immediate signs that court, enforcement or insolvency measures should be started without delay, the out-of-court stage may be used first. This stage is especially useful when the creditor needs to confirm the debtor’s position, preserve evidence, negotiate payment terms and prepare the documents that may later be required for court or enforcement action.

The out-of-court stage involves structured negotiations with the debtor in order to obtain payment, agree on an instalment plan or reach another settlement that protects the creditor’s position, such as the return of goods, set-off, transfer of the debt to a third party or another commercially acceptable arrangement.

Communication with the debtor should be documented from the beginning. A written demand should identify the creditor, the debtor, the amount claimed, the legal and contractual basis of the debt, the payment deadline and the documents confirming the claim. Further communication by email, phone or messengers should support the same legal position and help establish whether the debtor admits the debt, disputes it, requests more time or refuses to cooperate.

If the debtor ignores the demand, disputes the debt without sufficient grounds or fails to comply with an agreed payment plan, the creditor should move to the appropriate legal route. Depending on the amount, the evidence and the debtor’s position, this may include judicial debt collection, a judicial letter under Article 166A, proceedings before the Small Claims Tribunal, ordinary court proceedings or enforcement based on an existing executive title.

Before initiating judicial collection, the creditor should assess the limitation period applicable to the specific debt. For many monetary claims arising from commercial or contractual obligations, a five-year limitation period may be relevant, but Maltese law applies limitation rules according to the legal basis and nature of the claim. The consequences of the expiration of the limitation period are applied by the court only if the debtor raises this defence. The limitation period may be interrupted by an action through which the debtor acknowledges the debt to the creditor, including partial payment or another clear acknowledgement of liability. After interruption, the limitation period begins to run again.

Judicial debt collection in Malta may be carried out through ordinary court proceedings, special summary proceedings, a judicial letter under Article 166A of the Code of Organisation and Civil Procedure and, for lower-value monetary claims, proceedings before the Small Claims Tribunal. The choice of procedure depends on the amount of the debt, whether the claim is certain, liquid and due, the debtor’s presence in Malta, the existence of a genuine dispute and the quality of the creditor’s documents.

A judicial letter under Article 166A may be used where the debt does not exceed €25,000, is certain, liquid and due, and does not require the debtor to perform an act other than payment. This route is available only if the debtor is present in Malta, is not a minor or legally incapacitated person, and the debt is not due from a vacant succession. The judicial letter must be confirmed on oath, signed by a lawyer, clearly state the cause of the claim, the reasons why the claim should be upheld and the factual grounds supporting it. If the debtor does not rebut the claim within thirty days from service, the judicial letter may be registered and treated as an executive title.

For smaller monetary claims, the Small Claims Tribunal may be relevant where the amount claimed does not exceed €5,000. The procedure is initiated by filing a Notice of Claim, and the respondent may file a reply within 18 days from service. A decision of the Small Claims Tribunal may be appealed to the Court of Appeal in its Inferior Jurisdiction within 20 days from the date of the decision.

An ordinary court proceeding is commenced by service of a subpoena. The subpoena must be accompanied by an affidavit setting forth all the facts relevant to the case and setting forth each fact separately; a list of witnesses to be examined; and evidence supporting the creditor’s claims. If the subpoena complies with the procedural requirements, the court shall register it and cause the defendant to appear in court.

The defendant must answer within twenty days from the date of service of the subpoena unless he intends to admit the claim. If the defendant intends to admit the claim fully and unconditionally, he must file a brief to that effect. Otherwise, the defendant must file a statement of defense that includes: (a) all defenses that will be deemed to be forfeited if not stated before the commencement of the dispute; (b) a clear and precise statement of the defenses on the merits of the claims, without reference to legal rules. Together with the statement of defense, the defendant must file a declaration setting forth: 1) all the facts relevant to the claim; 2) a denial, admission or explanation of the facts stated in the plaintiff’s statement of claim. The declaration must be sworn to by the registrar or accompanied by an affidavit by the defendant. The defendant must also state the names of the witnesses he intends to call, stating the facts and evidence he intends to support by their testimony. All documents necessary to support the objections must be attached to the statement of defence.

If the defendant fails to file a statement of defence and a declaration, the court shall enter judgment as if the defendant had failed to appear when summoned, unless the defendant satisfactorily explains to the court his failure to file these documents within the prescribed time. However, before entering judgment, the court shall grant the defendant a short period, which shall not be extended, to file written objections to the plaintiff’s claim. These objections shall be served on the plaintiff, who shall be given a short period to respond. Upon the filing of the statement of defence or the expiration of the prescribed time, the preliminary written proceedings shall be deemed to be completed and the case shall be listed for hearing.

Special summary proceedings are separate from the Article 166A judicial letter procedure. If the creditor’s claim concerns a specific, liquid and payable debt that is not related to the performance of any act, the creditor may request in the statement of claim that the court gives judgment in a simplified manner without a full trial. To use this route, the plaintiff must state in the sworn declaration that, in the plaintiff’s opinion, the debtor has no defence to the claim.

After service of the claim, the defendant is ordered to appear before the court no earlier than fifteen days and no later than thirty days from service in order to challenge the plaintiff’s request. If the defendant does not appear or does not satisfy the court that there is a reasoned defence, the court may give judgment in favour of the plaintiff.

If the defendant successfully challenges the request, the case continues as a contested court case. The defendant is then granted the right to defend the claim and file a statement of defence within twenty days from the date of the court order.

A case set for hearing must be considered continuously until a final decision is made. Nothing prevents the court from deciding the case on the day specified in the summons if the claim is not contested or the court is satisfied that the plaintiff has no grounds for the claim or the defendant has no reasonable defense. The hearing may be postponed only in special cases that prevent the consideration of the case, such as the failure of a witness to appear. If the defendant or his lawyer fails to appear, the case may be considered on the basis of the available materials after hearing such evidence as the court deems necessary despite the failure of the defendant to appear.

After reviewing the procedural documents of the parties and the evidence presented, the court makes a decision.

Any of the parties to the dispute who is not satisfied with the final decision of the court of first instance has the right to appeal it in the appellate procedure within 20 days from the date of the decision. An appeal cannot be filed against a decision made on the basis of recognition of the claim, or taken as a result of a waiver of the right to appeal or agreement with the conclusions of the decision. As a result of the appeal review, the court makes a decision that comes into force from the moment it is made and is not subject to further appeal.

After receiving a final court decision or another executive title, if the debtor does not comply voluntarily, the creditor may proceed to compulsory enforcement in Malta. Maltese law treats different documents as executive titles, including judgments and decrees of Maltese courts, a judicial letter registered under Article 166A, certain notarial contracts for debts that are certain, liquidated and due, registered arbitration awards, bills of exchange and promissory notes, enforceable mediation agreements and decisions of the Consumer Claims Tribunal.

Enforcement may be carried out through different measures depending on the nature of the title and the debtor’s assets. These measures may include a warrant of seizure of movable property, a warrant of seizure of immovable property, seizure of a commercial going concern, judicial sale by auction, an executive garnishee order, a warrant of ejection or eviction from immovable property, and, where relevant, arrest of sea vessels or aircraft.

The timeframes for making an executive title enforceable again are not the same for all titles. Judgments of the Superior Courts may be made enforceable again after ten years from the date when the judgment or decree could be enforced. Judgments of the Inferior Courts and decisions of the Small Claims Tribunal may be made enforceable again after five years. Executive titles based on certain contracts, Article 166A judicial letters, bills of exchange and promissory notes may be made enforceable again after three years. In these circumstances, a thirty-year prescription period may also apply, and it may be interrupted by the relevant application.

Not all assets or payments can be targeted in the same way. Certain personal items, professional documents and tools, items needed for basic living, and specific categories of payments may be protected. Garnishee orders cannot be issued against salaries or wages, certain social security benefits, maintenance payments, bank guarantees and letters of credit. This makes the prior assessment of the debtor’s bank accounts, business assets, real estate, receivables and commercial activity important before starting enforcement proceedings.

If the creditor already has a judgment from another EU Member State in a civil or commercial matter, the recognition and enforcement of foreign court judgments in Malta may proceed under Regulation (EU) No 1215/2012. A judgment given in one EU Member State is recognised in other Member States without any special procedure, and an enforceable judgment is enforceable in another Member State without a separate declaration of enforceability. For enforcement, the creditor normally provides a copy of the judgment and the certificate issued under Article 53. The enforcement procedure itself is governed by Maltese law, and the foreign judgment cannot be reviewed as to its substance in Malta.

If the debtor is in a state of insolvency, the creditor may consider bankruptcy or insolvency-related recovery as a separate strategy. This route should be treated differently from ordinary debt collection, because its purpose is not only to obtain a judgment for payment, but also to address the debtor’s inability to pay and the distribution or recovery of assets within the insolvency framework.

A commercial debtor may be considered to be in a state of bankruptcy if, taking into account contingent and prospective obligations, the debtor is unable to pay its commercial debts. A commercial debt may also support a bankruptcy route if it remains unpaid in whole or in part for twenty-four weeks after enforcement of an executive title against the debtor by an executive act. This makes the enforcement stage important not only for direct recovery, but also for assessing whether insolvency-related measures may become available.

A creditor may file a claim with the court demanding recognition that the debtor is in a state of bankruptcy, regardless of whether the debt owed to that creditor is commercial or otherwise, and even if the maturity date of such debt has not yet arrived. Together with the filing of the claim, the creditor must provide security in favour of the debtor in an amount equal to the higher of ten percent of the amount owed to the creditor or €1,000. This security is intended to ensure the proper conduct of the case without delay and to support the creditor’s claim.

Expenses incurred during the bankruptcy procedure may be reimbursed to the creditor from the funds received from the bankruptcy estate, in priority to other debts. In the bankruptcy procedure, transfers of property, renunciation of inheritance or acquired prescription, obligations assumed by the bankrupt and other actions made to the detriment of creditors may be treated as invalid, even where the interested parties acted in good faith. The cancellation of such actions may allow assets to be returned to the estate and increase the funds available for satisfaction of creditors’ claims.

If you need support with debt collection in Malta, Grandliga can assist at all stages of the recovery process: debtor and document analysis, out-of-court negotiations, preparation of a recovery strategy, judicial debt collection, Article 166A proceedings, Small Claims Tribunal matters, enforcement of executive titles, recognition and enforcement of foreign court judgments, and insolvency-related recovery. The appropriate route should be selected after reviewing the contract, invoices, correspondence, payment history, debtor status, available assets and the procedural stage of the claim.

# DEBT COLLECTION AGENCY MALTA

12.04.2024

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