Debt collection from a debtor who has fled abroad

In today’s globalized environment, cases where debtors leave the country in an attempt to avoid responsibility are becoming more and more common. This situation may create certain difficulties in the process of debt collection, but it does not make it impossible.

Creditors, faced with such a problem, need a clear understanding of the step-by-step plan of action and possible legal means to return their money. This material will be useful for creditors who have already received a court decision on debt collection from an individual or are planning to receive one.

The first step in the process of debt collection from a debtor located abroad is to establish the jurisdiction in which this collection will be carried out. This depends on a number of factors: where the debtor actually lives and where his foreign assets are located.

After establishing jurisdiction, the next important step is to apply to a foreign court with an application for recognition of the court decision in the debtor’s country and its enforcement. Here it is necessary to take into account that in order to file such a petition it is necessary to confirm the fact of the debtor’s residence in the given country or the presence of assets on its territory, which must be documented at the time of filing the application.

If the creditor only has information about the country of residence of the debtor or the location of his assets, but does not have official confirmation, at this stage it is necessary to involve competent specialists to collect evidence. It is important to understand that the list, content and format of the necessary evidence may vary from country to country. For example, in a number of countries access to property registers may be limited, and to obtain information it will be necessary to know the local identification data of the debtor, such as his tax number or the exact address of his foreign assets.

In England, for example, evidence may include newspaper articles, publications on social networks, information from Internet resources, as well as reports of private detectives.

If the collection of such evidence was successful, the creditor needs to make sure that there is an international treaty between his country and the country of the debtor that regulates the procedure for recognizing court decisions. If there is no agreement, recognition of the decision may occur on the basis of the principle of reciprocity, which means that the creditor must prove in a foreign court that his country also recognizes the decisions of the courts of the state in which the debtor resides or in which the debtor’s assets are located.

Once the creditor’s court decision has been recognized and permission for its execution has been received, it is necessary to initiate enforcement proceedings. Within the framework of this stage, standard measures can be applied, such as the seizure of the debtor’s bank accounts and property, with subsequent forced sale.

In many cases, the measures described are sufficient for effective debt collection. But there are cases with additional nuances. For example, if the debtors are former owners of companies who were held liable in the creditor’s country for the debts of their company as joint debtors. In order to avoid paying the debts for their company, they leave the country and open a business in another country.

If such a state provides for the possibility of seizure and confiscation of corporate rights of the company or such debtors withdraw profits or dividends to their accounts in local banks of this state, then the above-described measures for debt recovery will be sufficient. However, if the country in which the debtor does business does not provide for the procedure for foreclosure on corporate rights and at the same time the debtor withdraws profits or dividends from the company to bank accounts opened in other countries (For example, such banks as WISE (Belgium), Revolut, Zen, Bankera, Paysera, Genome (all registered in Lithuania), as well as Bunq (Netherlands) are publicly available and allow you to open an account without being in their country and without visiting a local branch), then this will entail the need to recognize the decision of the national court of the creditor not only in the country in which the debtor does business, but also in the states where these bank accounts are registered and, after successful recognition, to freeze such bank accounts. To do this, it is necessary to provide evidence that the debtor actually owns accounts in these banks. Collecting such evidence can be a difficult task, but this does not mean that it is impossible.

It is also important to consider that before a debtor leaves his country, he often tries to sell or transfer his assets in order to avoid their confiscation in favor of creditors. In such a situation, it is important to check what assets the debtor had at the time the obligations to the creditor arose.

If the property really existed, it is worth analyzing the transactions related to its alienation. Contracts concluded in order to avoid paying debts can be declared invalid by the court. These transactions, called fraudulent, can lead to the return of property to the debtor, after which the debt can be collected at the expense of this property.

Our company has extensive experience in international debt collection. We cooperate with international legal organizations and have a network of partner lawyers around the world. This allows us to provide a full range of debt recovery services, including securing a claim abroad, searching for the debtor’s assets, recognizing national court decisions and enforcing them abroad. 

If you require assistance in such a situation or have any questions, please contact us to discuss your case.

18.01.2025

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