Debt collection in Croatia

The debt collection procedure in Croatia begins with an assessment of the debtor’s solvency, his field of activity, the history of the company, the availability of documentary evidence of the debt, current court cases and enforcement procedures, as well as the possibility of challenging the debt. This assessment determines the strategy that will be used on behalf of the client during the collection process.

If the debtor does not have current court cases or outstanding court decisions on debt collection, and he is actively engaged in commercial activities, then it is advisable to use the stage of amicable debt collection.

In the vast majority of cases, debt collection is carried out without the participation of the court. Generally, Croatian companies try to avoid getting a “bad reputation” (e.g. “for instance, being constantly subjected to debt collection proceedings”), since paying for goods or services is a legal obligation of every company, and those who deliberately do not pay bills are not entrepreneurs, but scammers.

An additional incentive for Croatian companies to pay their debts out of court is the Law on Time Limits for Fulfilling Financial Obligations. This law determines that the maximum period for making payment for goods or services is up to 60 days, while in exceptional cases this period can be extended to a longer period. If the parties have not provided for a payment period for the cost of goods supplied or services provided, then by default it is 30 days.

In cases of violation of the designated deadlines, the debtor must pay a fine in the amount of 10,000.00 to 1,000,000.00 kuna per violation, and the responsible person of the debtor must be subject to a fine in the amount of 1,000.00 to 50,000.00 kuna, respectively.

The mere announcement of the possibility of litigation is usually sufficient incentive for the debtor to make payment if he has sufficient means to do so. Litigation can be lengthy and costly, and debtors usually try to avoid it at all costs.

The out-of-court stage involves active negotiations with the debtor to reach an agreement to pay the creditor’s claims or other possible settlement options (for example, return of goods, transfer of debt to a third party, exchange of services or goods).

Interaction with the debtor begins immediately after sending the notification by mail, email, telephone or instant messengers. This process involves intensive communication with the debtor in order to apply constant pressure. The main task is to establish contact with key decision makers to achieve speedy debt repayment.

The average time for out-of-court collection is up to 60 days (except for cases where an installment plan for debt repayment has been agreed upon for a longer period). If this stage does not bring the expected results, or after an initial analysis it becomes clear that it is not applicable, you should proceed to recovery through the court.

Before initiating legal action, you should pay attention to the statute of limitations. The general limitation period is 5 years. The law on obligatory relations prohibits changing the specified period. Missing the statute of limitations does not prevent the creditor from going to court, since the court will take such a circumstance into account only if the debtor declares it. This law provides for the possibility of interrupting the statute of limitations in the event of a written acknowledgment by the debtor of the debt, or partial payment of the debt or interest on the debt.

Carrying out a mandatory pre-trial debt collection procedure before going to court is not required and failure to perform such actions is not a requirement for initiating a case.

Depending on the complexity of the case and the cost of the claim, the legislation provides for the following options for judicial debt collection:

1. Proposal for execution by a notary. If the debt is confirmed by original documents (such as invoices, bills and checks with protest, public documents, extracts from business books, private documents certified by law, special public documents), then the writ of execution can be issued by a notary and subsequently executed by a bailiff . To do this, the notary sends the opposite party a proposal for execution, indicating the need to fulfill the requirement before the bailiff within 15 days. If the proposal is not withdrawn within the specified period, the notary will issue a decision on execution and serve it on the parties. Otherwise, the case is referred to the competent court for consideration.

2. Approval of a settlement agreement at the trial stage. This option is applicable if the court considers that the circumstances of the case and the duration of cooperation between the parties make it possible to resolve the dispute through reconciliation of the parties. If the parties agree to the conciliation procedure, the court schedules a meeting for reconciliation with the participation of a mediator. Upon successful completion of the conciliation procedure, the parties enter into a judicial settlement agreement, which has the force of an executive document.

3. The procedure for issuing a payment order (“Platnog naloga”) is applicable to undisputed claims of the creditor. After filing the application, the court issues a payment order, in which it instructs the defendant to fulfill the claim with costs within eight days, or to submit an objection within the same period. If the defendant does not raise objections within the specified period, the payment order acquires the force of a final decision. If the debtor raises an objection within the specified period, then the payment order is considered invalid and the case is subject to consideration in a general claim proceeding.

4. The procedure for disputes over small amounts (“Postupak u sporovima male vrijednosti”) is applicable to cases with a claim value of no more than 1,320 euros. Otherwise, this procedure is similar to the procedure for general claims proceedings, but is carried out in the form of written proceedings within a period of no more than one year.

5. The procedure for issuing a European payment order (“Europski platni nalog”) is applicable to cases of undisputed monetary claims between parties from European Union countries (with the exception of Denmark). The claim price for this procedure must not exceed 5,000 euros. To obtain a European payment order, you must fill out a standard application form and submit it to the court. The court accepts the payment order in closed session and sends it to the debtor, after which the debtor has 30 days to file its objections with the court. If the debtor files an objection, the court summons the plaintiff to hear his position on the case and, if it considers the objection to be justified, cancels the payment order. In this case, the case must be considered in accordance with the general procedure. If the debtor does not submit any objections to the court, the payment order acquires the force of a final decision. The European Payment Order is recognized in all EU member states (except Denmark).

6. General claim proceedings are applicable for cases in which the debtor disputes the payment order or when it is initially obvious that the creditor’s claim is controversial. This process is carried out through a trial where the parties are summoned to inform their positions on the case. According to the law on civil procedure, the case must be considered within a reasonable time but not more than three years from the date of filing the claim. As a result of the consideration of the case, the court makes a decision on the case (“Presude”), which comes into force within 15 days from the date of delivery of the transcript of the decision to the party in the case, provided that it is not appealed.

One of the parties to the dispute that is not satisfied with the decision of the court of first instance has the right to appeal it on appeal within 15 days from the date of receipt of the transcript of the decision. The period for consideration of a case in the court of appeal should not exceed one year, and for cases involving small amounts up to six months.

The final decision of the appellate court may be reviewed by the Supreme Court of the Republic of Croatia within thirty days from the date the court issues permission for review. Permission to review the decision of the second instance must be filed within 30 days from the date of issue of the appealed decision. However, a review can be carried out only if during such a review it can be expected that a decision will be made on a legal issue that will be important for resolving the dispute and ensuring uniform application of the law in such a category of cases.

After receiving a final court decision, if the debtor refuses to voluntarily comply with the court decision, forced execution of the court decision should be initiated through the court. In turn, the court makes a decision or conclusion in which it indicates to the bailiff what actions must be performed in relation to the debtor.

As part of the judicial execution of a decision, the creditor’s claims can be satisfied by writing off funds from the debtor’s accounts; foreclosure of movable and immovable property, determination of their value and subsequent sale; forced establishment of a lien on real estate; judicial and notarial insurance with transfer of ownership.

If the enforcement proceedings do not lead to positive results and the debtor is unable to fulfill his monetary obligations, the creditor has the right to initiate bankruptcy proceedings for the debtor. Art. 173 of the Bankruptcy Law provides for the possibility of holding the debtor’s owners personally liable for the company’s debts. In turn, the Law on Commercial Companies established that participants in a public trading company and general partners in a limited partnership bear personal, unlimited and joint liability for the obligations of these companies with all their property. As for participants in a limited liability company, joint-stock companies and limited partners in limited partnerships, they can be held liable only in exceptional cases, such as: using the company to harm creditors or reduce the company’s assets for their own benefit or for the benefit of another person, even if he did not know that as a result of this the company would not fulfill its obligations.

An alternative way of putting pressure on the debtor in order to collect the debt is to bring officials or other responsible persons of the debtor to criminal liability in accordance with Art. 311 of the Criminal Code of the Republic of Croatia for failure to comply with a legally binding court decision.

If you have any questions or need support regarding international debt collection in Croatia, our company is ready to provide our expert assistance to effectively resolve your financial issue. Please contact us to receive additional information and professional support from specialists of the leading debt collection agency.

# DEBT COLLECTION AGENCY CROATIA

12.04.2024

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