Debt collection in Georgia

The process of debt collection in Georgia begins with an analysis of the debtor’s financial capacity, its field of activity, the history of its enterprise, the existence of documentary evidence of the debt, the existence of ongoing court cases and initiated enforcement procedures, as well an opportunity to dispute the debt. This analysis forms the strategy that will be used on behalf of the client in the debt collection process.

If there are no current court cases against the debtor or court decisions on debt recovery, and he is actively engaged in his activities, then it is advisable to proceed to the stage of amicable debt collection.

This stage is based on active negotiations with the debtor in order to reach an agreement on payment of 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 the notification is sent by mail, e-mail, by phone or via instant messengers. This process involves daily communication with the debtor in order to maintain constant pressure on him. The main goal is to communicate with key decision makers in order to achieve fast debt recovery.

The average term for extrajudicial recovery is up to 60 days. If this stage does not bring the expected results, or if after the initial analysis it becomes clear that it is not applicable, you should proceed to recovery through the courts.

Before initiating a lawsuit, you should pay attention to the statute of limitations. The general limitation period is 10 years, but for disputes over contractual obligations it is 3 years. The legislation establishes a ban on changing the specified period in the contract between the parties. The limitation period is interrupted if the debtor acknowledges the existence of the debt by paying a portion of the debt, interest, or providing guarantees. After the interruption, the limitation period begins to count anew.

There is a simplified debt collection procedure without the need to go to court by contacting the enforcement bureau, which enforces court decisions on the return of debts. To apply this method, it is necessary to submit a special application and evidence of the existence of a debt to the enforcement bureau. An employee of the enforcement bureau forwards this application to the debtor and gives him 10 days to give a response. If the debtor protests and does not recognize the debt, then the simplified proceedings are terminated, and the case must be considered in court in the general manner. If the debtor recognizes the debt, does not make a protest, or simply does not provide an answer, then the enforcement bureau decides to satisfy the creditor’s application and begins the enforcement of the debt.

The current legislation does not provide for mandatory pre-trial settlement of the dispute before going to court, but it is desirable to conduct it in writing.

Judicial debt collection in Georgia occurs in a general and simplified procedure.

The general procedure for judicial review is carried out by filing a statement of claim with the court. The statutory period for considering a case in the court of first instance is 5 months, but in practice it is much longer. If the debtor acknowledges the debt, the case can be considered in a shorter time. The court is obliged to notify the debtor of the hearing in the manner prescribed by law. If the debtor fails to appear at the hearing for an unjustified reason, then at the request of the plaintiff, the court may make a decision in absentia. The simplified procedure applies to cases of debt collection on the basis of a bill of exchange or a check.

A party to the case has the right to appeal the decision of the court of first instance to the court of appeal within 14 days from the date of its adoption. Appeal is not allowed if the amount of debt does not exceed 2,000 GEL. The appeal is considered within six months. In turn, the decision of the appellate court can be appealed to the Supreme Court of Georgia within 21 calendar days from the date of its adoption. If the cassation appeal is accepted, the entry into force of the appealed decision is suspended. The appeal is considered in the Supreme Court within six months. The decision of the Supreme Court is final and is not subject to further appeal.

The decision of the court comes into force after the completion of litigation in all three court instances, if one of the parties continues to appeal to a higher authority. The law allows the parties to specify in the contract a condition that the judgment will be enforced after the decision of the court of first instance.

After the court decision enters into force, the creditor should receive an enforcement document and present it to the enforcement bureau. For the opening of enforcement proceedings, a state fee is charged in the amount of 2% of the amount of the debt, which is returned to the creditor at the end of the execution. The period for presenting an enforcement document for execution is 5 years. Foreign creditors should take into account that at the stage of enforcement, the debt is collected only in the national currency – Georgian lari. Therefore, a foreign creditor should open an account in a Georgian bank or authorize a local representative to receive the collected amounts from the enforcement bureau. Otherwise, the opening of the enforcement procedure will be denied.

If within 2 years from the date of commencement of enforcement proceedings for debt collection, the creditor’s claim cannot be satisfied due to the debtor’s lack of property from which collection can be made, the writ of execution/enforceable decision is returned to the creditor. When the writ of execution (enforceable decision) is returned, all measures taken for enforcement are canceled, and the limitation period for the execution of the decision is suspended until the start of new enforcement proceedings in connection with the same case.

If the debtor is a business entity and has signs of insolvency, the bankruptcy procedure of the debtor should be considered. According to the provisions of the law, insolvency is the inability of a debtor to satisfy a creditor’s claim that is due. The creditor has the right to initiate this procedure if 1) there are at least two final and binding court decisions against the debtor, issued in favor of other creditors, which are subject to compulsory execution and the total amount exceeds 50,000 GEL; or 2) if the amount of the creditor’s claim according to the latest financial statements exceeds 30 percent of the total amount of claims against the debtor, and at least 30 calendar days have passed from the date of the due date of the claim. The creditor has the right to file an insolvency petition with the court only if it has notified the debtor of the overdue claim and the debtor has failed to fulfill it after 30 days. The bankruptcy procedure provides for the possibility of canceling the actions of the debtor that caused harm to the creditor and were committed within a year before filing the application to the court (or within two years if they were committed with related parties). Such actions include: giving an advantage to one creditor over others; alienation of property at a reduced price; debt forgiveness or other similar actions. Cancellation of such actions allows for the return of property or other assets lost by the debtor, which increases the liquidation estate and, accordingly, increases the chances of satisfying the creditors’ claims in full. 

Depending on the circumstances of the case, an additional method of debt collection is bringing the debtor’s officials or the debtor himself to criminal liability in accordance with Article 377 (note 2) of the Criminal Code of the Republic of Georgia for the debtor’s failure to perform an action prescribed by a court decision.

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

# DEBT COLLECTION AGENCY GEORGIA

06.02.2022

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