Debt collection in Hungary

Debt collection in Hungary should begin with a legal and financial assessment of the debtor, the basis of the claim and the practical recoverability of the debt. At this stage it is important to check not only the debtor’s solvency and commercial activity, but also whether the claim is due, whether the debt is supported by contracts, invoices, delivery documents, correspondence, acknowledgements of debt or settlement proposals, and whether the debtor has pending court, enforcement, bankruptcy or liquidation proceedings.

For a Hungarian debtor, the assessment should also include the debtor’s registered seat or address for service in Hungary, the availability of assets that may be subject to enforcement, the value of the claim, and whether the case is suitable for a Hungarian notarial order for payment, ordinary court proceedings, a European payment order or insolvency-related action. This preliminary assessment is important because some Hungarian procedures depend on the amount of the claim, the monetary nature of the demand and the existence of a known Hungarian address for service.

If the debtor is commercially active, has identifiable assets and there are no obvious signs that enforcement or liquidation proceedings have already made recovery impractical, it is usually advisable to begin with an out-of-court collection stage. This allows the creditor to test the debtor’s position, obtain payment or a repayment schedule, and preserve evidence for further proceedings if voluntary payment is not achieved.

The out-of-court stage is focused on structured negotiations with the debtor and on documenting the debtor’s position. The creditor may seek immediate payment, a repayment schedule, return of goods, transfer of the debt to another liable party, set-off, replacement performance or another commercially acceptable settlement. In Hungary, a written acknowledgement of debt, an agreed amendment of the obligation or a settlement agreement may also be important for limitation purposes, so communications with the debtor should be organised in a way that preserves evidence.

Interaction with the debtor may begin after a written notice is sent by post, email or another reliable communication channel used by the parties. The purpose of this stage is not only to request payment, but also to identify the person authorised to decide on payment, confirm the debtor’s objections, obtain documents that may support the creditor’s position and determine whether the debtor is willing to sign a settlement or repayment arrangement.

The average time for informal out-of-court collection is up to 60 days, except where the parties agree on a longer instalment plan or restructuring schedule. If the debtor refuses to cooperate, disputes the claim without proper grounds, ignores the payment notice or shows signs of insolvency, the creditor should proceed to the appropriate legal route, including a notarial order for payment, ordinary court proceedings, a European payment order or insolvency-related action.

Before initiating legal action, the creditor should check the limitation period applicable to the claim. Under the Hungarian Civil Code, the general limitation period is five years unless a specific rule provides otherwise. The limitation period begins when the claim becomes due. The parties may alter the limitation period by written agreement, but an agreement excluding limitation entirely is null and void. If the limitation period has expired, the claim is generally not enforceable in court proceedings, although Hungarian courts and authorities do not take limitation into account ex officio.

The limitation period may be interrupted by the debtor’s acknowledgement of the debt, amendment of the obligation by agreement, a settlement agreement, enforcement of the claim in court proceedings if the court adopts a final and binding decision on the merits, or notification of the claim in bankruptcy proceedings. After interruption, the limitation period restarts, and after an enforceable decision has been adopted, the limitation period may also be interrupted by amendment of the obligation by agreement or by any act of enforcement.

A mandatory pre-trial debt collection procedure is not required for every debt recovery case in Hungary, and the absence of such a step does not automatically prevent the creditor from initiating legal proceedings. However, before bringing an action, a party may request the competent court to summon the other party to an attempt at settlement. This mechanism may be useful where the creditor wants to formalise negotiations, approve an agreement as a court settlement or demonstrate that a voluntary resolution was attempted before litigation.

The court sets a date for the settlement attempt not later than thirty days after receiving the request, or not later than fifteen days in the case of a joint request. If the parties reach an agreement, the court records it and applies the rules on approval of settlements. If no settlement is reached at the scheduled date, the court closes the proceedings and declares the settlement attempt unsuccessful, after which the creditor may proceed with the appropriate claim route.

Depending on the value of the claim, the debtor’s position and the level of dispute, Hungarian law provides several routes for judicial debt collection: a domestic notarial order for payment, ordinary court proceedings, a court injunction in ordinary litigation where the defendant fails to submit a proper defence, and, in cross-border European Union cases, a European payment order.

The domestic notarial order for payment is a simplified out-of-court civil law procedure for enforcing monetary payment claims. It falls within the competence of Hungarian civil law notaries, and notarial proceedings have the same effect as court proceedings. Except in excluded categories of cases, an overdue pecuniary claim may be pursued through this procedure.

For an overdue claim limited exclusively to the payment of money, if the sum in dispute does not exceed HUF 3,000,000, the claim may generally be pursued only through an order for payment procedure or through an attempt to reach a pre-trial settlement, provided that the statutory conditions are met. One of the key practical conditions is that each party must have a known address for service in Hungary. If the sum in dispute exceeds HUF 30,000,000, the pecuniary claim may not be pursued through the domestic notarial order for payment procedure.

The domestic notarial order for payment route is especially relevant for undisputed monetary claims where the debt is clear, due and supported by documents. The application should identify the legal relationship, the right claimed, the principal amount and related charges, the starting date of the legal relationship, the due date of the claim and the data needed to identify the claim. Evidence is not taken in the order for payment procedure, but the application may include a short presentation of the facts and an indication of the supporting evidence.

If the debtor lodges a statement of opposition against the order for payment within the statutory period, the disputed part of the procedure is transferred to ordinary civil proceedings. If the order for payment is not challenged in time, it has the same effect as a final court judgment and may become the basis for enforcement.

In ordinary court proceedings, if the statement of claim is suitable for litigation, the court serves it on the defendant and calls on the defendant to submit a written statement of defence within forty-five days after service. At the defendant’s reasoned request, the court may exceptionally extend this time limit by up to forty-five days.

If the defendant does not submit a written statement of defence or a set-off document, or if such document is rejected, the court may issue a court injunction outside the hearing. A court injunction may also be issued if the defendant submits only a general challenge without formal or substantive defence. Any party may file a written statement of opposition to the court injunction within fifteen days of service. A request for deferred payment, payment by instalments or rectification alone is not treated as a challenge to the court injunction. If a valid opposition is filed, the court injunction becomes ineffective and the case continues under the rules on preparation of ordinary proceedings. The part of the injunction that is not challenged, or against which the opposition is finally rejected, becomes final and binding after the expiry of the opposition period.

Ordinary court proceedings are appropriate where the claim is disputed, the amount of the claim is outside the domestic notarial order for payment limits, the debtor has no known Hungarian address for service required for the notarial procedure, or the case requires full examination of evidence. The proceedings are initiated by filing a statement of claim with the competent court. If the claim is suitable for litigation, the court serves it on the defendant, requests a written statement of defence and prepares the case for examination on the merits.

The period for consideration of the case in the court of first instance is not fixed by a single statutory deadline. Hungarian civil procedure is structured around a preparatory stage and a main hearing stage. During the preparatory stage, the parties define the factual and legal framework of the dispute, submit statements and evidence, and the court prepares the case for the main hearing. The timing of the hearing depends on the procedural posture of the case, the service of documents, the need for evidence and the conduct of the parties.

After the case is considered, the court issues a decision. As a general rule, the court sets a fifteen-day period for performance of the obligation established in the decision. If justified by the equitable interests of the parties or by the nature of the obligation, the court may set a shorter or longer performance period or order performance in instalments.

A party that disagrees with a first instance decision may appeal within fifteen days after communication of the decision. The appeal has suspensory effect on enforcement unless the law or the court’s decision provides otherwise. The opposing party may submit a statement of defence on appeal and, where applicable, a cross-appeal within the procedural time limits.

The second instance court may decide the appeal without a hearing unless a hearing is requested or the circumstances of the case require one. If an appeal hearing is necessary, the hearing should be scheduled in a manner allowing it to be held within four months after the documents or the request for a hearing are received by the court of second instance, unless the circumstances of the case prevent this. The absence of the parties does not in itself prevent the appeal from being considered.

After the second instance decision is put in writing, the documents are sent to the court of first instance within eight days, and the first instance court communicates the decision closing the second instance proceedings to the parties within fifteen days after receiving the documents.

As a rule, the final decision of the appellate court is not subject to ordinary further appeal. In exceptional cases, the highest judicial forum of Hungary may permit review where the legal issue justifies it, for example to ensure the consistency or development of case law, because of the exceptional weight or social significance of the legal question, because a preliminary ruling from the Court of Justice of the European Union may be necessary, or where the judgment departs from a published decision of the highest judicial forum. A request for permission for review may be filed with the court of first instance within forty-five days after communication of the judgment.

If the request for permission for review is suitable for adjudication on the merits, the highest judicial forum decides outside the hearing and within thirty days whether to grant or refuse permission for review. Such review should therefore be treated as an exceptional legal remedy rather than a standard third level of appeal.

The European payment order procedure is available for cross-border civil and commercial cases involving due monetary claims. In Hungary, the procedure falls within the competence of civil law notaries, and the application may be submitted to a notary. Unlike the domestic Hungarian order for payment procedure, the European payment order procedure is not limited by the value of the claim. Denmark is excluded from the European payment order system.

The procedure begins with an application submitted on standard Form A. When the application is submitted to a Hungarian civil law notary, it must be completed in the language accepted by that notary, and a version in the official language of the debtor’s Member State may also be needed for service. Supporting evidence should be identified in the form, but evidentiary documents are generally not attached to the application itself.

If the formal examination of the application does not lead to rejection, the notary issues the European payment order as soon as possible and generally within thirty days after submission of the application. The order is then served on the debtor together with a copy of the application. If the debtor lodges a statement of opposition, the proceedings are transferred to ordinary court proceedings before the competent Hungarian court where Hungarian jurisdiction exists.

If the debtor does not lodge opposition, the European payment order becomes final and enforceable. Enforcement may be requested in the Member State where the debtor has assets subject to enforcement. In European Union Member States other than Denmark, a European payment order declared enforceable can generally be enforced without a separate declaration of enforceability.

The period from July 15 to August 20 and from December 24 to January 1 of each year is treated as a judicial break for procedural time-limit purposes. As a general rule, this period is not included in procedural time limits, and hearings are not scheduled during the judicial break unless a statutory exception applies. If a procedural period would expire during the judicial break, the expiry is postponed to the first day after the judicial break.

After receiving a final and enforceable decision, a final order for payment or another enforceable title, the creditor may initiate compulsory enforcement if the debtor does not comply voluntarily. The application for enforcement should identify the parties, the enforceable decision, the claim to be enforced and, where possible, information about the debtor’s assets. The court or notary examines the enforcement application and, if it is justified, issues the enforcement order.

Compulsory enforcement in Hungary is asset-driven. The most important enforcement measures include attachment of wages and other emoluments, seizure of funds held by financial institutions, blocking of bank accounts, seizure and sale of movable property, seizure of claims against third parties, seizure of business shares and seizure and sale of immovable property. Enforcement measures restrict the debtor’s right to dispose of the affected assets.

Practical recovery depends on whether the debtor has bank accounts, receivables, salary, movable assets, real estate, business interests or other assets in Hungary. Certain debtor-protection rules and exemptions may apply, especially for natural persons, and in some cases payment by instalments may be determined in enforcement proceedings. Therefore, obtaining a final decision is only one stage of recovery; the availability and location of enforceable assets remain decisive for actual collection.

If enforcement does not lead to recovery and the debtor is unable or foreseeably unable to pay debts when due, bankruptcy or liquidation proceedings may become relevant. Bankruptcy proceedings are aimed at giving the debtor a temporary payment stay and an opportunity to reach a composition with creditors. Liquidation proceedings are aimed at satisfying creditors according to statutory rules when an insolvent debtor is dissolved without a legal successor.

Liquidation is especially important for creditors because, once liquidation starts, the debtor’s ownership rights over the insolvency estate are restricted and the liquidator acts as the debtor’s legal representative. From the starting date of liquidation, monetary claims related to the assets of the insolvent estate are generally asserted within the liquidation proceedings, and enforcement proceedings against assets forming part of the liquidation estate must be terminated.

A creditor should act quickly after publication of the liquidation order. Creditors are generally called to notify their claims to the liquidator within 40 days from publication of the order ordering liquidation. Claims reported after 40 days but within 180 days may still be registered, but they are satisfied only after timely claims and other statutory priority debts if coverage remains. Missing the 180-day deadline results in loss of rights.

In liquidation proceedings, a creditor may also seek liability of former managers of the debtor company where, during the three years preceding the commencement of liquidation and after the emergence of a situation threatening insolvency, those managers failed to perform their duties with regard to creditors’ interests, causing a decrease in the debtor’s assets or frustrating full satisfaction of creditors’ claims. A situation threatening insolvency arises when the executives foresaw or should have foreseen, with the prudence expected from persons in their position, that the company would not be able to meet its obligations when due.

If several persons were jointly managing the company during the relevant period, their liability may be joint and several. This mechanism does not replace enforcement against the debtor’s assets, but it may be relevant where the debtor’s assets are insufficient and there are grounds to argue that management conduct harmed the creditors’ prospects of recovery.

If you have questions or need support with Debt collection in Hungary with Hungarian flag, map and legal background, our team can assess the debtor’s position, determine the appropriate recovery route and assist with negotiations, court proceedings, payment order procedures, enforcement or insolvency-related steps. Contact us to receive a preliminary analysis of your case and practical recommendations for recovering debt from a Hungarian debtor.

# DEBT COLLECTION AGENCY HUNGARY

12.04.2024

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