Debt collection in Iceland

The debt collection procedure in Iceland 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 out-of-court debt recovery.

This 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 informal out-of-court collection is up to 60 days (except in cases where an installment plan for debt repayment has been agreed upon). 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.

The statute of limitations for debt collection is 4 years. The law prohibits the parties from changing the statute of limitations by mutual agreement. If the specified period expires, the creditor loses the right to demand payment of the debt. The limitation period is interrupted when the debtor directly or by his conduct acknowledges an obligation to the creditor, for example, by promising to pay or paying in installments the principal amount of the debt, compensation or interest. After performing one of the specified actions, the statute of limitations is interrupted and begins to count again.

Icelandic legislation provides for judicial collection of debt in the form of a general judicial procedure.

The general judicial procedure is carried out by filing a summons, after which the court publishes the summons and serves it on the defendant. The published summons must be served on the defendant within three days, a week, or a month depending on the defendant’s location. If the defendant does not appear in court or does not indicate his position regarding the plaintiff’s claims, the case will be considered to the extent consistent with the data and evidence presented. If the defendant files an objection, the court may give the plaintiff an opportunity to respond to the defendant’s objections, in which case the case will be decided on the basis of the claims, documents and actions of the plaintiff in relation to what was presented by the defendant.

If the defendant has filed a defense, the case should usually be tried in one hearing to achieve a settlement and to give the parties the opportunity to present visible evidence that they previously did not have the opportunity to present. At this meeting, depending on the circumstances, the parties are asked to answer for what purpose they themselves intend to give evidence, and to call individual witnesses to test whether the provision of information is required and, if so, to what extent. As a general rule, the judge does not decide to hold a hearing at the main hearing of the case until the parties declare that the collection of visible evidence has been completed.

When the collection of evidence is completed, the judge decides in advance when the main hearing will be held, and the hearing and oral presentation of the case must usually be held in one session. After the hearings are completed and the parties’ positions are presented orally, the court makes a decision, which becomes a final decision after the deadline for appealing it has expired.

An interested party who is not satisfied with the decision of the court of first instance has the right to appeal it to the National Court within four weeks from the date of its announcement. The decision of the court of first instance can be appealed if the amount of the claim is at least 1,000,000 ISK. If the amount claimed is less, the decision may be appealed if the outcome of the case is of significant overall significance or the outcome of the case affects important interests of the person applying for leave to appeal. To implement the appeal procedure, the interested person must first obtain permission from the National Court for such an appeal. If an appeal procedure is opened, the parties exchange their positions and documents, after which the court may consider the appeal either orally or in writing if special reasons so require. During the hearing, each of them provides a summary of the events of the case in chronological order, statements and references to legal norms, as well as quotations from scientific publications and court decisions on which they intend to rely in the arguments. After the hearing, the court makes a decision, which comes into force from the moment it is announced.

The decision of the National Court can be appealed, but to do this it is necessary to request permission to appeal from the Supreme Court of Iceland within four weeks from the date of announcement of the contested decision. The Supreme Court may give other parties to the case an opportunity to comment on the application for leave to appeal the decision. The case is considered in court with oral arguments. As a result of consideration of the case, the Supreme Court makes a decision that is not subject to further appeal and enters into legal force from the moment of its announcement.

After receiving the final judgment, the creditor should obtain a writ of execution and initiate enforcement proceedings. A court decision may be brought for execution within ten years from the date of entry into legal force. As part of the enforcement of a court decision, the creditor’s claims can be satisfied by seizing and writing off funds from the debtor’s accounts; seizure of movable and immovable property of the debtor with their subsequent sale; seizure and confiscation of rights that have financial value; arrest and confiscation of investments; arrest and confiscation of securities.

If the debtor has signs of insolvency, the option of bankruptcy proceedings for the debtor should be considered. The debtor has the characteristics of bankruptcy on the condition that it will not be able to fully satisfy the claims of its creditors when their claims become due and it is unlikely that its difficulty in paying will cease within a short time. At this stage, if the debtor’s assets are insufficient to fully satisfy the creditors’ claims, it is possible to cancel the debtor’s transactions that caused damage to the debtor or deprived him of his assets. Among such transactions, we should highlight in particular: a donation of property made within twelve months before the opening of bankruptcy proceedings, unless it is proven that at the time of the transfer the debtor was solvent, despite the donation; payment of a debt for the last six months before the due date of payment, if the payment was made in an unusual way, which subsequently significantly reduced the debtor’s solvency; actions that unreasonably benefit one creditor at the expense of others, result in the debtor’s property becoming unavailable to satisfy the creditors’ claims, or lead to an increase in debts to the detriment of creditors if the debtor was insolvent or became so as a result of these actions, and the person, who benefited from these actions, knew or should have known about the insolvency of the debtor and the circumstances that led to the fact that these actions were unreasonable. As a result of the cancellation of such transactions, it is possible to return back to the debtor what he lost from such transactions and thereby increase the liquidation estate to satisfy the claims of creditors and cover the costs of implementing the bankruptcy procedure.

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

# DEBT COLLECTION AGENCY ICELAND

15.08.2024

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