Debt Collection in Kuwait

The debt collection procedure in Kuwait begins with an assessment of the debtor’s solvency, scope of activity, business history, availability of documentary evidence of the debt, current court cases and enforcement proceedings, and the possibility of disputing the debt. This assessment determines the strategy to be used on behalf of the client in the collection process.

If the debtor has no ongoing court cases or outstanding judgments for debt collection and is actively engaged in commercial activities, then it is advisable to use the out-of-court debt collection stage.

This stage involves active negotiations with the debtor in order to reach an agreement on payment of the creditor’s claims or other possible settlement options (e.g. return of goods, transfer of the debt to a third party, exchange of services or goods).

Interaction with the debtor begins immediately after sending a notice by mail, email, phone or instant messengers. This process involves intensive communication with the debtor in order to exert constant pressure. The main objective is to establish contact with key decision makers to achieve early recovery of the debt.

The average time for informal out-of-court collection is up to 60 days (except in cases where a payment plan is agreed upon). If this stage does not bring the expected results or after an initial analysis it becomes clear that it is not applicable, it is necessary to proceed to collection through the courts.

Before initiating judicial collection, it is worth paying attention to the limitation period. The general limitation period is 15 years. The consequences of the expiration of the limitation period are applied in court only at the request of the debtor. The limitation period is interrupted if the debtor directly or indirectly acknowledges the debt. Indirect recognition is considered to be the case when the debtor transfers his property to the creditor as security. After interruption, the limitation period begins to count anew.

Kuwaiti law provides for judicial collection of debt in the usual judicial procedure and by issuing an order for payment.

The ordinary judicial procedure begins with the filing of a statement of claim with the court. The court registry then registers the claim on the day of filing in the appropriate register and sets a date for the hearing. The original and copies of the statement are given to the bailiff to notify the defendant and then returned to the registry.

The defendant must submit his documents and a memorandum of defense no later than the second hearing. The period for appearing in court is five days, but if necessary, this period can be reduced to two days.

If the plaintiff and defendant appear in court on their own initiative and present their dispute, the court has the right to immediately consider the claim and make a decision, if possible. Otherwise, another hearing is scheduled. The court secretary must complete the process of registering the case in the journal after collecting the fee.

During the hearing, the court first tries to reconcile the parties. If reconciliation is not achieved, the judge orders that the oral statements of the parties or their representatives on the demands and objections be recorded in the minutes of the hearing. After considering the parties’ positions, weighing the evidence, and hearing the arguments, the court will conclude the trial and make a decision either at that hearing or at a subsequent hearing.

If the defendant fails to appear at the initial hearing or requests more time to arrange legal representation, the court will adjourn the hearing for a period of one to three weeks. Courts generally do not adjourn a hearing more than once for the same reason. Therefore, if the defendant fails to appear at the hearing several times without good cause, the court will evaluate the merits of the claim and either dismiss the claim or enter a default judgment.

A payment order is used to collect a clearly defined amount of debt supported by written documents. To do this, the creditor must first notify the debtor of the debt due within at least five days and then file a motion with the court for a payment order. A payment order is issued upon the motion, which is accompanied by evidence of the debt and proof of notification of the debtor’s payment. This document remains in the secretariat until the appeal period expires. The petition must be filed in two identical copies and contain the details of the claim.

If the court finds the petition justified, it shall issue an order within three days of the filing of the petition. Otherwise, the court shall refrain from issuing an order and shall schedule a hearing to consider the case in the competent court. In this case, the creditor shall notify the debtor of the need to appear in court at the scheduled hearing, notifying him of the content of his petition.

The debtor must be notified of the order within six months. Otherwise, the order will be considered invalid. The debtor has the right to appeal the order within thirty days of its receipt. The appeal is made to the court of first instance and is carried out according to the usual procedural rules. In the absence of an appeal, the order acquires the force of a final decision.

The decision of the court of first instance may be appealed to the court of appeal within 30 days of the date of the contested decision. The decision of the court of appeal may be appealed to the Supreme Court of Cassation of Kuwait within 30 days of the date of the contested decision. Appealing the decision does not entail a stay of its execution. However, the court may, at the request of the applicant, stay the execution of the decision if its execution is likely to cause serious damage and the grounds for appeal are sufficiently weighty to suggest its revocation. The decision of the court of cassation is final and cannot be further appealed.

After the court decision comes into legal force, the creditor should initiate the enforcement procedure. The decision can be presented for enforcement within 15 years. Within the framework of the enforcement of the court decision, the creditor’s claims can be satisfied by seizing and writing off funds from the debtor’s accounts; seizing the movable and immovable property of the debtor with their subsequent sale; seizing and confiscating securities; seizing and confiscating company shares, seizing and confiscating the debtor’s property that is in the hands of third parties. Also, at the request of the creditor, it is permissible to detain the debtor for a period of not more than six months if he refuses to comply with the final decision or final order, despite the possibility of execution. If the debtor is a legal entity, the order for detention is issued against the one who is directly responsible for the execution of the court decision.

An alternative option for debt collection from a company and an entrepreneur is the bankruptcy procedure of the debtor. According to Kuwait Bankruptcy Law, a creditor has the right to initiate this procedure if the following conditions are met: the debtor has stopped making payments; there is a deficit in the debtor’s financial position; the debtor’s business is not sustainable. 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 made with the intention of causing harm to the creditors. The following transactions or actions may be declared invalid if they were made by the debtor within three months preceding the date of suspension of payments: donations or gifts, with the exception of small gifts; any transaction in which the debtor’s obligations are clearly disproportionate to the obligations of the other party; repayment of debts before their maturity in any way different from the usual procedure for repayment of this type of debt; encumbrance of any type of property with additional collateral to secure an existing debt, unless this is justified by business considerations; any transactions if they caused damage to creditors and if the person involved in the transaction knew or should have known that the debtor had suspended payments or was in a state of financial insolvency. The limitation period for claims to cancel the above transactions and actions expires one year from the date of publication of the decision to initiate bankruptcy proceedings. As a result of the cancellation of the above 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 on international debt collection in Kuwait, our company is ready to provide its expert assistance to effectively resolve your financial issue. Contact us to get additional information and professional support from specialists of the leading debt collection agency.

# DEBT COLLECTION AGENCY KUWAIT

04.11.2024

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