Debt Collection in Libya

The debt collection procedure in Libya 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 the 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 the fastest possible debt recovery.

The average time for informal extra-judicial collection is up to 60 days (except in cases where a debt repayment installment 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, you should proceed to collection through the court.

Before initiating judicial collection, it is worth paying attention to the limitation period. The limitation period for debt collection is 15 years. The law prohibits changing this period by agreement of the parties. The consequences of the expiration of the limitation period are applied in the court of first instance and the appellate court only at the request of the debtor. The limitation period is interrupted by the explicit or implicit recognition of the creditor’s claims by the debtor. After the interruption, the limitation period begins to count anew.

Libyan law provides for judicial collection of debts through the ordinary court procedure and through the issuance of a payment order.

The ordinary court procedure begins with the filing of a statement of claim in court. The court then hands over a copy of the claim to the bailiff for service on the defendant. The period for appearing in the court of first instance is at least eight days in civil cases and three days in commercial cases. After the claim has been served on the defendant, the bailiff notifies the plaintiff of this, and the plaintiff is then obliged to file the claim for registration in the court register no later than the day preceding the date of the appointed hearing.

On the appointed day of the hearing, the parties must appear in person or through their representatives, lawyers, authorized by general or special assignment. They can also entrust the representation of their relatives or in-laws up to the third degree of kinship on the basis of a statement made at the hearing or confirmed by the signature of the tribal elder or the head of the community, certified by a competent justice of the peace.

If the defendant fails to appear at the first hearing, the court, on its own initiative, after checking the correctness of his notification, recognizes the defendant as absent and considers the case without his presence. In such a case, the defendant has the right to participate in the case if it has not yet been transferred to the stage of rendering a decision.

At the first hearing, the plaintiff must state the facts and the subject of the claim, present all relevant claims and evidence. The defendant must present his objections, claims and documents before the second hearing. The court of first instance has the right, for good reason, to allow the parties to present new objections, evidence or documents or amend the claims during the consideration of the case.

The court of first instance may attempt to reconcile the parties if it deems it useful. To this end, the court has the right to oblige the parties to appear in person. If reconciliation is achieved, a protocol is drawn up, which has executive force. The court has the right to repeat attempts at reconciliation as necessary.

The court is obliged to conduct an investigation of the case as soon as possible and send the parties to a hearing to consider the essence of the claim. The parties must submit notes with final demands, a statement of facts and legal justifications five days before the said hearing. After considering the essence of the claim, the court makes a final decision.

The procedure for issuing a payment order is used to collect debts in a clearly defined amount, which are confirmed by documents. To do this, the creditor must first send the debtor a demand for fulfillment of the obligation, providing a period of at least three days. If the debtor fails to fulfill the demand within the specified period, the creditor has the right to file an application with the court for the issuance of a payment order. After filing the application, the court issues a payment order. If the court cannot satisfy the application, a hearing of the case is scheduled.

The payment order must be handed to the debtor within six months from the date of issuance of the order, otherwise it loses its force. The debtor can file a protest against the payment order. The challenge is carried out by summoning the creditor to a hearing of the court of first instance or the local court, depending on the circumstances. The office of the bailiffs registers the case for the challenge, and the court considers it in an expedited manner and makes a final decision.

The decision of the court of first instance can be appealed to the court of appeal within 30 days from the date of the contested decision. The decision of the appellate court may be appealed to the Supreme Court of Libya within 30 days from the date of the contested decision. The decision of the Supreme Court is final and cannot be appealed further.

After the court decision comes into legal force, the creditor should initiate the procedure for enforcement. The decision can be presented for enforcement within 15 years. As part 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 the debtor’s property, which is held by third parties.

An alternative option for collecting a debt from a company or entrepreneur is the bankruptcy procedure of the debtor. According to the Libyan Commercial Law, the creditor has the right to initiate this procedure if the debtor has stopped paying his debts. 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 intent to cause damage to creditors. Such transactions or actions, completed two years prior to the opening of bankruptcy proceedings, include, in particular: 1) gratuitous actions, with the exception of ordinary gifts and actions aimed at fulfilling a moral duty or achieving public benefit, if they are proportionate to the financial situation of the donor; 2) early payment of debts; 3) transactions with related parties; 4) provision of collateral to secure a previously incurred but not yet due debt; 5) transactions in which the debtor’s obligations significantly exceed the obligations of the opposite party. Compensatory actions shall also be invalid if they are made within a year before the declaration of bankruptcy, provided that the debtor’s counterparty knew about the debtor’s insolvency. 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 for international debt collection in Libya, 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 LIBIYA

19.11.2024

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