Debt collection in Lithuania

Debt collection in Lithuania should begin with a legal and financial assessment of the debtor, the available documents and the real possibility of later enforcing the claim. At this stage, it is important to verify the debtor’s exact legal name or personal name, address in Lithuania, business status, assets, pending court cases, already initiated enforcement proceedings, possible signs of insolvency and the documents proving the debt.

For a foreign creditor, it is also important to determine whether the claim arises from a contract, supply of goods, services, acknowledgment of debt, court decision or arbitral award. This assessment affects the choice between out-of-court negotiations, court proceedings, enforcement, recognition and enforcement of a foreign decision, or insolvency proceedings against a legal entity.

If the debtor continues to operate, has verifiable contact details and the creditor’s documents clearly prove the amount and legal basis of the debt, the first practical step may be out-of-court debt recovery. In Lithuania, this stage is useful not only for requesting payment, but also for testing the debtor’s reaction, recording the debtor’s position, obtaining partial payment, agreeing on a repayment schedule and preparing stronger evidence for possible court proceedings.

This stage includes negotiations with the debtor, sending a written payment demand, clarifying the reasons for delay and looking for a solution that can be documented. Depending on the circumstances, such a solution may include full or partial payment, a repayment schedule, return of goods, set-off of mutual claims, transfer of the debt to a third party or another settlement option that does not weaken the creditor’s evidentiary position.

Out-of-court communication with the debtor should be consistent, verifiable and traceable. The creditor should keep notices, correspondence, the debtor’s replies, payment schedule proposals, acknowledgment of debt and information about the persons who actually make payment decisions. This approach helps assess whether the debtor is willing to pay and, at the same time, prepares materials for court if voluntary settlement fails.

If the debtor ignores payment demands, disputes a documented debt without a clear basis, delays negotiations, hides assets or shows signs of insolvency, the creditor should move to court debt recovery and also assess protective measures, enforcement or insolvency proceedings.

Before initiating court proceedings, the creditor should determine the limitation period for each claim separately. In Lithuania, the general limitation period is 10 years, but shorter periods apply to certain types of claims. Claims for interest and other periodic payments are subject to a 5-year period; claims for contractual penalties, fines or late payment charges are subject to a 6-month period; claims related to defects in goods, services or digital content are subject to a 2-year period; and claims for damages are subject to a 3-year period. The parties may not change the limitation periods or the rules for calculating them by agreement.

Expiry of the limitation period does not automatically prevent the creditor from filing a claim in court. However, if the debtor asks the court to apply the consequences of expiry of the limitation period, the court will assess that objection and, if there are legal grounds, may dismiss the claim in whole or in the relevant part.

In ordinary debt recovery cases, a mandatory pre-trial collection procedure is not required before filing a court claim. Failure to carry out out-of-court collection usually does not prevent the creditor from initiating court proceedings.

Carrying out a mandatory pre-trial debt collection procedure before going to court is not required and failure to perform such actions is not a requirement for initiating a case.

Depending on the amount of the debt, the available evidence, the debtor’s location and the nature of the dispute, Lithuanian law provides several types of judicial debt recovery.

General claim proceedings apply when the dispute requires a full examination of evidence and the positions of the parties. The creditor files a claim with the competent court, after which the court decides whether to accept the case, sends copies of the procedural documents to the defendant and sets a deadline for the response. As a rule, the deadline for submitting a response is from 14 to 30 days. In exceptional cases, taking into account the complexity of the case and the defendant’s request, this period may be extended up to 60 days.

In Lithuania, procedural documents may be submitted through the electronic court portal. A party to the case may use the portal to submit documents to the court, receive notices about acceptance of documents, identified deficiencies and court hearings, and pay court fees. This is especially important for a foreign creditor handling the case remotely and needing to monitor document movement and court notices.

Court proceedings may be conducted orally, with the participants invited to the hearing, or in writing without their participation, when this is allowed by procedural rules and is appropriate in the circumstances of the case.

The law does not establish specific deadlines for the trial, but the court is obliged to ensure that the case is considered in court as soon as possible, not to delay the consideration of the case, and to strive to consider the case in one court session. If the court of first instance fails to carry out procedural actions to be performed within the time limit, a participant in the process interested in performing these actions has the right to apply to the appellate court with a petition to set a time limit for performing such procedural actions. Such a claim is filed through the court of first instance, and if the court does not complete the procedural action within seven days, the petition must be transferred to the court of appeal. The appeal court considers the petition within 7 working days and makes a decision that is not subject to appeal.

As a result of the consideration of the case, the court makes a decision on the case, which becomes final after the expiration of the period for appealing it. When making a decision, the court, if necessary, determines the specific procedure and deadline for execution of the decision.

An interested party who is not satisfied with the decision of the court of first instance has the right to appeal it on appeal within 30 days from the date of its adoption. The appeal is filed through the court of first instance, which, within three working days from the date of acceptance of the appeal, sends copies of the appeal and its annexes to the persons participating in the case. After the expiration of the deadline for appealing the decision on appeal and submitting responses to the appeal, the court of first instance, within seven days, sends the case to the court of appeal, and the persons participating in the case are notified of sending the case.

Consideration of the complaint in the court of appeal, depending on the circumstances of the case, is possible either in oral or written proceedings. In cases of written proceedings, the persons participating in the case are not invited to the court hearing and the court session is held in their absence. In the case of an oral hearing, the persons participating in the case are invited to the court hearing, but their absence does not prevent the consideration of the case on appeal. The time limit for consideration of an appeal is not established by law. As a result of consideration of the case, the court, depending on the circumstances of the case, makes a decision, which comes into force from the moment of its adoption.

The final decision of the appellate court may be appealed by filing a cassation appeal with the Supreme Court of Lithuania within three months from the date of entry into force of the appealed decision. Filing a cassation appeal is allowed only in the event of: a violation of substantive or procedural law that is of fundamental importance for the uniform interpretation and application of the law, if this violation could influence the adoption of an illegal decision; if the court has departed from the practice of application and interpretation of law established by the Supreme Court of Lithuania in the appealed decision; if the practice of the Supreme Court of Lithuania on the disputed legal issue is not uniform.

The cassation case is considered in writing. A court session consists of a notification of the case, a cassation appeal, a response to the cassation appeal, expression of the judges’ opinion, voting and adoption of a ruling. In exceptional cases, the case may be considered orally. As a result of the consideration of the case, the Supreme Court makes a decision that is final and not subject to further appeal.

The written evidence procedure applies to monetary claims supported by admissible written evidence. This procedure is not suitable for every debt case: it does not apply if the defendant resides abroad or if the defendant’s location is outside Lithuania. To request examination of the case under this procedure, the claimant must expressly state this request and identify the written evidence on which the claim is based.

The court may issue a preliminary decision without first notifying the defendant about the filed claim. The preliminary decision cannot be appealed in the appeal or highest review procedure, but the defendant may submit written reasoned objections within 20 days from the date on which the preliminary decision is served on the defendant. This is an important point: the deadline runs from service of the preliminary decision, not from the date on which the decision is issued.

If the defendant does not submit objections within the statutory period, the preliminary decision becomes final. If objections are submitted, the court sends them to the claimant, who may file a response, additional arguments and new evidence. The case is then examined taking into account the positions of both parties, and the final decision may be appealed under the ordinary rules.

The payment order procedure applies to monetary claims of the creditor, including claims based on a contract, damage, employment relationship, maintenance obligation and other legal grounds. This procedure does not apply if the debtor resides abroad or if the debtor’s location is outside Lithuania, if the debtor’s residence or workplace is unknown, or in other cases provided by procedural rules.

When examining an application for a payment order, the court does not review the merits of the creditor’s claim as fully as in ordinary claim proceedings. After accepting the application, the court issues the payment order and decides on temporary protective measures if they have been requested and are justified by the circumstances.

A payment order cannot be appealed through appeal or highest review procedures. The debtor may submit written objections within 20 days from service of the payment order notice and is not required to state the reasons for those objections. If no objections are submitted, the payment order becomes final.

If the debtor submits objections, the court informs the creditor of the right to file a claim under the ordinary procedure. In that case, the creditor must proceed with ordinary claim proceedings and submit a properly prepared claim; otherwise, the payment order application is considered not filed and any temporary measures may be cancelled.

The low value dispute procedure applies to monetary claims not exceeding 5,000 euros. Such cases are examined under the general rules of claim proceedings, with the specific features provided by law. As a rule, the case is considered in writing, but an oral hearing is held if at least one party requests it or if the court considers oral examination necessary.

After obtaining a final court decision, if the debtor does not comply voluntarily, the creditor must obtain an enforcement document and submit it to a bailiff. An enforcement document based on a court decision may be submitted for enforcement within 5 years from the date on which the court decision becomes legally effective.

Monetary enforcement documents are assigned to bailiffs through a special distribution system. After receiving the enforcement document, the bailiff usually checks within 3 working days whether there are obvious grounds for refusing to initiate enforcement. If the debtor is an individual, enforcement is carried out at the debtor’s place of residence, place of work or location of assets. If the debtor is a legal entity, enforcement is carried out at its registered office or where its assets are located.

In the course of forced enforcement, the creditor’s claims may be satisfied from the debtor’s bank funds, property rights, salary and other income, movable and immovable property, funds or assets held by third parties, set-off of mutual claims and other measures permitted by law. Several enforcement measures may be applied at the same time if this is necessary for actual recovery of the debt.

When enforcement is carried out against an individual, legal restrictions must be taken into account. For example, enforcement against the residential premises where the debtor lives is generally possible only if the amount to be recovered exceeds 4,000 euros. In certain situations, the court may also take into account family circumstances, children, persons with disabilities and socially vulnerable persons. Actions or refusals of a bailiff may be challenged within 20 days from the date when the person learned or should have learned about the action or refusal, but not later than 90 days from the date of that action.

In cross-border debt cases, recognition and enforcement of foreign court decisions and arbitral awards in Lithuania may have independent practical importance. Unless applicable international treaties or special rules provide otherwise, these matters are examined by the Court of Appeal of Lithuania. The court does not re-examine the merits of the foreign decision, but checks whether the conditions for recognition and permission for enforcement are met.

The application and its attachments must be submitted in the Lithuanian language. Depending on the country of origin of the decision, the creditor may need to provide confirmation of authenticity of the document, official certification of foreign documents, translation, and documents confirming that the decision is legally effective or enforceable. The application may be submitted directly, by post or through the electronic court portal.

For the creditor, this means that before starting recovery in Lithuania, it is necessary to determine whether the claim is based on a Lithuanian court decision, a foreign court decision, an arbitral award or original debt documents. This determines whether recognition of the decision is required first, whether a separate claim should be filed in Lithuania, or whether another procedural route can be used. If the debtor has moved abroad or assets are located in several countries, the creditor should also assess the strategy for debt collection from a debtor who has fled abroad.

If the debtor shows signs of insolvency, the creditor should assess not only ordinary court recovery, but also insolvency proceedings against the legal entity. In Lithuania, a legal entity may be considered insolvent if it cannot perform its property obligations on time or if its obligations exceed the value of its assets.

Bankruptcy or restructuring apply in different situations. Bankruptcy is aimed at liquidation of the legal entity and satisfaction of creditors’ claims from the debtor’s assets. Restructuring applies when the legal entity has financial difficulties but remains viable and may continue its activity through measures aimed at restoring solvency. Bankruptcy proceedings are opened if the legal entity is insolvent and restructuring proceedings are not opened.

A creditor whose claim is due may initiate insolvency proceedings. For this purpose, the creditor sends the debtor a notice regarding an undisputed and unpaid obligation and warns that, if the debtor does not pay, does not reach an assistance agreement and does not decide on out-of-court bankruptcy, the creditor will apply to court for the opening of bankruptcy or restructuring proceedings. If the notice is not sent by electronic means, it is generally deemed served 7 days after sending. The notice must set a period of not less than 15 days and not more than 30 days from service on the debtor.

If the debtor does not perform the obligation and no agreement is reached with the creditor, the creditor may apply to court for the opening of bankruptcy or restructuring proceedings. After accepting the application, the court sends copies to the participants and other persons provided by law, while other creditors may request inclusion in the case as interested parties. From this stage, sale of assets and recovery under previously issued enforcement documents are generally suspended, except where the court allows the bailiff to complete the sale of assets.

The court must decide on the opening of insolvency proceedings within 30 days from the date of acceptance of the application. For important reasons, this period may be extended once, but for no more than 30 days. If the proceedings are opened, the legal entity receives the status of an entity in bankruptcy or restructuring, and the creditor’s further actions depend on the type of procedure.

After the opening of insolvency proceedings, creditors must submit their claims and supporting documents to the appointed administrator within 30 days from publication of the court decision on the website of the supervisory authority. The administrator examines creditors’ claims and submits them to the court for approval within 30 days after the expiry of the claim submission period. The court may extend this period at the administrator’s request, but for no more than 14 days. Claims that arise after the opening of the proceedings because of the conduct of the insolvency procedure must be submitted within 30 days from the date on which they arise.

In restructuring, the duration of the plan may not exceed 4 years from the date of the court decision approving the plan. The deadlines for satisfying creditors’ claims stated in the plan may not be longer than the duration of the plan itself. If implementation of the plan requires additional time, the administrator, based on a creditors’ meeting decision, or the head of the legal entity may submit a reasoned request for extension no later than 6 months before the plan expires. The court may extend the duration of the plan once, but for no more than 1 year.

The threshold exceeding 10 minimum monthly wages approved by the government relates to the creditor’s right to initiate restructuring and is not a universal condition for any creditor application concerning the debtor’s bankruptcy. Therefore, when choosing between bankruptcy and restructuring, it is necessary to assess not only the amount of the debt, but also the debtor’s solvency, assets, prospects of continuing activity, management conduct and the likelihood of satisfying creditors’ claims.

In insolvency proceedings, the actions of the debtor’s head and controlling persons may be important. The head must act without delay when the likelihood of insolvency arises, protect creditors’ interests and initiate insolvency proceedings when the legal entity becomes insolvent. If a previously concluded assistance agreement is not performed or is performed improperly, the head must initiate insolvency proceedings within 5 working days from the moment when the head became or should have become aware of the breach.

The court may recognize bankruptcy as intentional if it establishes that the insolvency of the legal entity was caused by deliberate mismanagement or transactions made in violation of the rights and legitimate interests of creditors. For the creditor, relevant warning signs include transfer of assets, economically unreasonable transactions, violation of the order of payments, improper accounting, transfer of business or assets to another person while debts remain with the previous company. When recognizing bankruptcy as intentional, the court also identifies the person or persons whose actions or omissions caused that result.

After bankruptcy is recognized as intentional, the insolvency administrator may apply to court within 6 months from the date on which the relevant court decision becomes effective, seeking invalidation of the debtor’s transactions. This applies to transactions that contradicted the purposes of the legal entity’s activity or may have affected its inability to pay creditors, as well as transactions that the legal entity was not obliged to enter into, if they violated the creditor’s rights and the debtor knew or should have known about this. The practical meaning of this mechanism is that assets or their value may be returned to the debtor’s estate and used to satisfy creditors’ claims.

If you need support with international debt collection in the Republic of Lithuania, Grandliga can analyze the documents, determine the applicable limitation period, assess the debtor, choose the appropriate out-of-court, court or enforcement recovery method, and prepare a strategy for recognition of foreign decisions, arbitral awards, bankruptcy or restructuring of the debtor. Contact us to receive a preliminary assessment of your situation and define the next steps in your case.

# DEBT COLLECTION AGENCY LITHUANIA

10.06.2024

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