Debt collection in Malta

The debt collection procedure in Malta begins with an assessment of the debtor’s solvency, its area of activity, its business history, the existence 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 utilised 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 in order to achieve the fastest possible recovery of the debt.

The average time for informal extra-judicial collection is up to 60 days (except in cases where a payment plan 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, it is necessary to 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 5 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 by any action by which the debtor acknowledges the debt to the creditor, for example, by partial payment of the debt. After interruption, the limitation period begins to count anew.

Judicial debt collection in Malta is carried out in the ordinary and simplified manner.

An ordinary court proceeding is commenced by service of a subpoena. The subpoena must be accompanied by an affidavit setting forth all the facts relevant to the case and setting forth each fact separately; a list of witnesses to be examined; and evidence supporting the creditor’s claims. If the subpoena complies with the procedural requirements, the court shall register it and cause the defendant to appear in court.

The defendant must answer within twenty days from the date of service of the subpoena unless he intends to admit the claim. If the defendant intends to admit the claim fully and unconditionally, he must file a brief to that effect. Otherwise, the defendant must file a statement of defense that includes: (a) all defenses that will be deemed to be forfeited if not stated before the commencement of the dispute; (b) a clear and precise statement of the defenses on the merits of the claims, without reference to legal rules. Together with the statement of defense, the defendant must file a declaration setting forth: 1) all the facts relevant to the claim; 2) a denial, admission or explanation of the facts stated in the plaintiff’s statement of claim. The declaration must be sworn to by the registrar or accompanied by an affidavit by the defendant. The defendant must also state the names of the witnesses he intends to call, stating the facts and evidence he intends to support by their testimony. All documents necessary to support the objections must be attached to the statement of defence.

If the defendant fails to file a statement of defence and a declaration, the court shall enter judgment as if the defendant had failed to appear when summoned, unless the defendant satisfactorily explains to the court his failure to file these documents within the prescribed time. However, before entering judgment, the court shall grant the defendant a short period, which shall not be extended, to file written objections to the plaintiff’s claim. These objections shall be served on the plaintiff, who shall be given a short period to respond. Upon the filing of the statement of defence or the expiration of the prescribed time, the preliminary written proceedings shall be deemed to be completed and the case shall be listed for hearing.

If the creditor’s claim concerns a specific, liquid and payable debt not related to the performance of any action, the creditor may request in the statement of claim that the court renders a decision in his favor in a simplified form without holding a trial. To do this, the plaintiff must state in his declaration that, in his opinion, the debtor has no defense to the claim. From the time the claim is served, the defendant is ordered to appear in court, no earlier than fifteen days and no later than thirty (30) days, to challenge the plaintiff’s actions. If the defendant fails to do so or fails to convince the court that he has a reasoned defense to the claim, the court will decide in favor of the plaintiff. If the defendant succeeds in challenging the plaintiff’s actions, he is granted the right to defend himself and file a statement of defense within twenty days from the date of the court order.

A case set for hearing must be considered continuously until a final decision is made. Nothing prevents the court from deciding the case on the day specified in the summons if the claim is not contested or the court is satisfied that the plaintiff has no grounds for the claim or the defendant has no reasonable defense. The hearing may be postponed only in special cases that prevent the consideration of the case, such as the failure of a witness to appear. If the defendant or his lawyer fails to appear, the case may be considered on the basis of the available materials after hearing such evidence as the court deems necessary despite the failure of the defendant to appear.

After reviewing the procedural documents of the parties and the evidence presented, the court makes a decision.

Any of the parties to the dispute who is not satisfied with the final decision of the court of first instance has the right to appeal it in the appellate procedure within 20 days from the date of the decision. An appeal cannot be filed against a decision made on the basis of recognition of the claim, or taken as a result of a waiver of the right to appeal or agreement with the conclusions of the decision. As a result of the appeal review, the court makes a decision that comes into force from the moment it is made and is not subject to further appeal.

After receiving the final court decision, if the debtor refuses to voluntarily comply with the court decision, a writ of execution should be obtained and presented for compulsory execution. A writ of execution may be presented for execution within 5 years. Satisfaction of the creditor’s claims in the process of compulsory execution is carried out by seizing funds and writing them off; seizing movable and immovable property with subsequent sale at auction; seizing and selling securities.

If the debtor is in a state of insolvency, the creditor should consider the possibility of bankruptcy of the debtor. A debtor-commercial entity is considered to be in a state of bankruptcy in the following cases: 1) if, taking into account conditional and prospective obligations, the debtor is unable to pay its commercial debts; 2) if a commercial debt remains unpaid in whole or in part within twenty-four weeks after the execution of an enforcement order against the debtor by any of the enforcement actions. The creditor may, regardless of whether the debt owed to him is commercial or otherwise, and even if the maturity date of such debt has not yet arrived, file a claim with the court, demanding recognition that the debtor is in a state of bankruptcy. In this case, simultaneously with the filing of the claim, the creditor is obliged to provide security in an amount equivalent to the higher of two amounts: ten percent of the amount of the debt owed to the creditor, or one thousand euros in favor of the debtor to ensure the proper conduct of the case without delay and to substantiate his claim. Expenses incurred during the bankruptcy procedure are reimbursed to the creditor from the funds received from the bankruptcy estate, in priority to any other debts. 

In the bankruptcy procedure, any action to transfer property, including the renunciation of any inheritance or acquired prescription, as well as any obligation assumed by the bankrupt or other action taken by him to the detriment of his creditors, is recognized as invalid, even if the interested parties acted in good faith. The cancellation of such actions allows the return of property lost by the debtor and an increase in the bankruptcy estate, which contributes to a more complete satisfaction of creditors’ claims.

If you have any questions or need support on international debt collection in Malta, our company is ready to provide its expert assistance to effectively resolve your financial issue. Please contact us for more information and professional support from specialists of the leading debt collection agency.

# DEBT COLLECTION AGENCY MALTA

12.04.2024

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