Debt collection in the Czech Republic

The debt collection procedure in the Czech Republic begins with an assessment of the debtor’s solvency, his field of activity, the history of the enterprise, 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 amicable debt collection.

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.

Before initiating legal action, you should pay attention to the statute of limitations. The general limitation period is 3 years. The legislation provides for the possibility for the parties to change the specified period of no less than one year and no more than fifteen years. Missing the statute of limitations does not prevent the creditor from going to court, but if the debtor applies to the court with an application to apply the consequences of missing the deadline, then the claim will be denied.

In addition, the Czech Republic is a party to the 1974 UN Convention on the Limitation Period in the International Sale of Goods, and therefore if a foreign creditor is registered in a country that is also a party to this convention, the limitation period in this case will be 4 years.

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. However, it is advisable to give the debtor a pre-trial notice requesting payment, otherwise failure to do so and provided that the debtor pays the debt within seven days before the commencement of the trial will prevent the creditor from being reimbursed for legal costs incurred.

Depending on the complexity of the case and the cost of the claim, the legislation provides for the following options for judicial debt collection:

1. Approval of a settlement agreement at the trial stage. This option is applicable if the court considers that the circumstances of the case allow the dispute to be resolved through reconciliation of the parties. As part of this procedure, the court explains to the participants in the case the provisions of the current legislation and the conclusions of the Supreme Court on this category of cases, after which it offers to use the opportunity for a peaceful resolution of the dispute. If the parties agree, they enter into a settlement agreement, which is approved by the court and has the force of a final court decision.

If it is subsequently determined that such a settlement agreement is invalid under substantive law, then the interested party may initiate the issue of canceling the agreement. In this case, the established period for canceling the agreement is three years from the date of its approval.

2. The procedure for issuing a payment order (“Platební rozkaz”) is applicable to undisputed claims of the creditor. After filing an application, the court can consider the stated claims within the framework of this procedure even without the creditor’s request for this and without calling the defendant. As a result of considering the application, the court accepts a payment order, in which it orders the defendant to satisfy the requirements in full within 15 days from the date of its delivery or to submit an objection within the same period. If the defendant does not raise objections within the specified period, the payment order acquires the force of a final decision. If the debtor raises an objection within the specified period, then the payment order is considered invalid and the case is subject to consideration in a standard lawsuit proceeding.

3. The procedure for issuing an electronic payment order (“Elektronický platební rozkaz”) is applicable for cases with a claim value of no more than CZK 1,000,000 and provided that the application is submitted electronically. Otherwise, this procedure is similar to the procedure for issuing a regular payment order.

4. The procedure for issuing a European payment order (“Evropský platební rozkaz”) is applicable to cases of undisputed monetary claims between parties from European Union countries (except Denmark). The claim price for this procedure must not exceed 5,000 euros. To obtain a European payment order, you must fill out a standard application form and submit it to the court. The court accepts the payment order in closed session and sends it to the debtor, after which the debtor has 30 days to file its objections with the court. If the debtor files an objection, the court summons the plaintiff to hear his position on the case and, if it considers the objection to be justified, cancels the payment order. In this case, the case must be considered in accordance with the standard procedure. If the debtor does not submit any objections to the court, the payment order acquires the force of a final decision. The European Payment Order is recognized in all EU member states (except Denmark).

5. Standard lawsuit proceedings are applicable for cases in which the debtor disputes the payment order or when it is initially obvious that the creditor’s claim is controversial. This process is carried out through a trial where the parties are summoned to inform their positions on the case. The total period for consideration of the case at this stage ranges from 9 months and depends on the amount of evidence that needs to be collected and examined. As a result of the consideration of the case, the court makes a decision on the case (“Rozsudek”), which comes into force within 15 days from the moment it is served on the party in the case, provided that it is not appealed. In the decision, the court sets a deadline for fulfilling the requirements specified in it; if a deadline is not set, then by default it is considered that the decision must be fulfilled within three days from the moment the decision enters into legal force.

One of the parties to the dispute that is not satisfied with the decision of the court of first instance has the right to appeal it on appeal within 15 days from the date of receipt of the decision. The period for consideration of an appeal is 4-12 months. The final decision of the appellate court may be appealed by filing an extraordinary appeal to the Supreme Court within two months from the date of service of the decision on the appellant. However, an extraordinary appeal can only be filed if the decision of the appellate court was made based on an incorrect legal basis. The law does not allow appeals against decisions of courts of appeal in cases with a claim value of less than CZK 50,000.00.

After receiving a final court decision, if the debtor refuses to voluntarily comply with the court decision, a petition for judicial enforcement of the decision must be filed with the court, after which the court enforces the decision. As part of the judicial enforcement of a decision, the creditor’s claims can be satisfied by writing off funds from the debtor’s accounts, seizing the debtor’s movable and immovable property with their subsequent sale, selling the enterprise, or imposing a judicial mortgage on the real estate.

If the enforcement proceedings did not lead to positive results and the debtor is unable to fulfill his monetary obligations within three months, the creditor has the right to initiate bankruptcy proceedings for the debtor. This procedure provides for the possibility of bringing the head of the company to additional liability for the company’s debts, provided that such head did not file a statement of insolvency of the company with the court within the allotted time frame. In this case, the court may recover from the head of the company the difference between the amount of the creditor’s claims and the amount that the creditor received during the debtor’s bankruptcy process.

In addition, the legislation provides for alternative options for holding the owners of the debtor company accountable for the company’s debts. For example, if the owner of a company declared the authorized capital in a certain amount, but did not contribute it, then the creditor can recover funds from such owner in the size of the amount not contributed to the authorized capital.

If the debtor was unable to pay the debt due to a certain influence of the controlling person on the business activities of the company, then the creditor can also initiate the issue of holding such controlling person liable for the company’s debts. However, in practice, it is extremely difficult to prove in court the existence of such influence or control.

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

# DEBT COLLECTION AGENCY CZECH REPUBLIC

24.07.2024

1300