Protection of the Debtor after the Latest Amendments to the CPC or Are We Witnessing the End of the Favored Position of Banks within Ordinance Proceedings

With the promulgated in the State Gazette (SG) no. 86 of October 27, 2017 recent amendments to the Civil Procedural Code (CPC), accompanied by a broad media response and confronted with controversial views in the legal environment, the legislator took important steps towards ensuring a stronger and more adequate public protection of debtors. But only time and practice will show how far these changes to the CPC are appropriate to achieve the goal set and how much they will reassure the long-term tensions between large corporate creditors and their debtors. We are also about to see whether these changes in the CPC, welcomed by debtors, will not affect the availability of credit to citizens and businesses or, to put it another way, to lead to “tightening lending”, which in the long run like a boomerang will come back to the same citizens and businesses, depriving them of the necessary credit, and hence lead to delay in the economy as a whole.

And if the social, economic and political consequences of the latest amendments to the CPC in the future can still be hardly predicted to date, then the specific legal analysis of the changes is not only possible but also necessary for their further reflection in social, economic and political aspects.

This article focuses on a specific part of the new aspects of the Civil Procedure Code concerning the ordinance proceedings and, in particular, the ordinance proceedings on the basis of a document and the thereto issued writ of execution. The specific change referred to below for this proceedings is likely to block the faster procedure through which creditors who are currently using it (in a larger number of cases – banks) have so far collected their claims from their debtors, thereby this change depriving the existence of such proceedings of any sense at all.

Without this material aiming in any way to serve as a handbook for unscrupulous bank debtors on how to prevent banks from benefiting from the privileged position the law gives them, this material aims to illustrate how the legislator with recent changes to the CPC has actually helped that – encouraging the debtor to hide from his creditor, because he thus takes away the ability of his creditor to collect his claim within a short time.

How will this happen in full compliance with the amended CPC? A parallel look at the old, on the one hand, and the new version of the CPC, on the other hand, gives a clear answer to this question.

Both according to the recent and according to the new version of the Civil Procedure Code, pursuant to Art. 417, item 2 in connection with art. 418 CPC banks are allowed only on the basis of an extract from their accountancy books to obtain a writ of execution of the claim they have against their debtor.

Under the old version of the CPC, this order for immediate execution and the thereto issued writ of execution proceedings consisted of the following successive steps: first, the bank would file an application for immediate enforcement order and a writ of execution before court. After their issuance, the creditor-bank would initiate an enforcement case before a bailiff. The latter would then serve the court order to the debtor who, within two weeks after receiving it, could lodge a blanket objection against the execution order, in which case the court would instruct the creditor-bank to defend its receivables by filing a court claim. In cases when the debtor could not be found at the address indicated by the bank or at his permanent or current address, the bailiff would stick a formal message at the address of the debtor with which the debtor was asked to receive the execution order from the bailiff office within two weeks as of the moment of sticking the message-invitation. If the debtor did not appear to have received the execution order within this period, the order was deemed to have been duly served as of the expiration of that period, from which time the two-week period for the objection to the execution order began to run. On the expiry of that period, the execution order entered into force, whereby the ability of the debtor to defend himself against it and against the enforcement proceedings against him was significantly limited to certain exhaustively listed legal hypotheses. Meanwhile, regardless of whether the debtor had filed an objection against the issued order for immediate execution, the enforcement case initiated on the grounds of the writ of execution issued against him was not suspended, except in rare cases.

In other words, in its old version, the CPC in practice told the debtor that his concealment and impediments to personal receipt of the execution order issued against him would not only help him with nothing but, on the contrary, would aggravate his situation by significantly limiting his legal options for protection against the creditor-bank.

In its new version, however, the CPC has radically changed its message to the debtor. Similar to the previous regulation, the amended CPC also states that after acquiring the immediate execution order and the thereto belonging writ of execution, the bank will again refer to a bailiff for serving the execution order to the debtor. Upon receipt, the latter will again be able to file a blanket objection within two weeks, in which case the court will instruct the creditor-bank to defend its receivables by lodging a court claim. Differences in the new regime arise in cases where the debtor cannot be found at the address specified by the bank or at his permanent or current address. Similar to the previous regime, in such cases the bailiff will again stick an official message-invitation at the address of the debtor, indicating that the debtor can receive the execution order within two weeks as of the moment of sticking the message-invitation. If the debtor fails to appear in the office of the bailiff to receive the execution order within this time limit, the order will be deemed to have been duly served as of the expiration of that term, but, instead of (as it used to be until now) start of the two-week time limit for the submission of an objection by the debtor against the execution order, depending on which the bank would have to defend its receivables within court claim proceedings, under the new CPC regime the court will directly instruct the bank to lodge court claim for its receivables and, more importantly, the court will of its own motion suspend the execution under the performance case against the debtor. Thus, if the debtor is sufficiently coherent to hide and not receive personally the execution order from the bailiff, the bank ability to collect its receivables before establishing and proving these undoubtedly in the lengthy, cumbersome and costly procedure of the court litigation is practically blocked.

In other words, in its new version the CPC in practice tells the debtor that hiding and hindering the personal receipt of the execution order against him is the best way to protect himself against the creditor-bank.

With this changed CPC, there is a great risk that the ordinance proceedings, which was originally created by the legislator as a quicker and cheaper procedure for the settlement of uncontested or controversial but documentarily proven claims, would be deprived of any common sense. We have yet to find out whether creditors will continue to benefit from this procedure, given that with the changes to the CPC, mere absconding of the debtor will easily block the realization of their claim within a reasonable timeframe, and will always put it in the stack of the long, cumbersome and expensive court litigation defense.