Sending a payment demand letter in the form of a notary or registered post invitation for voluntary payment to a debtor in Bulgaria is an out-of-court settlement procedure which is not mandatory but is a common and widespread practice. Very often Bulgarian individuals or legal entities, but also foreign ones residing in Bulgaria, owe debts to foreign citizens or companies from all around the world, from the USA, the UK and Western Europe to China, Russia and Ukraine. And in such situations foreign creditors look for ways to effectively collect their takings from their debtors in Bulgaria.
The first step for successful debt collection in Bulgaria is to establish that the debtor is located or has assets in Bulgaria (real estates, bank accounts, etc.). If they have doubts or suspicions, foreign creditors usually trust Bulgarian lawyers who have negotiation and litigation experience as well as full access to all kinds of public registers and private sources of information from which they can establish the residence and assets of an individual or company. Establishing these facts provides a solid foundation on which to build in order to effectively collect monetary debts.
If the debtor is located in Bulgaria before being taken to court and sued, other legal options are also available. The first one is the payment demand letter to the debtor in Bulgaria, whether Bulgarian or foreign citizen or company. Such payment requests can be in the form of a letter with acknowledgement of receipt or a notary invitation, which is the safest bet. The invitation for voluntary performance demonstrates the creditor’s willingness to settle relations with the debtor without going to court and initiating a lawsuit. The latter is not obliged to respond to the payment demand letter, but very often does so and sets out his view of the relationship with his creditor, which in turn increases the chances of reaching an out-of-court settlement for voluntary payment. However, if he does not respond, it may be that he does not reside at his known address, which would make it much quicker and easier to win a court case trial against him.
However, many foreign creditors complain that their debtors are hiding in Bulgaria. If the debtor behaves in such bad faith, the creditor can expect that effective enforcement will be hindered, including the concealment or disposition of assets to the detriment of the creditor, so that the creditor cannot collect its takings. In such scenarios, an available legal option is the securing of the creditor’s future claim by injunction order. This is essentially an order by a judge, ruling that the debtor’s bank accounts should be seized and frozen, so that he cannot empty his bank accounts, or foreclosure of his real estates, so that he cannot sell his properties when he finds out that he is being sued and litigation proceedings have been initiated. This is an extremely effective weapon against unscrupulous debtors that any creditor can use.
With or without prior liens, a creditor can authorize a Bulgarian solicitor to file a lawsuit against the debtor on his behalf. There are several main types of court trial proceedings, one of which is fast track and can result in the procurement of a writ of execution and the effective collection of amounts owed by a public bailiff or private enforcement agent within just a few months. Commercial court cases, where either the plaintiff or the defendant must be a Bulgarian or foreign commercial company, are also dealt with more quickly. Normally, a litigation case in the first instance district or regional court takes about a year. The state fee payable to the court varies between 2% and 4% of the amount claimed by the plaintiff. If the amount claimed by the creditor is too large, a claim can also be brought for only part of the amount, the so-called partial claim. It is important to note that all costs, including attorney’s fees, are awarded in addition to the amount claimed by the claimant and thus, in practice, the Bulgarian attorney’s fees remain on account of the debtor.
Once the lawsuit has ended with a final court judgment, the next stage is the collection of the amounts awarded by court. This can be done either voluntarily or by compulsory order. Enforced debt recovery in Bulgaria involves the assistance of a public or private bailiff, who are empowered under Bulgarian law to enforce the collection from debtors of amounts that have been awarded by the court and for which a writ of execution has been issued. The bailiff has full access to all possible sources of information, including those which are intended for internal use by public authorities only, and from there can make a comprehensive investigation of the debtor’s assets and satisfy the creditor’s takings from various sources. The bailiff sends to the debtor a summon for voluntary payment, but before that, in order to surprise him, he may impose preliminary measures such as seizure of bank accounts, injunction of immovable property, etc. It is permissible for a solicitor to whom the creditor has signed a power of attorney to represent his interests before the bailiff, and the attorney’s fee for representation in the debt collection proceedings is again on the debtor’s account.
If the debtor is extremely unscrupulous, there is a possibility that he may have deliberately disposed or hidden his assets to prevent his creditor from being satisfied. In such cases, it is perfectly acceptable to take a legal action for rescission or annulment of a property or other transaction (e.g. if the debtor has sold, donated or otherwise transferred his property), as a result of which the property reverts to the debtor’s ownership. And the creditor sells it at public sale with the help of a bailiff and satisfies the claim of the creditor. There are other similar private cases with which Bulgarian litigation lawyers are well acquainted and which are a good idea to consult in case of problematic or practically impossible to collect claims.
Another private case involves the recognition and enforcement of a foreign court judgment or arbitral award in Bulgaria. It is perfectly legal for a judgment, e.g. given in the UK by a British court against a Bulgarian defendant, citizen or a company with its registered office and registered address in Bulgaria, to be formally enforced in Bulgaria. For this purpose, an additional step of recognition of a foreign judgment in Bulgaria, the so-called exequatur, must be passed. It takes place before a Bulgarian court which recognises the foreign judgment and allows its enforcement in Bulgaria. When the judgment is granted in an EU country, exequatur proceedings are not necessary because judgments of European courts are directly enforceable and recoverable in Bulgaria.