How to Recover an Unpaid Debt: Steps and Debt Collection in Lithuania

Introduction

Every creditor can face a situation where the debtor delays or refuses to repay the debt. Unpaid debts can cause significant financial hardship for both individuals and businesses. However, there are several ways to legally recover a debt in Lithuania.

Unpaid debt can cause serious problems, from a lack of liquidity for a business to personal financial problems. Businesses may not receive the necessary funds to continue their operations, and private individuals may experience stress and lose confidence in lending in the future.

In Lithuania, there are several effective ways to recover debt legally:

1. Mediation

2. Judicial award of debt

3. Enforcement proceedings before the bailiff

4. International recovery process (if applicable)

How the Court Proceeding (Debt Recovery in Lithuania): Steps to Recover the Debt

Before filing the case in court

Notice of debt

It is advisable to send the debtor a formal debt notice (notice of unpaid debt) before filing a lawsuit to collect the debt. This helps inform the borrower of the intention to take legal action if the debt is not repaid. Such notification may encourage the debtor to pay the debt in order to avoid court proceedings. If you have a promissory note, special rules apply to them, and it is important not to miss the statutory deadlines.

Negotiation and mediation

If the debtor does not respond to the notice or disputes the debt, negotiation or mediation may be helpful. Both parties must agree to mediate the dispute, and it is free of charge in court. Mediation is an alternative dispute resolution method in which an independent mediator helps the parties reach an agreement. This is a quick and cheap way to resolve a dispute without going to court. The advantage of mediation is confidentiality and the ability to maintain good relations with the debtor.

Judicial award of debt

If pre-trial collection, negotiations or mediation do not help, a judicial debt award process follows. A claim or statement can be filed through the EPP system, and the file will be electronic, saving time for parties and representatives. There are several ways to do this:

Application for the issuance of a court order

If the debt is small and the debtor does not dispute its existence, an application for a court order can be filed. It is the cheapest, simplified and fast process in which the court issues an injunction without a full hearing. If the debtor does not agree with the issued court order, the case, after the plaintiff has paid the stamp duty, goes to the court of dispute and is examined in the usual manner. It is important to serve the court order on the debtor, otherwise the court order will not take effect.

Documentary process

When you have enough written evidence, you can go to court through a documentary process. It is also a quick way to get a court decision because there is no need for an oral hearing – the court makes a decision based on the admissible evidence presented. This process is cheaper, but the documents must be served on the defendant, so you need to know his address. In addition, the claim can only be satisfied in full by the procedure of the documentary process. If the court sees deficiencies or that the claim cannot be satisfied, the dispute will be referred to the normal process.

Law of dispute

If the debtor disputes the debt or the case is more complicated, the court process takes place in the dispute legal procedure. It is a detailed trial that includes court hearings, oral hearings, questioning of trial participants, examination of evidence, arguments and closing arguments. After covid, if it is not possible to attend the court live, it is possible to request that the hearings be held by video conference, where the participants in the process connect via the zoom app. Lately, it happens that the court does not satisfy the requests to consider the case remotely, but we believe that the parties should be given the opportunity to participate in the case remotely. The adopted court decision can be appealed to the court of appeal or cassation instance, which usually takes place in written procedure and takes time.

In the dispute legal process, documents can be served to the defendant by way of public announcement. In addition, if the defendant does not submit a response or other preparatory documents within the deadline set by the court, the court has the right, if there is a request from the plaintiff, to make a default judgment. The debtor may not appeal such a decision, but may submit a statement for review of the decision in absentia.

peace treaty

It should be noted that at any stage of the process, both when examining the case in court and during the enforcement process, in order to ensure debt recovery in Lithuania, the parties can enter into a settlement agreement and end the dispute peacefully. A settlement agreement can restructure the debt, create a new repayment schedule, or make other concessions in order to reach an agreement. In order to take effect, the settlement agreement must not violate mandatory legal norms, not be contrary to good morals, and must be approved by the trial court or bailiff if the case has already reached the enforcement stage.

Enforcement of court decision

After receiving a court decision or a court order, but the debtor still does not pay the debt, the process of enforcing the court decision follows. After the decision has taken effect, the creditor has the right to apply to the court for the issuance of a writ of execution. This letter is usually issued in electronic form.

The creditor can apply to the bailiff through the www.antstoliai.lt system and submit a writ of execution. The creditor must pay the necessary enforcement costs, which are recovered from the debtor. The bailiff takes enforcement actions and can seize the debtor's property, bank accounts or use other enforcement measures to collect the debt. Difficulties in seeking a debt may arise if the debtor:

• hides assets;

• enters into transactions for its transfer;

• does not work;

• does not have property or the property belongs to the common joint property of the spouses;

• has left Lithuania, etc.,

however, even in these situations, there are ways to help you collect the debt.

If you are faced with an unpaid debt, the first step should be to contact professional lawyers. The Zabulis Legal law firm specializes in disputes and debt collection and has accumulated valuable experience, especially in the field of consumer credit and working with financial institutions. Since 2016 we represented more than 1,550+ civil cases in which our clients were awarded more than EUR 5mn+ . We have represented professional creditors in various situations, so we are well versed in the civil and enforcement process. Our experts will help you choose the most appropriate way to recover the debt, take care of all the necessary documents and represent your interests both during mediation and judicial process, enforcement and, if necessary, during the international recovery process.

Contact Zabulis Legal for help

Unpaid debts can be a big concern, but with the help of professionals, this problem can be solved efficiently and quickly. Contact us and let Zabulis Legal lawyers take care of your debt collection process. Our goal is to ensure that your claim is defended and your financial interests are protected.