On 30 July 2014, the new Act Amending the Enforcement and Securing of Civil Claims Act (hereinafter: the ZIZ-J) entered into force with the aim to improve the situation in enforcement proceedings and increase their effectiveness.
The amendment brings numerous new solutions, the most significant of which is definitely the new regulatory framework for the attachment of real estate, which allows creditors to select the sales method and thus achieve higher proceeds or faster sale. Moreover, it enables the creditors to challenge the land debt successfully based on the public disclosure of the identity of the land debt holder. With the introduction of a special notification proceeding, the court will now summon the holders of land debt to submit to the court the personal data within a period of three months and to hand over the original of the land debt certificate. Otherwise, a presumption arises that the holder of the land debt certificate is in fact the owner of the real estate. The amendment stipulates that despite the expiry of the deadline specified in the Code of Obligations, a debtor's legal acts connected with the establishment or transfer of a land debt may be challenged by way of a lawsuit if a creditor or another person contests them no later than at the distribution hearing.
If the creditors wish to repay their claims from the proceeds, which were acquired from the sale of the real estate, on which a mortgage had been registered in their favour, they need to actively participate in the enforcement proceedings. The amendment imposes a duty on the creditors to register their claims no later than at the distribution hearing. Pledgees who fail to register their claims on time during enforcement proceedings, do not lose their claims that they hold against the debtor, however they lose their mortgage on the real estate in question, thus losing their entitlement to be repaid from the value of precisely that (pledged) real estate. More details on the amended attachment of real estate are given in our article "Proposed amendments to attachment of real estate".
According to the previous regime, in the event of the debtor's insolvency, the creditors proposed the suspension of the enforcement when they wished to prevent the completion of the enforcement proceedings due to the unsuccessful enforcement with specific means of enforcement. For this purpose, the court served the notice of suspension of the enforcement proceedings to the debtor and set a deadline, within which the latter had to express its view on the suspension. If the enforcement officer had already taken the matter under review, the creditor had to file the motion for a suspension with the enforcement officer, who sent the creditor's proposal to the debtor for a reply. In practice, such acquisition of a reply from the debtor was time consuming, therefore in order to accelerate the process the amendment introduced a solution, where the creditor who proposes the enforcement suspension has to obtain the debtor's consent to the enforcement suspension. According to the new regulatory framework, a court will now suspend the enforcement that was already initiated, if the creditor who proposes the suspension submit to the court a document that demonstrates the debtor's consent to the suspension. However, in the event of attachment of real estate, the creditor will have to present also the written consent of all creditors, at the request of which the attachment of real estate had been permitted. A creditor may propose an enforcement deferral only once and for a maximum period of one year. If a creditor proposes a suspension that goes beyond one year, the enforcement is terminated; the creditors retain their pledge on the subject of the enforcement, while the court does not invalidate the notice of the enforcement order in the land register or companies register or the already completed seizure of movable property. This ensures the protection of creditors’ rights by way of a mandatory pledge, which provides the latter the possibility to propose enforcement again within the scope of the statute of limitations.
According to the previously applicable legislation, a creditor in the event of unsuccessful seizure (if items that could be subject to enforcement were not found, or if the seized items were not sufficient to repay the creditor's claims) had to submit the proposal for additional seizure within three months of the first seizure, otherwise the enforcement was terminated. The amendment imposes the above-specified obligation on creditors, also in cases when an enforcement officer fails to perform the seizure due to the absence of the debtor or when the debtor refuses to open the premises.
The mandatory termination of the attachment of salary and other steady income has also been introduced, if the debtor one year prior to or one year after receiving the enforcement order receives no seizable income derived from earnings or other sources of steady income.
The amendment also lowers the protected sum, which cannot be subject to attachment, i.e. from the sum of the minimum wage to 70% of the minimum wage. The debtor must retain at least 50% of the minimum wage in the recovery of claims from statutory maintenance and compensation for the loss of maintenance due to the death of the person on which such payment was imposed. If the debtor supports a family member or other person, who he or she is forced to support by law, the debtor must also retain the sum of the income determined for the person the debtor supports, according to the criteria which is specified by the act governing financial social assistance for the award of financial social assistance. Restrictions also extend to daily allowance (per diems), travel expenses and loyalty bonuses, i.e. to all income related to an employment relationship in a broader sense, as set out in the Personal Income Tax Act. In addition, the above-specified restriction also applies to the so-called administrative prohibition to pay out salary; in cases where a debtor permits a portion of his or her salary to be subject to attachment and paid out to a creditor with the employer's approval. Under the new legislation, in terms of order, the administrative prohibition to pay out salary has a legal effect equal to that of an enforcement order attaching a debtor's earnings, when the debtor’s employer approves this prohibition.
For the protection of child rights and more efficient recoverability of the child support (maintenance) the amendment sets out the absolute priority of the attachment of monetary claims in the repayment of claims from statutory maintenance; i.e. primarily with respect to the attachment of earnings and other sources of steady income and attachment of funds on bank accounts at payment transaction organisations.
According to the new regulatory framework, at the request of a creditor, a third party must reimburse the unjustified costs incurred to the creditor. This is of the utmost importance in cases, when a third party disposes of the appropriate document to register ownership in the land register prior to the registration of the execution order in the land register, but omitted such registration, thereby deceiving creditors in terms of the real estate's ownership, such that they proposed the attachment of such real estate.
The amendment introduces a new type of authentic instrument based on which enforcement proceedings can be allowed. The written pay slip now constitutes an authentic instrument, based on which enforcement proceedings may be initiated.
The previously applicable legislation enabled a creditor to secure its monetary claim with a mortgage on real estate and pledge on movable property. The amendment brings a new means of security, the possibility to obtain pledge on the business share, in addition to the previously available means of security. Based on an enforceable title, which refers to a monetary claim, a creditor is entitled to demand its protection by a pledge on the debtor's business share, which is acquired with the registration in the companies/court register based on a security order.