Securing of a future claim
How can you prevent your debtor from hiding assets?
Practice shows that it is not rare for a creditor to initiate a lawsuit against a debtor that lasts for years. Fortunately, the court of last instance rules that the debtor must pay the amount. However, when the creditor commences an enforcement action, it turns out that the debtor - individual or company - has alienated its assets (or had none at all) - i.e. the enforcer has nothing to sell to repay the unpaid debt. In this case, the judgment is not only useless because the creditor cannot be satisfied, but the creditor has even suffered additional damages in the form of court and attorneys' fees.
Procedural law has a mechanism to prevent such an outcome. This is the so-called "securing of a future claim". The law allows a creditor, even before filing a claim, to ask the court to "block" the debtor's assets, which, if the future claim is successful, will then serve to satisfy the claim. A garnishment of the debtor's bank account or motor vehicle or a foreclosure of a real estate, etc., may be requested.
The most significant characteristic of these proceedings is that the debtor does not become aware of the creditor's request and of the garnishment or foreclosure until they have already been implemented on his property. Thus, the debtor does not have the time and opportunity to conceal his property, for example by withdrawing his money from the bank or fictitiously selling the real estate to someone else.
As is understood, this constitutes a very serious interference in the legal sphere of the debtor - and it is carried out without a final judgment against him. The law therefore imposes requirements on the creditor willing to use this remedy.
In order to allow the claim to be secured, the court must be sure that without the securing it would be difficult or even impossible for the creditor to receive satisfaction of his claim. Indicators of this may be, for example, other pending cases against the same debtor, evidence of the debtor's deteriorating financial situation, etc. Next, the application for securing must be accompanied by convincing documentary evidence that the claim is likely to have merit. The law states that security may be granted even in the absence of such evidence, but upon the provision of a monetary guarantee by the creditor. However, in their practice, the courts too often require both: convincing documentary evidence and the payment of monetary guarantee.
The requirement of a monetary guarantee, on the one hand, is intended to prevent abuse by unscrupulous persons who would use the security proceedings only to block a company's business by bringing an unfounded claim. The need to invest resources in such abuse would discourage some of those persons. On the other hand, security is granted without there being a final judgment recognising the creditor's claim as valid. Therefore, it is quite possible that the person whose bank account is blocked, for example, does not actually have a debt or that it has been duly paid. In that situation, that person needs to be compensated for the time during which his or her assets have been wrongly blocked. The paid monetary guarantee would serve namely for the compensation of such damages.
Once the court allows the securing of the claim and the debtor's assets are blocked, the creditor is given a period of time in which he shall file his claim. This period is no longer than 1 month and if no action is brought during this time, the court shall of its own motion annul the securing.
If a lawsuit is filed and the creditor wins, then the blocked property (cash, real estate, etc.) is used by the enforcer to satisfy the claim. In addition, the creditor has the right to ask the court to reimburse the guarantee paid at the beginning of the securing proceedings. Since his claim was well-founded, the request for security was also well-founded and did not lead to an undue restriction of the debtor's rights. The guarantee would therefore not be necessary to compensate for damages.
It should be emphasised that the preparation and conduct of successful securing and subsequent action proceedings can only be carried out by a qualified lawyer who is familiar with the specifics of the legislation and the case law. Therefore, if necessary, do not hesitate to contact me for advice and assistance in such matters.
This article expresses a personal opinion of the author, which clarifies principle and hypothetical positions - i.e. the positions expressed should not be considered applicable in every particular case. Therefore, the text does not constitute and should not be construed as legal advice. If you require such advice, you may contact me at [email protected] .
