Methods of Debt Recovery in Georgia
At present, there are two methods of debt recovery in Georgia: the simplified procedure conducted by the National Bureau of Enforcement and judicial proceedings.
Simplified Procedure
The simplified procedure, offered by the National Bureau of Enforcement, enables disputes related to non-fulfilment of monetary obligations to be resolved without court proceedings, ensuring a faster, more efficient, and cost-effective process.
To initiate the simplified procedure, the applicant must submit:
- An application (the application form is available on the National Bureau of Enforcement’s website);
- Documentation confirming the existence of the debt.
Upon receiving the application, the National Bureau of Enforcement directly notifies the debtor, outlining the negative consequences of non-payment should the matter proceed to judicial proceedings.
Within 10 calendar days from the receipt of the notification, the debtor has the right to choose and undertake one of the following actions:
- Fully repay the debt to the applicant;
- Partially settle the debt if they consider the claim to be partially justified;
- Submit a written objection to the claim if they disagree with it;
- Acknowledge the claim in full in writing if they consider it justified;
- Partially acknowledge the claim in writing if they believe it is partially justified;
- Submit a proposal for settlement if they wish to negotiate repayment terms with the applicant.
Case managers from the National Bureau of Enforcement will assist the parties in the settlement process. The procedural aspect is initiated by the debtor (respondent) by submitting a reconciliation request. The case manager then initiates the reconciliation process, facilitates negotiations, and monitors compliance with the terms of the settlement agreement.
The application fee for a claim based on a single legal ground is fixed at 200 (two hundred) GEL. In cases of joint liability, where the claim is filed by more than one applicant and/or against more than one respondent, the registration fee is 200 (two hundred) GEL per person.
If a payment order is issued or the debtor fails to comply with the settlement terms, the applicant may request enforcement at any stage of the proceedings. For this, a security fee of 2% of the claim amount must be paid, which is refundable upon enforcement. Additionally, the applicant may request interim measures on the debtor’s assets, which incurs a fee of 100 GEL per asset.
Judicial Proceedings
One method of debt recovery is to initiate court proceedings. It should be noted that the general statute of limitations for claims is 10 years, whereas the limitation period for contractual claims is three years.
In Georgia, debt recovery proceedings fall under the jurisdiction of the Civil Chambers of City/District Courts. As per Article 16(2) of the Civil Procedure Code of Georgia, claims arising from contractual relations must be filed at the place where the contract was performed or was to be performed.
The court is obliged to notify the debtor of the hearing in accordance with the law. If the debtor fails to appear without a valid reason, the court may issue a default judgment at the claimant’s request.
A party dissatisfied with the decision of the first-instance court has the right to file an appeal within 14 days of the decision. However, if the debt amount does not exceed 2,000 GEL, an appeal is not permitted. Appeals are considered within six months. The decision of the Court of Appeal may be challenged before the Supreme Court of Georgia within 21 calendar days of its issuance. If a cassation appeal is filed, the enforcement of the decision is suspended. Cassation proceedings in the Supreme Court also take no longer than six months. The Supreme Court’s decision is final and not subject to further appeal.
The court decision becomes enforceable after all judicial stages are completed, provided no appeal has been filed. However, the law allows parties to agree in advance that the first-instance court’s decision will be enforced immediately without awaiting the final verdict.
Once the decision has come into force, the creditor must obtain an enforcement document and submit it to the enforcement bureau. A state fee of 2% of the debt amount is charged for initiating enforcement proceedings, which is subsequently refunded to the creditor upon completion of enforcement. The enforcement document remains valid for five years. If the creditor is a foreign entity, it should be noted that the debt will be recovered exclusively in Georgian Lari. To facilitate this, a Georgian bank account must be opened, or a representative must be authorised to collect the recovered sums from the enforcement bureau. Without this, enforcement proceedings cannot be initiated.
If, within two years of the commencement of enforcement proceedings, the debt cannot be recovered due to the debtor’s lack of assets, the enforcement order is returned to the creditor. In this case, all enforcement measures are revoked, and the statute of limitations is suspended until new enforcement proceedings are initiated for the same case.
If the debtor is a business entity and is unable to fulfil its obligations, bankruptcy proceedings should be considered. Insolvency is defined as the inability of the debtor to meet due creditor claims. A creditor may initiate bankruptcy proceedings if at least two court decisions have been issued against the debtor for a total amount exceeding 50,000 GEL or if the debtor’s obligations to the creditor exceed 30% of all outstanding claims. The bankruptcy process may include the annulment of transactions that have harmed creditors, such as preferential treatment of one creditor, disposal of assets at an undervalued price, or debt forgiveness.
In certain cases, if the debtor’s actions cause harm to creditors, criminal liability may apply to company officials or the debtor under Article 3772 of the Criminal Code of Georgia for non-compliance with a court decision.
Author: Iashagyan Oksana
REVERA law group lawyers prepared a guide on debt collection in Belarus, Uzbekistan, Kazakhstan and Poland. If you have any questions - write to us.
Contact our legal team to learn more
Write to lawyerDear journalists, use of material from the REVERA website in publications is only possible with our written permission.
To approve material, please contact i.antonova@revera.legal or Telegram: https://t.me/PR_revera
