The debt collection process in Serbia is relatively straightforward and can be effectively carried out with the appropriate legal guidance and support.
It is not a very uncommon situation where one party is deprived of financial compensation for their rendered services or delivered goods. Debt collection can be carried out through either out-of-court or court proceedings, depending on various circumstances. Many creditors perceive the process of recovering receivables as complex and therefore hesitate to initiate it, often leaving their claims unprotected. In this guide, we will walk you through the entire debt collection procedure and clarify any uncertainties you may have.
Out of court procedure of debt collection in Serbia
When it comes to debt collection in Serbia, out of court settlement is the most efficient way of debt recovery. This procedure consists of few main steps:
1. delivering warning letter to debtor;
2. negotiations with debtor;
3. conclusion of the settlement agreement and payment of debt.
This is actually the fastest and most efficient way of collecting debt, as you are not initiating court proceedings (which consider some previous steps for their initiation, as we will be explaining below). To ensure that the process runs smoothly and that negotiations with the debtor are handled appropriately, you may consider hiring a law firm specializing in debt collection.
Initiating enforcement proceedings
Judicial debt collection comes into play when the debtor fails to settle their obligation after receiving a warning notice and the expiration of the deadline stated within it, or when it becomes evident from the debtor’s behavior that they do not intend to fulfill their obligation. In such situations, the creditor has the right and option to initiate enforcement proceedings to recover the debt through legal channels.
The enforcement process involves several key steps, but in this case it would be necessary for a foreign creditor to open a non-resident bank account in Serbia, in order to receive collected funds on that account. While this process might seem complex, having legal support with bank account opening can make it much more straightforward.
Another necessary step in this procedure is sending a warning letter to debtor and leaving debtor with some deadline to fulfill its obligations. In case debtor fails to act upon warning letter, next step would include submitting a proposal for initiating enforcement proceedings to the competent court.
Litigation phase
It is important to be aware that, in case debtor files objections against the decision on enforcement, enforcement proceedings are turning into litigation phase. This means that the further process will continue as civil litigation during which several actions will be conducted. That includes attendance at the hearings, presenting evidences by creditor and debtor, examination of witnesses and finally, issuing court decision. If it comes to this phase, those proceedings may slightly last longer and involve some additional steps – as mentioned: hearings, providing court with additional evidence and in some case engaging expert witness for issuing opinion (for example if the other party disputes the amount of the claim and requests that this evidence be presented).
After conclusion of such litigation proceedings, the court may decide to continue enforcement proceedings, in which case settlement of debt will be conducted through previously initiated enforcement.
Costs associated with enforcement proceedings
As for the costs related to initiation of enforcement proceedings, it is important for creditor to know that all costs shall be borne by debtor. Therefore, all costs related to court fees, costs of enforcement proceedings as well as lawyer’s fees shall be paid by the debtor. However, creditor must first advance the costs in order for the enforcement procedure and the collection of the principal debt from the debtor to be carried out. Subsequently, upon the creditor’s request, the debtor may be ordered to reimburse all costs incurred in connection with this procedure.
How long will it take for creditor to collect debt?
Serbian law provides for very short deadlines in enforcement proceedings ensuring that the debt collection process is completed in a short period of time. Of course, it is necessary for creditor to act promptly, in order to avoid statute of limitation, since once the statute of limitation has expired, the creditor loses the right to demand fulfillment from the debtor. For this reason, it is strongly recommended that the creditor responds without delay if the debtor misses the payment deadline stated in the invoice or another supporting document.
In conclusion, the debt collection process in Serbia is relatively straightforward and can be effectively carried out with the appropriate legal guidance and support. To minimize the risk of non-payment, it is highly recommended that creditors enter into a written agreement with the debtor before commencing any business relationship. Such agreements provide greater legal certainty, clearly define the obligations of both parties, and allow for the implementation of various security mechanisms to ensure payment. Nevertheless, if the debtor repeatedly fails to meet their obligations, creditors still have legal options available to recover their claims, with the assistance of a legal professional experienced in debt collection.
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