Collecting Commercial Receivables: Enforcement Proceedings and Annulment of Objection Lawsuits

The most common route for collecting commercial receivables is enforcement proceedings without a judgment. The proceedings start with the creditor’s application to the enforcement office and a payment order is served on the debtor.

The Debtor’s Objection

The debtor may object to the debt within seven days of service of the payment order. A timely objection halts the proceedings, and the objection must be removed for the creditor to continue.

Removal or Annulment of the Objection

If the creditor holds documents of the kind listed in the Enforcement and Bankruptcy Law, it may ask the enforcement court to remove the objection. Otherwise, an annulment of objection lawsuit may be filed before the general courts within one year of notification of the objection. For commercial receivables, mediation must be attempted before this lawsuit.

Compensation for Bad-Faith Denial

If the objection is found unjustified and the claim is liquid, the court orders the debtor to pay compensation of not less than twenty percent of the claim. This acts as a deterrent against unjustified objections.

Practical Tips

Keeping invoices, contracts, purchase orders and delivery documents in order, obtaining periodic account reconciliations and using precautionary attachment where needed significantly increase collection success.