Steps during the Legal Collection of money debts

1. Demand for payment

The first non-legal step in debt collection is a demand for payment, where the creditor gives the debtor the opportunity to fulfill his payment obligation to the creditor, possibly by stipulating an installment payment.

2. Payment order

If the debtor does not fulfill his/her/its payment obligation as a result of the demand for payment, it is possible to submit a payment order, which is a non-litigious procedure, during which the creditor tries to enforce his/her/its claim with the help of a notary. If the debtor accepts the content of the order for payment or does not object to it within 15 days, it will be legally binding and enforceable.

3. Litigation

However, if the debtor objects to the order for payment within 15 days, the proceedings are automatically turned into litigation, during which the parties have the opportunity to prove whether the claim is lawful and to what extent. An appeal may be lodged against a judgment given at first instance, in which case the case is referred to a judge of second instance, who examines the proceedings and decision of the court of first instance.

4. Legally binding judgment

In the event that a legally binding payment order or a legally binding court judgment arises which obliges the debtor to pay his/her/its debt (or its proportion) to the creditor, the debtor will be obliged to pay his debt to the creditor in 15 days. If the debtor does not comply with this within the given deadline or do not request the possibility of providing an installment payment, the claim will be enforceable.

5. Enforcement proceedings

During the enforcement proceedings, the debtor’s debt is enforced with the assistance of an independent bailiff, who during the proceedings assesses the debtor’s financial situation and leads enforcement on the debtor’s enforceable assets, from which the creditor’s claim will be payed off.

6. Liquidation proceedings

In the event that the debtor is a legal entity and the enforcement is unsuccessful, ie the claim is declared irrecoverable, liquidation proceedings will be conducted, within which the legal entity will be liquidated and the resulting assets will be payed to the creditors.

More details about the payment order

Pursuant to Act L of 2009 on the order for payment procedure, as of 1 June 2010, parties with legal representation and legal entities may submit an application for a payment order exclusively electronically, through the system of the Hungarian National Chamber of Notaries (hereinafter: MOKK) with a qualified electronic signature and a qualified time stamp.

If the amount of the creditor’s claim does not exceeds HUF 1 million, the claim can only be enforced by means of a payment order and the creditor can not start a litigation procedure. If the claim exceeds HUF 1 million, a payment order or litigation can also be chosen.

Order for payment proceedings were subject to the jurisdiction of the courts until the entry into force of Act L of 2009 on the order for payment procedure, where from 1st of June 2010, the Act entrusts notaries to conduct payment orders if the debtors have a place of residence or stay. At the same time, the law stipulates that a party with legal representation and a party of a legal entity may submit a payment order only electronically.

In addition to electronic submission, individuals will still have the opportunity to submit applications on paper or orally, provided that registration in the MOKK system is required even in the case of non-electronic submission.

Thus, order for payment procedures are no longer carried out by the courts on paper, but primarily by electronic means by notaries. As a result of the change, the course of the proceedings has been significantly accelerated, so on the basis of the final payment order, the enforcement proceedings can be started much sooner than before.

If the notarial decision has become legally binding, the creditor may apply for an enforcement procedure. The purpose of the enforcement procedure is that the creditor will have the opportunity to get his/her/its rightful claim back through the enforceable assets of the debtor according to the provisions of Act LIII of 1994 on Judicial Enforcement as soon as possible.

The change in legislation provides an opportunity for the simple and fast mass processing of payment orders, as well as a solution for the development of a full-scale electronic payment order and electronic enforcement service with an appropriate IT background.

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