Debt Collection In Turkey - Ways To Recover Debt Effectively In Türkiye - Arbitration & Dispute Resolution

When parties commit to providing something to each other or performing an action, a debt relationship is established between them. However, expectations and realities do not always align, and debtors may sometimes fail to fulfill their obligations. This leads to the consideration of debt collection, whether it involves money, services, or goods, to ensure compliance with the obligations assumed by the parties. In cases where the debt is about money, the debtor likely has debts to others, and the creditor is racing against time to collect the receivables. This article will examine debt collection through execution proceedings, debt recovery lawsuits, and other collection methods in Turkey, and answer frequently asked questions.

Debt Collection Through Execution Proceeding

In Turkey, the first method to recover debt is debt collection through execution. It is not necessary for the creditor to have a document proving the debt to apply for execution. However, the creditor facing the debtor's objection will need evidence to prove the debt. Evidence can be promissory notes, as well as documents like lease agreements or bank receipts that demonstrate the existence of a rental relationship.

With evidence in hand, the creditor who can prove the debt can apply to the bailiff's office for the collection of the debt. If the debt is based on a document, the eligibility of the parties to participate in the execution procedure is examined. In addition, the execution must meet the conditions set out in the law. For example, execution cannot be carried out on a deceased person, so the heirs of the deceased person will be the party to the execution. If the execution request meets the conditions specified in the law, the bailiff issues a payment order and serves it to the debtor.

The debtor who receives the payment order can object to the execution within 7 days. If there is no objection, the execution becomes final, and the debtor's assets can be seized, and the assets can be sold to satisfy the debt. In case of the debtor's objection, the creditor applies to the court to resolve the objection, and if the objection is resolved, the debtor's assets can be seized for the satisfaction of the debt. If the debt requested through execution is based on a court decision or arbitration the debtor's objection is limitedly reviewed.

Debt Collection Through Lawsuit

Another method for debt collection in Turkey is the lawsuit. Creditors who do not want to initiate execution proceedings before obtaining a court decision or have doubts about the amount and existence of the debt can also resort to this method. In this case, the creditor will submit the lawsuit petition and evidence to the court. After reviewing the documents and confirming that the lawsuit meets the legal requirements, the court serves the lawsuit petition and attachments to the defendant and requests the defendant to respond to the case. The defendant then prepares a response petition and submits it to the court. In simple litigation procedure in Turkey, the petition stage consists of one petition for each party. In cases subject to written trial procedure in Turkey, both parties have the right to submit two petitions.

After the petition stage, the trial moves to the substantive phase, and the requested evidence is collected. This stage includes the collection of evidence, expert reports, and, ultimately, the judge's decision. The decision can be appealed for further review. Once the decision is made, the creditor can either communicate with the other party to collect the debt or, if necessary, enforce the judgment through the bailiff's office.

Other Methods of Debt Collection

In addition to debt collection through lawsuit and execution, there are other methods that creditors can pursue. These methods may include alternative dispute resolution methods such as arbitration and mediation, as well as the assignment of the debt.

Debt Collection Through Arbitration

Parties can agree to arbitration before a dispute arises, or they can choose arbitration after a dispute arises. The selection of arbitration can be made through an additional arbitration clause in the existing contract or a separate arbitration agreement. While it is possible to go directly to arbitration without any agreement, if the other party objects, the dispute cannot be resolved through arbitration.

During the arbitration process, the parties submit their petitions and evidence to the arbitration panel. The arbitrators review the documents, and the parties are invited to a hearing for oral arguments. Arbitration is a faster method of dispute resolution compared to traditional court proceedings, and it resolves disputes relatively quickly. To enforce an arbitration award, an enforceability clause must be obtained from the court, and then the arbitration award can be enforced in the same way as a court judgment.

Debt Collection Through Mediation

Mediation regulations in Turkey are constantly expanding, and various dispute resolution methods are also being included in mandatory mediation. Whether mandatory or voluntary, mediation can be used as a method for debt collection in Türkiye. Parties can apply to a mediator, and the mediator assists the parties in dialogue. In the course of dialogue, the parties can reach agreements regarding the amount, timing, and method of payment, resolving the dispute in the process. Parties who have reached an agreement are likely to adhere to it. In case of non-compliance with the agreement, the creditor can obtain an enforceability clause, and enforce the mediation agreement just like a court judgment.

Debt Collection Through Debt Assignment

Debt assignment involves the transfer of a creditor's receivables to a third party in return for money. The purpose is to quickly collect a portion of the debt by transferring it to a third party. With this method, the creditor does not initiate legal proceedings to collect the debt. However, there is a disadvantage to this method, as the creditor is giving up a certain amount of the receivables. For example, if a creditor has a receivable of 100,000 TL, he may transfer it to a third party for 50,000 TL, and his right to demand the receivable from the debtor comes to an end. The third party that acquires the receivable can initiate legal proceedings against the debtor based on the transferred amount. The debtor cannot object to the debt assignment and must fulfill his obligation to the transferee. Of course, any objections the debtor could have raised against the creditor can also be raised against the transferee. Debt assignment must be done through a written agreement, as it is considered invalid otherwise.

How can a foreign creditor recover a debt in Turkey?

If there is no reciprocity agreement between Turkey and the creditor's nationality, the creditor must pay a security payment to the court or bailiff's office. After that, they initiate the proceeding. If the documents to be submitted to the institutions are not in Turkish, they should be translated and legalized.

Can interim measures be taken?

Yes, it is possible to apply to the court to take interim measures. This way, the creditor increases his chances of recovering debt.

What types of legal action can be taken to recover debt in Turkey?

Debt collection can be pursued through execution, but also through court proceedings, arbitration, mediation, and other friendly resolution methods.

Which documents are required to initiate the debt collection procedure in Turkey?

Attaching a document is not mandatory to start an execution proceeding. However, invoices, correspondences, contracts, promissory notes, or other supporting evidence should be provided for the best result. If an attorney is governing the process, a power of attorney will be required. It should be translated and legalized unless it is in Turkish.

What is the best way to recover debt in Turkey?

The choice of debt collection method depends on the specific circumstances and the parties involved. Each method has its advantages and disadvantages. The key is to choose the right method for debt collection that best suits your interests, protect your rights, and collect debts through legal means. To do so, it is advisable to consult with an attorney in Turkey and pursue the collection of your debts through legal channels.

CONCLUSION

Debt collection is an important process in the management of debt relationships in Turkey and can be carried out through various methods. Debt collection through execution proceeding is one of the most commonly used methods, whether or not the creditor has a document in hand. However, if the debtor objects, evidence may be required to resolve the objection. The bailiff examines the requests that meet the conditions specified in the law and issues a payment order. The debtor can object to this order within 7 days. If there is no objection, the execution becomes final, and the debtor's assets can be seized and sold. Alternatively, it is possible to file a lawsuit. Creditors who do not want to initiate execution proceedings before obtaining a court decision or have doubts about the amount of the debt can choose this method. The lawsuit process includes the petition stage, evidence gathering, trial, and decision stages.

There are also alternative dispute resolution methods such as arbitration and mediation that can be pursued for debt collection. Parties can resolve their disputes amicably through these methods. Arbitration offers a speedy resolution and requires obtaining a court order for enforcement, after which the arbitration award can be enforced. Mediation focuses on resolving disputes through dialogue.

Debt assignment is another option for debt collection. The creditor can transfer the debt to a third party in exchange for money, allowing the third party to initiate legal proceedings based on the transferred debt amount.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

Turkey: Debt Collection In Turkey - Ways To Recover Debt Effectively In Türkiye