In certain situations, a company established inTurkey is not able or refuses to pay its debts, forcing its suppliers to face difficulties in paying its own debts to other business partners. In order to avoid this vicious circle, the creditors may use several methods to force the indebted to pay. Using the Code of Obligations, Code of Commerce and Bankruptcy Law regulations, the debt collection agencies or law offices can choose to pursue an amicable settlement or a court procedure.
Usually, the debt collection agencies are more oriented to the first method, while the law offices choose the second method; foreign investors who are involved in a debt collection situation can receive assistance on this matter from our Turkish lawyers.
Pre-legal debt collection procedure in Turkey
The pre-legal procedure consists of a request made by the creditor (or the lawyer) to the debtor to make the payment of the amount of money to which he or she is liable to. The request can be made written or verbally, but it is highly recommended to use a written document, such as a notification of payment, which will be sent to the debtor.
As a result, the debtor may try to arrange the payment with its creditors. The payment can be made in full, partial or in installments, depending on the concluded deal. According to the Turkish legislation, the debtor is required to pay a specified sum of money, as established between the parties but if this fails, the creditor can request an order of peremptory payment, in which case the debtor is obliged to pay the debt/part of the debt in 10 days. If the creditor does not receive a confirmation of payment in this sense, he or she can file for a lawsuit in a period of 5 days after the debtor has received his order.
Lawsuit proceedings in Turkey
If the pre-legal procedure for the collection of the debt from the partner/supplier fails, a lawsuit can be raised against the indebted. To do that, the contract signed between the parties and the due invoices must be presented to the Court, translated into Turkish by a certified translator (only if the documents are drafted in a foreign language); it is also required to notarize the documents. Also a claim has to be filed, containing the name of the court, the name and address of the creditor and the debtor (along with the name of the attorney or the legal representative), the amount due, the circumstances of the claim, the content of the demand, the public taxes and costs, the power of attorney (if necessary), the signature of the person requesting it.
Businessmen involved in a debt collection case should know that the Turkish legislation stipulates that the court can impose a fine with a value of 20% of the claim in dispute. The decision taken by the first instance courts may be appealed in front of the Court of Cassation but no later than 15 days. The decision on the appeal is taken no later than 6 months from the application. For the lawsuit, it is required the assistance of our team ofTurkish lawyers, who will represent you in front of the court.
We invite you to watch a short video about the types of debts in Turkey and how you can recover them:
Types of debt recovery in Turkey
The two types of processes of debt recovery are HACIZ and IFLAZ. Haciz is a process that begins with filling an order for payment which will be served to the debtor. If there are no objections to the order, the assets of the debtor are liquidated in order to cover the claims. If the order is not accepted by the debtor, he has the possibility to request the creditor to prove the claim in court. Ilfaz, or bankruptcy liquidation in Turkey, starts by sending an order of payment to the indebted. The trial begins, and the creditor has full control during the process: it can decide to cancel the process or continue with it. The process is between the creditor which raised the complaint and the debtor, the rest of the claimants can participate only with certain limitation.
As a result, the court may decide to appoint a liquidator which will begin the process of liquidation by informing the creditors regarding the period of time allowed for depositing the claims. A process involving debt collection doesn’t usually require witnesses. If necessary, an expert witness is called in order to explain the submitted documents. We invite you to talk to our team of lawyers in Turkey on this aspect. They can also hhelp you register for VAT in Turkey.
Debt collection for foreigners in Turkey
Foreign individuals and companies are allowed to file claims with Turkish courts in order to collect debts for Turkish counterparts. However, they are subject to several requirements before being allowed to file their cases with the Turkish courts:
- they must deposit a security with a Turkish bank, in order to be allowed to start the procedure;
- the security is no longer required if their home country has an agreement with Turkey (these agreements are usually related to reciprocity clauses in terms of legal actions);
- the court trying the case depends on the nature of the debt and on the outstanding amount of money;
- the debt collectionpetition must be filed by a lawyer in Turkey who is granted a power of attorney.
Documents required to start debt recovery in Turkey
Cagatay Altunsoy is the the co-founder and coordinator of CS Yonetim ve Destek Hizmetleri and he is an experienced specialist in company formation and business consulting services provided for foreign investors all over the world.