A person who claims to be a creditor may resort to enforcement against a debtor without holding any court judgment or document whatsoever. Known in practice as debt enforcement without judgment by way of general attachment, this method is a rapid collection avenue afforded to creditors by the Enforcement and Bankruptcy Act.
That convenience does not leave the person against whom the debt is asserted defenceless. Under Article 62 of the Enforcement and Bankruptcy Act No. 2004, the debtor is allowed seven days from receipt of the payment order; an objection lodged within that period stays the proceedings. The declaration is addressed to the enforcement office that issued the payment order.
Within that period the matters the debtor may contest fall under four headings: the claim itself, that is the debt; the interest added to the claim; the signature on the document underlying the proceedings; and the territorial jurisdiction of the enforcement office before which the proceedings are being conducted.
Below we examine, in the light of the provisions of the Enforcement and Bankruptcy Act, the types of objection that may be raised against a payment order, the period within which and the manner in which they must be made, the legal effect an objection produces on the proceedings, and the burden that unfounded objections may impose on the debtor.
The Nature of Enforcement Proceedings Without Judgment
In this form of proceedings the creditor is not required to produce a judgment, an official document or any comparable basis; the creditor’s declaration that the claim exists is sufficient for the proceedings to be commenced. The enforcement office serves a payment order on the debtor, and if the debtor allows the seven-day period to pass without objecting, the proceedings become final and the attachment stage is reached.
Points of Difference from Proceedings Based on a Judgment
In proceedings based on a judgment there is a court ruling in existence and the enforcement office is asked to give effect to it. Proceedings without judgment require no such ruling; the creditor’s assertion suffices to set the process in motion. This feature makes the method swift and practical. By contrast, if the debtor objects within the period, the process is locked and the creditor is obliged to prove the claim before the courts.
Commencement of Proceedings and Service of the Payment Order
Enforcement without judgment is generally preferred for monetary claims that have no written basis or where the burden of proof lies with the creditor. The process opens with the creditor’s application to the enforcement office, following which a payment order is dispatched to the debtor.
Drawing Up the Request for Enforcement
The creditor submits to the competent enforcement office a request for enforcement setting out the debtor’s identity and address details together with the sum claimed. If the source of the claim is known it is stated in the request; however, attaching any document to the file is not obligatory.
Issuing the Payment Order for Service
Following the application, the enforcement office draws up a payment order for the debtor. That document sets out the amount of the claim; if the legal relationship or transaction from which the claim arose is known, this too is included. The debtor is also expressly reminded that an objection to the debt, the interest, the jurisdiction or the signature may be raised within seven days.
Validity of Service and the Running of Time
The payment order is delivered to the debtor’s address in accordance with the provisions of the Notification Act and the related legislation. Whether service was duly effected is decisive as regards the point from which the period for objection and payment begins to run. If no objection arrives within the period, the proceedings become final and attachment measures may be applied.
Objection to the Debt
A declaration made against a payment order on the ground that no such debt exists is characterised as an objection to the debt. Since the creditor is placed under no obligation to document the claim, the debtor is correspondingly empowered to stay the proceedings by objecting within the period.
A debtor who considers that the debt never arose, that it was subsequently paid or that it has been extinguished for some other reason may raise this objection within seven ( 7 ) days of service of the payment order by applying to the relevant enforcement office. No lengthy explanation need be given in the petition; a short and intelligible statement such as “I am not a debtor”, “I had paid the debt in question” or “I object to the debt” is regarded as sufficient. Upon such an objection the proceedings are stayed automatically, without any court ruling being awaited.
Objection Directed at Part of the Debt
Where it is only a particular portion of the sum pursued, rather than the whole of it, that can be contested, a partial objection arises. That possibility most often presents itself where part of the debt has already been paid or has not yet fallen due.
The debtor may set aside the amount accepted and reject the portion considered excessive. As a result of such a declaration the proceedings are stayed as to the sum objected to, whereas the proceedings continue for the portion left outside the objection.
Example: where proceedings have been commenced for TRY 50,000 and the debtor objects only to the TRY 20,000 portion of that sum, asserting that it was paid earlier, enforcement measures continue in respect of the remaining TRY 30,000.
The Requirement that a Partial Objection Be Clear and Specific
A partial objection must, unlike an objection to the debt, be made with a clarity and specificity that leaves no room for doubt. Vague and abstract formulations such as “I had paid some of it” or “the debt is not in that figure” produce no effect. The debtor is expected to set out the contested portion in figures.
For example: “I have already paid the TRY 20,000 portion of the TRY 50,000 pursued in these proceedings; my objection is directed at the remaining TRY 30,000.”
A partial objection raised in this manner stays the proceedings only as to the sum indicated.
Objection to Interest
The creditor’s claim is often not confined to the principal; the interest accrued on the claim is also made the subject of the proceedings. Not every claim for interest, however, is lawful. A debtor who considers that the rate shown in the payment order exceeds the statutory limits, that the calculation was made incorrectly, or that no circumstance justifying a claim for interest exists, may confine the objection to the interest item alone.
The Consequence of Not Objecting to the Interest Item
If the interest item in the payment order is not separately targeted, that item becomes final. In such a situation, even where the proceedings have been stayed by an objection to the debt, the process continues to run as regards interest. If the objection to the debt is set aside at the conclusion of the action for annulment of the objection brought by the creditor, the proceedings resume from where they left off in respect of the unchallenged interest item.
Leaving excessive claims for high interest in particular unchallenged may give rise to heavy financial burdens for the debtor. For that reason the interest item in the payment order should be examined scrupulously and, where necessary, the words “I also object to the interest” should be expressly included in the petition.
Objection to Jurisdiction
The Concept of Jurisdiction
In proceedings without judgment, jurisdiction determines the enforcement office before which the proceedings may be conducted. In the general attachment procedure the rule is that the enforcement office at the debtor’s place of residence on the date the proceedings were commenced has general jurisdiction.
That rule cannot be said to apply on its own. The parties may have agreed on a special jurisdiction by contract. If the place of performance has been expressly stipulated in the contract, the enforcement office at that place of performance also has jurisdiction. Alongside these, in certain cases special rules of jurisdiction arising directly from statute come into play.
Proceedings Brought Before an Office Without Jurisdiction and the Objection
A debtor who considers that the proceedings are being conducted before an enforcement office lacking jurisdiction may raise an objection to jurisdiction within seven days of service of the payment order. That objection may be raised on its own or together with objections directed at the debt, the interest or the signature.
Where objections are combined, the debtor must express that intention by a declaration leaving no room for doubt, such as “I object to the debt, the interest and the jurisdiction”. The petition must also identify the enforcement office considered to have jurisdiction.
If the seven-day period passes without an objection to jurisdiction being raised, the proceedings continue before the same office and jurisdiction becomes final.
The Creditor’s Options When Faced with an Objection to Jurisdiction
A creditor confronted with an objection to jurisdiction has two courses open.
Accepting the Objection to Jurisdiction:
The creditor may consider the objection well founded and request that the file be transmitted to the enforcement office with jurisdiction. The consequences of that choice are as follows: the office with jurisdiction that takes over the file serves a fresh payment order on the debtor; the debtor may not raise a further objection to jurisdiction against that second payment order, and conduct to the contrary is incompatible with the rule of good faith.
Not Accepting the Objection to Jurisdiction:
If the creditor does not accept the objection and the debtor has objected to jurisdiction alone, the proceedings are stayed. In that event the creditor may ask the enforcement court to “set aside the objection”. If the court concludes that the office conducting the proceedings has jurisdiction, the process resumes from where it was stayed.
Note: where the debtor’s objection relates to jurisdiction alone, the creditor may not resort to an action for annulment of the objection. If such an action is brought it is dismissed on the ground of lack of subject-matter jurisdiction.
Raising Objections to Jurisdiction and to the Merits Together
The debtor may put forward an objection as to jurisdiction together with objections as to the merits (debt, interest, signature) against the payment order. For that to be valid, the objections must be expressed within seven days of service and in the same declaration; objections made piecemeal at different times produce no effect.
The Order of Examination
In files where objections of both kinds are present, the first matter to be dealt with is the objection to jurisdiction. Unless that objection is disposed of, the assertions as to the merits are not taken up for examination.
The Courses Open to the Creditor
Where the debtor has objected both as to jurisdiction and as to the merits, the creditor may apply to the enforcement court and request that the objection be set aside, or may bring an action for annulment of the objection before the general courts. Whichever course is chosen, the first matter the court will assess is the objection to jurisdiction; the merits are reached only once that objection has been dismissed.
The Legal Consequences of an Objection
An objection made within the period both interrupts the progress of the proceedings and determines the legal route the creditor will follow. Its principal consequences are as follows.
The Stay of the Proceedings
Where an objection is raised to the debt, the interest, the signature or the jurisdiction within the seven-day period, the proceedings are stayed automatically. The enforcement office requires no separate decision for that purpose; it is obliged to halt the measures. From that point on, steps of enforcement such as attachment or sale may not be taken.
Prevention of Finality and the Bar on Attachment
An objection raised within the period prevents the proceedings from becoming final. Where the proceedings have not become final, attachment may not be levied on the debtor’s assets; enforced collection measures may not be pursued through the enforcement file; and the creditor may not, relying on that file, require the debtor to make a declaration of assets.
Proceedings stayed by reason of an objection may resume from where they stood only if one of the judicial avenues referred to above is concluded in the creditor’s favour.
The Sanction for an Unfounded Objection: Compensation for Wrongful Denial in Enforcement
Because an objection directed at a payment order stays the proceedings immediately, the creditor’s means of attachment and collection are temporarily removed. In some files the debtor, although aware of the debt, resorts to objection solely in order to prolong the process or to put pressure on the creditor. Such conduct means a loss of time, effort and money for the creditor.
To make good that loss, Article 67 of the Enforcement and Bankruptcy Act provides for compensation for wrongful denial in enforcement. Under that provision, if the creditor brings an action for annulment of the objection and succeeds in it, the court may, where it finds the debtor’s objection unjustified, award compensation of not less than 20% of the amount of the claim.
That compensation is not penal in character; it is a private-law compensation intended to make good the loss suffered by the creditor because of the objection. Its rate is assessed by the judge having regard to the circumstances of the particular dispute. The legislature has fixed only the lower limit, namely at least 20% of the claim, leaving the upper limit to the court’s discretion.
An award of compensation depends on two conditions being met together. The first is that the creditor has succeeded, in whole or in part, on the claim pursued in the proceedings. The second is that the court has established that the objection raised by the debtor was unjustified.
Objection Made After the Period Has Expired
As noted above, the period for objecting to a payment order is as a rule 7 days. It is nevertheless possible for the debtor to miss that period for reasons that cannot be attributed to him and could not have been foreseen. A sudden illness, a serious accident or some other impediment amounting to force majeure may be considered within that scope. In order to prevent the loss of rights, the practice of enforcement and bankruptcy law recognises for these eventualities the institution of the belated objection (“objection on excused grounds”).
The Period for Application
A belated objection must be raised within 3 days at the latest of the moment the impediment constituting the excuse ceases. It is also essential that the application be made before the stage at which the assets are converted into money is reached in the proceedings; requests raised after that stage has passed are not entertained.
The Procedure for the Application
A belated objection differs in two respects from an ordinary objection made within the period. The application is addressed not to the enforcement office but directly to the enforcement court. Moreover, such an objection does not stay the proceedings automatically; the debtor must additionally request the court to stay the proceedings.
It is therefore not enough merely to state the excuse; a request for the proceedings to be stayed provisionally must also be added to the application. If the court finds the excuse put forward justified and well founded, it orders the proceedings to be stayed and grants the debtor the right of objection. Otherwise, enforcement measures, including attachment and sale, are continued from where they stood.
Independent Legal Assessment
In files concerning enforcement without judgment, the factor determining the outcome is most often not the content of the objection but whether the objection was made in time and with the correct scope. The seven-day period is a preclusive period and, once missed, the options remaining to the debtor narrow considerably. Equally, leaving a heading such as the interest item or jurisdiction outside the objection causes the proceedings to continue on that item even where the debt itself has been contested.
On the creditor’s side, the nature of the objection directly determines the course to be followed. Bringing an action for annulment of the objection in a file where only jurisdiction has been contested leads to a loss of time and court fees. The scope of the objection petition should therefore be analysed carefully before any counter-step is taken.
In practice the following points in particular should not be overlooked:
- Verifying from the file the date of service of the payment order and whether service was duly effected
- Stating in the petition, item by item, which of the debt, interest, signature and jurisdiction heads the objection covers
- Separating in figures, in a partial objection, the amounts accepted and those rejected
- Applying to the enforcement court where jurisdiction alone is contested, and to whichever course is appropriate where the merits are also contested
- Taking into account from the outset, against the risk of an unjustified objection, compensation for wrongful denial in enforcement at the rate of 20%
- Where the period has been missed, documenting the excuse, applying to the enforcement court within three days and separately requesting a stay of the proceedings
Independent Legal advises and represents both creditors and debtors in proceedings without judgment, from the preparation of an objection to a payment order through to the stages of setting aside the objection and annulment of the objection.