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Debt collection in Cyprus

Debt collection in Cyprus

Sometimes, when a company is facing financial problems, it’s difficult to pay the creditors. In this exceptional cases, collection agencies or a law firm in Cyprus may be hired to recover some of the creditor’s losses. Usually, there is a fee or a part of the recovered debt that must be paid to these agencies.

The main reasons for failure to respect payment deadlines

Cyprus’ economy is made of various types of businesses according to their size, but also of different types of consumers. This is why when dealing with debt recovery, the first aspect to consider is the type of consumer that has failed to meet his/her financial obligations and then decide on the method to recover the outstanding amount of money.

 Quick Facts  
Legal framework  Debt collection in Cyprus is governed by the legal framework, including the Contract Law and the Law on Civil Procedure. 

 Debt recovery methods

Methods include negotiation, court proceedings, and the involvement of our debt collection lawyers. 

 Statute of Limitations

There is a time limit within which creditors can legally pursue debt collection in Cyprus, typically six years from the date of default. 

Demand letters   Creditors often send demand letters to debtors with the help of our Cypriot debt collection lawyers, outlining the amount owed, payment terms, and the consequences of non-payment.
Mediation and arbitration 

Alternative dispute resolution methods like mediation and arbitration may be explored before resorting to legal proceedings. You can get these debt recovery services in Cyprus from our lawyers. 

Enforcement orders 

Successful court judgments can be enforced through various means, such as wage garnishment, bank account freezes, or asset seizure. 

Bankruptcy proceedings 

If a debtor is insolvent, creditors may initiate bankruptcy proceedings, potentially leading to the liquidation of assets to satisfy debts. 

Cross-border debt collection 

Procedures for debt collection involving parties in different countries are subject to international agreements and regulations. You can get information from our lawyers in this regard. 

Consumer protection laws 

Cypriot debt collection activities are regulated by consumer protection laws, prohibiting abusive or harassing practices in the collection process. 

 Interest and late fees Creditors may charge interest and late fees on overdue payments, and these terms are often specified in the original credit agreement. 
Debt restructuring options 

 In certain cases, creditors may explore debt restructuring options, allowing debtors to repay in installments or under modified terms.

 International treaties

Cyprus is a party to international treaties facilitating the recognition and enforcement of foreign judgments for cross-border debt collection. 

Insolvency practitioners 

In cases of insolvency, the appointment of insolvency practitioners may be necessary to oversee the distribution of assets among creditors. 

Public auctions 

Seized assets may be sold through public auctions, with proceeds used to satisfy the outstanding debts in accordance with legal priorities. 

Professional Legal Advice   Acquiring legal advice is recommended for both creditors and debtors involved in Cypriot debt collection cases to navigate legal complexities. Contact our lawyers for legal help.

In most cases, the reasons that lead to debt collection are:

  • consumer loans contracted by natural persons who fail to pay their installments;
  • mortgage contracts concluded with Cypriot banks can also lead to debt collection;
  • businesses entering insolvency procedures can be chased by creditors;
  • the failure of small enterprises to pay their invoices can also lead to creditors appealing to debt collection procedures in Cyprus.

No matter the situation, it is best to first reach an agreement with the debtor before taking any further actions. This is why, there are two ways through which debt recovery can take place in Cyprus. Even if collection agencies can be used, it is also possible to ask for legal help, especially when dealing with important amounts that need to be recovered.

The main debt recovery methods in Cyprus

There are two ways in which creditors can appeal to debt collection in Cyprus:

  1. through the amicable procedure;
  2. through court proceedings.

Even if they can work with collection agencies, it is also common to use the services of lawyers in Cyprus who can provide tailored support in accordance with the provisions of the Civil Code.

Amicable debt collection in Cyprus

In most cases, debt recovery in Cyprus starts with contacting the debtor in order to reach a mutual beneficial agreement for the payment of the outstanding amount of money. This usually applies to business-to-business contracts where creditors and companies deal with unpaid invoices.

In the case of natural persons, banks or other institutions will also contact debtors, however, these may also send dunning letters through in-house financial departments. It is not uncommon for these to also refer the debts to collection agencies or lawyers in Cyprus, as they want to recover their money as soon as possible.

There are certain advantages to work with law firms when it comes to debt collection in Cyprus, as these can:

  • contact the debtor and offer detailed information on the main legal ways the debt can be repaid;
  • explain their rights as consumers, but also obligations;
  • propose various methods that help them pay the amounts due in several installments, and thus avoid a higher financial burden.

Considering that if reaching court proceedings, a judge can dispose for the due amounts to be withheld directly from the debtor’s bank account, reaching an amicable agreement is often the chosen path. However, there are also case where a situation can end up in a court of law. In this case, the service of a Cypriot law firm becomes mandatory.

Court proceedings in debt recovery in Cyprus

Court proceedings are usually the last resort when it comes to debt collection in Cyprus, and they occur when no other solution is left. Failure to respond to the attempts of contact from the creditor, recovery agency, or lawyer will usually lead to the latter filing for a court order through the due amount is obtained.

It should be noted that the court can enforce the freezing of the debtor’s bank account or even to issue an order against any immovable property the debtor has. However, even in this case, there is a chance of reaching a settlement through which the debtor will commit to paying the due amount of money.

If you need support in chasing a debt, our Cypriot lawyers are at your disposal and can help you in both the amicable and court proceedings.

Forbidden debt collection methods in Cyprus

There are some forbidden practices in the Cypriot debt collection procedure for a debt collector or lawyer to use in his attempt to determine a debtor to pay its dues. It’s forbidden for a collector to use abusive language, to make public a list with the debtors (even though he can provide this information to other agencies) or to harass the debtor with numerous calls.

Also, the credit collector cannot use false statements in its attempts to recover the dues or using another identity. Accusations of any kind cannot be addressed to the debtor. The creditors cannot send a notification that looks like official documents, cannot give false information regarding the debtor to other agencies or use a false company name.

We also invite you to watch the video below on the debt recovery procedure in Cyprus:

Another forbidden action is that the creditor cannot collect more debit than it supposed to, except the case where the state law provides so.

Debt collection policy in Cyprus

The collection agencies and law firms in Cyprus can also assist the creditors during the trials against the debtors.

To enforce payment of the dues, the debtor must be judged by an authorized Court. A fee must be paid for issuing the case to the court. The value of it is regulated by the Company Registrar according to the court regulations. The judgment costs are usually paid by the defendant but it’s not a general rule, the judge may dispose that both parties must pay their part.

Normally, if the procedure for debt claiming is not disputed, the average time from the issue of proceedings to the judgment doesn’t take longer than a month.

A petition of bankruptcy can be filled only if the judgment was issued against the debtor.

After the judgment is issued, the procedures of enforcement may begin. The debtor’s assets may be object of the enforcement if the Court decides so. A subpoena for confiscation and sale of the surety’s movable property can be emitted. The surety’s movable property must be part of public auctions.

If a loading order over the immovable assets of the debtor has been recorded with the Land Registry, a sale of it may be ordered if it’s necessary to cover the debtor’s dues.

The debtor’s assets may be frozen before the judgment issue by applying some measures after the claim was registered to the Court but only under some special circumstances. The immovable and movable properties can be part of the special seizure.

Out-of-court negotiations in Cyprus

Before forwarding the issue to an authorized court, there will be attempts to resolve the debt collection in Cyprus through out-of-court negotiations.

This implies finding out as much as possible about the debtor and about his financial status. Then, our attorneys in Cyprus will write a letter of claim and send it to the debtor, summoning him or her to acquit the debt within a certain time frame, usually of 7 to 10 days.

In case the debtor does not respect his or her financial obligations within this timeframe, our lawyers will then attempt to negotiate with him or her. In our experience, there are numerous debtors who will opt to settle their debts at this point.

Eventually, if the negotiations are not successful, we will initiate the proceedings with an authorized court against the debtor. 

Enforcement methods in Cyprus

After the final court has made the decision and if the debtor refuses or fails to comply with the debt payment, our Cypriot lawyers can use the following procedures to recover the debt:

  • issuance of immovable writ;
  • issuance of delivery writ;
  • writ movable issuance;
  • sale of land writ;
  • attachment writ;
  • bankruptcy proceedings;
  • garnishee proceedings.

Cypriot debt collections can be effectuated not only inside the country, but abroad, too. Therefore, even though a debt was made in Cyprus, if the debtor moved out of the country at a later date, a court action may be submitted and then the debt repayment can be enforced in the debtor’s country of residence.

Debt per adult in Cyprus

Usually, most debts are incurred by natural persons in Cyprus. Credit cards, student loans, mortgages, and even personal or automobile purchase loans give way to their unpayment. According to data:

  • the value of debt per adult dropped by 30 USD in the first half of 2019;
  • in 2017, the value was 33,113 USD per adult;
  • in 2018, the amount had dropped to 30,699 USD.

If you need assistance in debt collection in Cyprus, we strongly recommend our services. With years of experience in civil law matters, our lawyers can help local and foreign companies to recover outstanding debts from their customers and clients. We are also at the disposal of those who need other legal services.

If you need assistance in a debt collection in Cyprus, we invite you to contact our Cypriot law firm.