Debt Recovery in Italy: Brief guidelines
Uncertainties about commercial relationship and eventual economic crisis might endanger fair conclusion of several commercial deals. Delayed payments often take place but sometimes the creditor are unable to recover the amount they are entitled.
Italian Law provides the creditor with various legal instruments for debt collection. It is essential to analyse the situation and use the proper instrument, whether judicial or extra-judicial. Generally speaking, Italian debt recovery procedure consists of four steps: a) letter of formal notice b) injunction order c) writ of execution d)
Letter of formal notice
First of all, it is wise to start by the extra-judicial procedure of debt collection, through the formal notice to the debtor. This is an essential step because it allows the dispute to be resolved without having to go before the Court, thus saving money and time.
In particular, this procedure consists in giving the debtor written notice (by registered letter with return receipt) asking to pay within a precise deadline. If the time limit runs without receiving the payment, then it will be possible to appeal to the judicial authority. Normally, the notice period is between 7-17 working days.
The letter of formal notice is not necessary when:
· The debt comes from illegal activity;
· Debtor’s written declaration stating he will not perform the obligation;
· The obligation was to be performed at the domicile of the creditor and the deadline has expired.
In the event deadline on formal notice letter unsuccessfully expires, then the creditor can judicially proceed through an injunction order. In case the creditor does not possess a writ of execution, the credit can file an appeal for an initial order of payment. This is the most common procedure and it consists in presenting to the Court the documents necessary to prove the existence of a claim against the debtor. If the judge confirms debt existence, the order of payment is temporarily enforceable. Whenever the sum is lower that €5.000.00, the appeal shall be filed before the Giudice di Pace. Contrarily, the appeal may be presented before the other competent Court.
The Court has 3 different options:
· Confirmation of the order of payment;
· Dismissing the appeal;
· Ask for further documents that may clarify the situation
In the event the Court released the order of payment, creditor’s lawyer shall present it to the debtor within the period of 60 days. Contrarily, the order looses its legal efficacy. The debtor may file an official objection to the order of payment. In that case, an ordinary lawsuit will start.
Writ of execution
The debtor has 40 days to oppose the order; otherwise this is considered a fully enforceable judgement. After that, creditor’s lawyer may ask the Judge to empower the order of payment with the enforcement clause and thus issue the writ of enforcement. This new document constitutes a fully enforceable order to proceed with the payment of the amount of money within 10 days. Whether the debtor does not pay, it is possible to proceed with the seizure of debtor’s asset through forced execution.
In some cases, the order of payment is temporarily executive. This event takes place when the debt is based on cheques or bill that are certified by a notary act. For instance, a payment order released in favour of a property manager based on unpaid contribution shall be temporarily executive.
If the debtor did not pay within 10 days, enforcement shall proceed. Generally, enforcement procedure starts with the distraint, which consists of the seizure of the goods of the debtor. It is important to highlight that the executive procedure shall be activated within 90 days from its notification to the debtor.
The Italian distraint can be categorised in three procedures:
· Foreclosure of immovable properties
· Foreclosure of movable properties
· Foreclosure towards third parties.