Debt Collection in Turkey


Debt Collection in Turkey – Invoices, Promissory Notes and other paymentinstruments under Turkish Law – Part 1

A “debt collection process” can be processed in a verydifferent way in one country compared to the process conducted in anothercountry.

If you have an outstanding unpaid invoice/check/promissorynote or a receivable which is due from a Turkish Company what procedure should befollowed for the debt collection? Under Turkish Law, there are differentprocedures applied for different claim and documents types. Debt collection basedon a check based collection process is filed and executed different than debtcollection process for an unpaid invoice for a Turkish company. Differences arein all sorts of matters; timing, local procedures and even the defense methods bythe debtor  applies to collecting aninvoice in Turkey would be quite different to the procedure for collecting acheck in Turkey.

How is the debt collection process carried out for adebt based on an unpaid invoice in Turkey?

If you would you like to collect an unpaid invoicefrom a Turkish Company, you have a couple of options to start the process. Thefirst and cheaper option is to send notification to the debtor and ask thedebtor to pay the outstanding amount. In case the receivable is not reallysubject to any disputes, this process is in some cases fruitful and a propercompany would usually pay the debt upon the service of the notification by thecreditor.

The second option of the creditors is to initiate anexecution proceeding via bailiff office in Turkey against the debtor company.Together with filing of such proceeding, the payment order through the bailiffOffice shall be served to the debtor company. You are free to start with thisoption without serving any notices to the debtor.

The third and least favored option by the creditors isfiling a law suit against the debtor. Some creditors decide that this willeventually be the result as most payment orders are challenged and the matteris referred to the court at the end.

What actions can a debtor take against a paymentorder?

If the debtor does not object to the payment order orfails to submit any objection against the payment order than the payment orderbecomes due and can be executed by the bailiff office. Remaining silent will bedeemed as acceptance.

Under Turkish law, a debtor can defend his caseagainst the payment order and my submit a petition to the bailiff office(execution office). Upon the submission of the defenses and objection theprocess will be ceased and be pending until the creditor starts further courtprocess in Turkey. 

What actions can the debtor take against the defenses?

Once a debtor places objection against a payment orderthen Creditor can file a law suit for cancellation of the objection. This legalaction i.e. “cancellation of law suit”, usually takes some time to finalize.Depending on the complexity of the matter, it may take up to 3 years. In somecases it takes much shorter. The commercial records, commercial books of theparties, correspondence and notices between the parties and etc. shall bereviewed by the respected court during the course of the litigation.

In both cases there is some common procedure to befollowed; such as notices, seizure and liquidation of assets etc…

The court shall at its sole and absolute discretionwill make a decision. The court may impose an extra fine as % of the claim indispute in addition to the interest to be applied.

Following the finalization of the court case thecreditor can continue debt collection process against the debtor. Now it is anundisputed matter as the court has made a decision about it.

If the debtor has money in the bank accounts then thefunds will be released and transferred to the account of the bailiff office tobe paid to the creditor. If the money is not enough or there is no money at allthen the assets will be liquidated in due course of the proceedings.

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Debt Collection in Turkey – Invoices, promissory notes and other paymentinstruments under Turkish law - Part 2

In the first part of this article, I mentioned thatthere are different procedures applied for different claim types. Debtcollection for a check is processed different than debt collection process foran unpaid invoice due for a Turkish company. In the second part of thisarticle, I will be giving some more information about debt collection processfor outstanding debts arising from an unpaid invoice and the promissory note inTurkey. I have already mentioned how a payment order is processed and what canthe debtor do against the payment order in the first part so please see thefirst part of this article to find more information about this.

Once a debtor places an objection against a paymentorder, the creditor can file a law suit for cancellation of the objection. Thecourt shall review the commercial records and commercial books of the parties,correspondence and notices between the parties and etc. during the course ofthe litigation. However, the most important item to be reviewed by the court isthe invoice. Therefore, it is essential to identify that which issues thatshould be included in any invoice according to Turkish law?

As per the Tax Procedural Law, at least the belowissues should be stated in the invoice to be issued;

•      Issuancedate of the invoice, serial and item number,

•      Name ofthe issuing party, if available trade name of the respected company, businessaddress, the related tax Office and account number;

•      clientname, trade name, address, if available tax number and account number;

•      Type ofproduct or work, amount, quantity, price of good or work; and

•      Deliverydate of the products sold and waybill.

Before mention the collection procedure of anoutstanding debt arising out of the promissory note, firstly I would like togive brief information on which issues should be taken into account at the timeof receiving a promissory note from a Turkish company?

The first essential issue is the signature. The promissorynote should be signed with the precedence of the party to which the promissoryshall be provided. In addition, it is strongly advised that the signatory ofthe promissory note should be the authorized representative of the debtor whois powered to bind and represent the company in respect of issuance of promissorynotes on behalf of the company. For this purpose, the circular of signatures ofthe company should be made available at the time of signing of the promissorynote and it should be checked from the respected circular of signatures as towhether or not the signing person is empowered.

The second essential issue should be taken intoaccount is the issuance date of the promissory note. The date on which thepromissory note is executed should be written in the promissory note.

Provided that the promissory note possess the allrequired conditions as set forth in the law and the creditor desires to collectthe outstanding debt arising out of the promissory note what procedure may beinitiated against the debtor?

When a creditor desires to collect the outstandingdebt due from the promissory note, he/she may initiate an execution proceedingat the respected bailiff courts in Turkey. Following filing of such proceeding,the bailiff offices shall serve payment order to the debtor in question.

If the debtor submits the limited objection reasons asstipulated in the law which are such as; the claim stating the debt is notbelonging to the party, the debt has been paid, the debt has been prescribedand etc., the court shall accordingly consider the valid claims and the caseshall be pending before the related court for a period of 6 months-2years. Atthe sole and absolute discretion of the court, the court gives its respecteddecision.







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