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Debt Collection in Georgia

Debt Collection in Georgia

Debt collection in Georgia involves the legal procedures undertaken by creditors to recover outstanding debts from individuals or businesses who have failed to meet their financial obligations. Debt collection operates within the framework of the Contract Law outlined in the Civil Code. These regulations govern the debt collection practices, ensuring fair treatment of debtors while allowing creditors to pursue their rightful payments.  

Below, our lawyers in Georgia explain the main procedures related to debt collection in this country. If you need assistance in the debt recovery process in Georgia, our law firm can advise and assist you.

Debt collection legislation in Georgia

The main law that provides for debt collection in Georgia is the Civil Code which provides for various contractual matters and breaches in agreements. However, another law that contains provisions on debt recovery is the Contract Act.

When interested in taking action against a debtor, it is good to request the assistance of a Georgian lawyer who can provide tailored assistance in accordance with the provisions of the law. This will not only ensure a law-abiding procedure, but also a fast one.

Debt collection procedures in Georgia

There are two main ways of recovering a debt in Georgia through amicable and court proceedings. In each situation there are various aspects to consider. First of all, it must be established if either the parties involved in the debt collection procedure is a natural or corporate person, as this can either simplify or complicate the process.

It is common practice for the debt recovery procedure to start amicably, thus saving time with court proceedings. Our law firm in Georgia can handle out-of-court debt collection to the benefit of both creditor and debtor. If you need debt collection services in other countries, such as the Netherlands, we can put you in touch with our local partners.

Amicable debt collection steps in Georgia

No matter if either the debtor or the creditor is a Georgian resident or not, the amicable procedure to recover an outstanding amount of money should be used first. In this case, the following steps are usually completed:

  1. the establishment of the due amount of money and interest or penalty fees;
  2. gathering of supporting evidence (invoices, contracts, correspondence, confirmation orders);
  3. the first contact with the debtor which can be made by phone, email or conventional mail;
  4. reaching an agreement with the debtor for the payment of the outstanding amount of money.

Generally speaking, the amicable debt recovery procedure can be completed quite fast as the parties are encouraged to reach a new agreement that favors them both and our lawyers in Georgia can oversee the entire procedure. We can also verify and send the necessary documents in order to speed up the recovery procedure.

Court proceedings in debt recovery in Georgia

If the amicable procedure fails (this usually occurs when the debtor does not respond to the contact attempts of the creditor), a petition with a Georgian court can be filed. In this case, there are several aspects to consider, among which is whether the debtor is a natural person or company. In the latter situation, the court can dispose of the liquidation procedure of the Georgian company which can lead to an automatic recovery of the debt.

In the case of natural persons, the nature of the debt will first be determined. According to the Civil Law in Georgia, a petition against a bad payer can be filed no later than 6 years after the debt has arisen in the case of consumer credits. In practice, the procedure is started much sooner than this.

No matter the situation, creditors can request the help of debt collection agencies or lawyers in Georgia. However, when deciding to work with debt collection agencies, the creditor must ensure that these respect the regulations related to the protection of the debtor’s rights.

You can work with our attorneys in Georgia if you need legal representation before a local court if you need to recover a debt.

In the case of companies headquartered in the European Union (except Denmark) there is the possibility for an expedited debt recovery procedure with Georgian courts by filing a standard Order for Payment.

Foreign creditors recovering debts in Georgia

Georgia attracts many foreign investors from different parts of Europe and around the world every year, however, not all the time business interests can be pursued, and debts may arise. There is also the situation in which the debt arises in Georgia, while the investor is in his or her home country. In this case, the recovery procedure will be completed in Georgia.

It is possible to try for an amicable debt recovery that will have a higher chance of success, however, if this does not work, court proceedings can also be requested with the help of our law firm in Georgia which can handle the procedure on behalf of the foreign party without the need for the latter to travel here until the process is sure to be leading to a good result or a mandatory presence to be requested by the judge.

The steps of debt recovery when a foreign party is involved will follow the next steps:

  • our lawyers will verify the laws of the country of the foreign claimant and will align with the Georgian laws applicable in such situations;
  • then, we will contact the Georgian debtor and try to reach a settlement for the quick repayment of the debt;
  • in case court action is required, we will make sure to file all evidence related to the case;
  • we will also offer representation in court proceedings for a suitable outcome;
  • once the judgment is issued, we will start the recovery of the outstanding amount of money.

This situation can also be encountered by Georgian companies with interests in other countries. In such cases, we can advise on the procedures that can be completed here and we can assist with the recognition and enforcement of the foreign judgment in Georgia.

What should be paid attention when dealing with debt collection with a natural person located in an European Union country is the General Data Protection Regulations (GDPR) which provides for various privacy requirements when using sensitive personal information.

If you need assistance in international debt collection cases, you can request the advice of our attorneys in Georgia.

Commercial debt collection in Georgia

The largest debts are usually registered by companies, case in which the procedures can take longer, but can also imply additional steps, when situations like insolvency are met.

When it is not the case of the debtor to be unable to pay the debts, mediation can be a solution through which the parties can make arrangements and sign contracts with new terms related to the payment of any outstanding amount of money.

Georgia is also home to an International Arbitration Centre that can handle various disputes, including those related to payment settlements. This is one of the most employed legal pathways through which commercial disagreements can be settled and if you need assistance in understanding how the procedure works, we invite you to discuss with our lawyers.

Consumer debt collection

Our Georgian lawyers also assist in cases involving debt collection from consumers or natural individuals. These debts refer to credit card balances, medical bills, utility bills, student loans, personal loans, and other forms of consumer credit. Some of these debts might affect the consumer’s credit score and creditworthiness.

Debt collectors in Georgia will contact consumers via letters, phone calls, or other means to request payment of outstanding debts. However, they must adhere to legal requirements regarding the frequency and manner of communication, without engaging in harassment or abusive practices.

If attempts to collect the debt outside of court are unsuccessful, creditors can pursue legal action through the Georgian court system. However, our law firm in Georgia recommends exploring alternative dispute resolution methods before resorting to litigation.

Asset seizure in debt collection procedures

Asset seizure is a legal process conducted in the debt collection procedures in Georgia when debtors fail to fulfill their financial obligations. It involves the seizure or confiscation of the debtor’s assets by creditors to satisfy outstanding debts.

Before creditors can initiate asset seizure in Georgia, it is needed to obtain a court judgment against the debtor. This involves filing a lawsuit, presenting evidence of the debt owed, and obtaining a decision from the court confirming the debt. Our Georgian lawyers can be of assistance in the case of lawsuits. 

Debtors must be notified before any asset seizure takes place, regarding the debt owed and the creditor’s intention to seize assets to satisfy the debt. Assets may extend to specific items, combinations of items, or intangible property.

Debt collection agency vs. law firm in Georgia

When trying to collect a debt, a creditor can use the services of a specialized agency or a lawyer. In the amicable recovery phase, both agents will act the same way by contacting the indebted party and proposing various ways in which the debt can be extinguished. However, if this method does not work, the lawyer will be the only solution to resolving such a case, as court action will be required.

When it comes to the fees, a debt collection agency can either chase the debt on behalf of the creditor or purchase it at a lower value by paying a percentage of the outstanding debt the creditor, while the lawyer will have his/her fee while making sure the entire debt is recovered, plus the interest in accordance with the rigors of the law.

Our lawyers in Georgia have an extensive experience in debt recovery cases and can act as mediators between the parties in order for both the creditor and debtor to find the suitable way to settle their differences in the shortest time possible. This will serve both their interests and will save them the time and money spent with long and time-consuming court proceedings.

Assistance in debt collection in Georgia

Our Georgian lawyers can provide tailored assistance to companies seeking to recover debts from bad payers. We will make sure to respect all the regulations imposed by the national laws, and we can also help foreign companies in debt recovery procedures against Georgian creditors. Should you have any questions related to how to convince a debtor to pay without going through lengthy court proceedings, our lawyers can advise you.

One of our primary functions is drafting and sending demand letters to debtors, outlining the amount owed, the due date, and the consequences of non-payment. Through this letter, our Georgian lawyers can convince the debtors to address their obligations.

We are also seeking to reach mutually acceptable settlements or payment plans between creditors and debtors. Through negotiation, we can advocate on behalf of the creditors to secure favorable terms while also considering the debtor’s circumstances. Negotiation is often an effective means in the process of debt collection in Georgia

In cases where negotiation proves unsuccessful, our team can pursue legal action by filing a lawsuit against the debtor. This involves initiating the proceeding in court, presenting evidence to support the creditor’s claim, and seeking a judgment for the debt owed. We provide representation and guidance to creditors, ensuring that their interests are presented in accordance with Georgia’s legal procedures.

Following the successful obtainment of a judgment, our attorneys in Georgia assist creditors in enforcing it through various means permitted by law. This will help creditors recover the outstanding debts owed to them.

We can also protect debtors from unfair or abusive practices during the process of debt collection in Georgia.

The economy of Georgia

From an economic point of view, Georgia has evolved a lot in the past few years, as foreign direct investment (FDI) increased. According to recent statistics:

  • FDI in Georgia reached nearly 2.1 billion US dollars in 2022, 1.7 times increasing from 2021;  
  • The amount of FDI from the UK is 437 million US dollars.
  • Spain also made a significant contribution, with 360.5 million US dollars in foreign direct investment;
  • The largest share of FDI was allocated in the financial and insurance activities sector, totaling 538 million US dollars, approximately 25.6%;
  • The real estate activities sector was the second largest, with 366.5 million US dollars, approximately 17.5%.

Besides debt collection services, we also offer guidance in real estate matters such as buying a house in Georgia.

If you need support in amicable or court debt collection procedures, do not hesitate to contact our law firm in Georgia.