Ukraine plans to introduce a new debt collection procedure

In Ukraine, in order to implement EU recommendations, draft law No. 14005 has already been adopted in the first reading. It significantly simplifies the procedure for debt collection and in practice allows property to be seized automatically.

These provisions will greatly speed up procedures and are intended to force debtors to pay.

For now, this is only a draft law (adopted in the first reading). For the document to become law, it must pass a second reading and then be signed by the president. The bill has already caused a lot of debate. The point is that along with automation, the process of seizing a debtor’s property is effectively simplified.

For example, if a debtor decides to re-register a car, the Interior Ministry Service Center will refuse, and the enforcement service will be notified of the attempt to carry out the re-registration. In addition, this effectively means an automatic seizure of a debtor’s real estate: it will not be possible to sell it until the debt is repaid.

They propose to add the following clause to the list of grounds for refusing state registration:

“An application for state registration of ownership rights or a special property right is submitted on the basis of a transaction that provides for the alienation of the relevant property or special property right by a person whose details are entered in the Unified Register of Debtors.”

At the same time, the rules for selling an apartment or house to repay a debt do not change.

“Article 48 of the current Law on Enforcement Proceedings, adopted in 2016, already provides that a debtor’s sole dwelling can be seized if the amount of debt exceeds 20 minimum wages. However, this is impossible without enforcement proceedings and a court decision. Draft law No. 14005 in no way changes these provisions. As for movable property, no additional encumbrances are envisaged here,” said Denys Maslov, chairman of the parliamentary Committee on Legal Policy.

The key innovation of the bill is the introduction of automatic actions in enforcement proceedings. In particular:

• automatic lifting of account seizures after the paid debt is received by the state enforcement service or a private bailiff;

• automatic interaction of the Unified Register of Debtors (as part of the automated enforcement system) with other registers to prevent the debtor from disposing of property;

• automatic updating of data in the Unified Register of Debtors;

• mandatory connection of all banks to information exchange with bailiffs via the automated enforcement system (АСИП).

In fact, court orders are used not only “against Ukrainians.” Indeed, the vast majority of proceedings relate to debts on loans and utilities. However, an effective debt collection procedure also makes it possible to collect alimony on time, to achieve payment of wages, and so on.

There are currently more than 3.2 million court orders in the register of court decisions. These documents concern the collection of all types of debts. In 829.2 thousand of those decisions, housing and utility services are mentioned.

Ukraine needs an effective debt collection procedure. But at the same time, those Ukrainians who, for one reason or another, were unable to pay on time must also be protected. In addition, it is important in the process of automation not to reach a point where consideration of a case in court becomes a mere formality. After all, some debts—especially in the case of loans—can often be disputed.