How Executives Collect Debts under New Rules

Опубликовано: 22.04.2021

On February 16, the decree of the National Bank of Ukraine (NBU) entered into force, which opened access to the debtors’ accounts for executors. Sometime later, new rules for disclosing bank secrets began to operate. Volodymyr Sytnyk, lawyer of the “Prime Law” Firm, prepared a column for the MinFin on how debtors should prepare for the new reality.

How It Worked Before

Prior to the adoption of the aforementioned regulations, some banks, at the request of the executor, refused to disclose data on the numbers of bank accounts and the balance of funds on them. They justified their refusal by bank secrecy. Therefore, they provided only general information about the availability of accounts, reported insufficient funds for them, etc.

The procedure for the automated seizure of debtors’ funds in bank accounts extended exclusively to debtors who did not pay alimony.

In all other cases, executors sent a request to provide information about the debtor’s accounts and an order to seize funds by mail, which required significant time and financial costs: after all, the debtor can open an account in any of the 73 operating Ukrainian banks.

What Has Changed

Now banks are required to provide public and private executors with information on the availability and/or status of a debtor’s accounts. It must include the numbers of accounts opened by the debtor in the bank, as well as the amount of funds on them. The specified information does not represent banking secrecy for public and private executors.

In addition, from now on, public and private executors can automatically send orders to seize funds of any debtors to banks, regardless of the type of debt.

At the same time, the seizure will also be carried out through an automated system of enforcement proceedings, and paper requests to banks are no longer necessary.

Algorithm for the Seizure of Debtors’ Funds

The procedure for seizing the debtor’s funds in the bank account is carried out as following:

  1. The executor, using the Automated Enforcement System (hereinafter referred to as the “AES”), creates and sends a request to obtain information on the availability and status of the debtor’s accounts to banks.
  2. The bank’s system, no later than one hour of working time after receiving the request, generates a message stating the requested information and immediately sends it to the AES.
  3. The executor issues a resolution on the seizure of the debtor’s funds and sends it to the banks where the debtor’s accounts are opened with the help of the AES.
  4. The authorized person of the bank seizes the funds in the debtor’s accounts, which is reported to the executor through the AES.

When Will Funds Be Written Off Automatically?

So far, the Ministry of Justice has automated the procedure for seizing debtors’ funds in bank accounts only.

In order for the executors to be able to write off the funds found on them automatically, a separate standard is needed, which, according to the Director of the Directorate of Justice and Criminal Justice of the Ministry of Justice Oleksandr Oleinyk, is at the approval stage by the Ministry of Finance. The document stipulates the creation, transfer and verification of payment requests in electronic form on write-off of funds in case of compulsory execution of court decisions.

The algorithm for the forced write-off of funds from the debtor’s accounts will look like this:

  1. If funds are available on the debtor’s account (s), the executor creates and sends payment requests to the appropriate banks for the forced write-off of the debtor’s funds, using the AES.
  2. Banks forcibly write off funds from the accounts of the debtor and transfer them to the accounts of the body of the state executive service or the private executor, from which the funds are directed to claimants.

In the meantime, in order to forcibly write off the debtor’s funds from the bank account, executors need to draw up payment requests and send them by mail or deliver them to the bank on their own.

Reasons for the Seizure of Accounts

The seizure can be imposed on funds in bank accounts of individuals and legal entities included in the Unified Register of Debtors. There are currently over 5.5 million entries in the register.

Mostly these are the debts:

  • for non-payment of fines;
  • for violation of traffic rules,
  • for non-payment of alimony,
  • debt to public utilities, etc.

The innovations make it possible to automatically seize the bank accounts of all debtors, and not just “alimony dodgers”.

How Many Banks Are Already Seizing Accounts “Automatically”

7 Ukrainian banks have already joined the system of the automated seizure of debtors’ funds. These include Privatbank, monobank (which operates under the license of Universal Bank), ProCredit Bank, Taskcombank, Oxy Bank, Bank Vostok and Industrialbank.

In the near future, 55 more Ukrainian banks, connected to the test version or at the stage of consultations and preliminary settings regarding connection to the test version, will join the system.

The Ministry of Justice provided the State Enterprise “National Information Systems”, together with the Department of State Executive Service of the Ministry of Justice, with a three-month period (until July 6, 2021) to implement the automated seizure of debtors’ funds.

What Creditors and Debtors Gain

Benefits of the automatic seizure of funds for the creditor are obvious. Nowadays, it is a common practice when creditors receive a positive court decision on debt collection, but it remains unfulfilled.

The fact that executors can request the necessary information about bank accounts of debtors and seize and write off the funds available on them in a simplified manner should significantly speed up the procedure for the execution of court decisions.

Simultaneously, this procedure has advantages for the debtor: funds on the account are seized within the amount owed only, while the seizure is not imposed on the bank account as a whole.

How to Protect Oneself from Dishonest Creditors

Along with a number of advantages, the potential disadvantages of innovations should also be considered.

For instance, the data of the Unified State Register of Court Decisions indicate the prevalence of cases of false issuance by courts of documents for the execution of decisions that have not entered into legal force (in particular, those against which an appeal has been filed).

In the future, claimants, in whose favor such decisions were made, will address state and private executors, who, in turn, have the opportunity to promptly collect funds from bank accounts of debtors.

At the same time, there is a high probability that such a write-off will occur before the debtor learns about the open enforcement proceedings and, moreover, receives a court decision on recognizing the enforcement document as unenforceable.

In the practice of the “Prime Law” Firm there was a case when the debtor was not informed about the opening of proceedings in the case by the court of first instance. The debtor voluntarily paid off the debt prior to the adoption of the court decision; however, the unscrupulous plaintiff did not inform the court about this. As a result, the decision of the court established the obligation of the debtor to pay the already repaid debt, which can be recovered in the manner of enforcement proceedings in the future.

In order to be able to respond to open enforcement proceedings in a timely manner, we recommend to regularly check the availability of information about the person in the Unified Register of Debtors and the Automated Enforcement System on the official website of the Ministry of Justice, as well as information on court cases on the official web portal of the Judiciary of Ukraine.


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