System for Automated Seizure of Funds on Debtors’ Bank Accounts Is Expected to Be Launched on July 6

Debtors’ bank accounts will now be seized not only for alimony debts, but also for non-payment of fines, traffic violations, utility bills and other debts. Moreover, from July 6, automated seizure of funds of the debtors included in the Unified Register of Debtors will be introduced.

In February, the National Bank, having adopted the Resolution “On Amendments to the Rules of Storage, Protection, Use and Disclosure of a Banking Secret” required banking institutions to provide information on the details of the debtor’s accounts and the amount of funds on them at the request of the executor; however, the procedure of receipt of information about the numbers of individual debtors‘ accounts remained complex and tedious for executors. The Ministry of Justice has already issued Order No. 1061/5 “Procedure for Automated Seizure of Debtors’ Funds on Bank Accounts”, which provides for electronic communication between executors and banks to speed up the process.

Decisions on the seizure of funds and the lifting of the seizure of the debtor’s funds will be made in the form of an electronic document. Thus, there will be no need for written correspondence and exchange of paper documents.

Procedure of Seizure and Recovery of Funds

As we have mentioned earlier, executors will use the Automated Enforcement System (AES), which will now not only help to seize funds, but also provide executors with information about the account numbers of individual debtors and the amount of funds available in the accounts. This access is expected to open on July 6.

The seizure procedure involves the following algorithm:

1. The executor, with the help of the AES, creates and sends a request for information on the availability and status of the debtor’s accounts to banks.
2. No later than one hour after receiving the request, the bank’s system forms a message setting out the requested information and immediately sends it to the AES.
3. The executor makes a decision on the seizure of the debtor’s funds and with the help of AES sends it to the banks where the debtor’s accounts are opened.
4. The responsible person of the bank seizes the funds in the debtor’s accounts, having been notified by the executor through the AES.

In order to automatically seize and write off funds on the debtor’s accounts, it is necessary to connect banking institutions to the AES. This has already been done by a number of large Ukrainian banks, but many others are also being consulted and tested for future joining.

What is the Maximum Amount that Can Be Collected from the Debtor?

The amount of deductions from the debtor’s income consists of the amount remaining after deduction of taxes, fees and a single contribution to the obligatory state social insurance.

Accordingly, the following may be deducted from the debtor’s salary according to executive documents:

• in case of recovery of alimony, compensation for damage caused by injury, other damage to health or death of a person in connection with the loss of a family supporter, property and/or moral damage caused by a criminal offense or other socially dangerous act – 50%;
• for other types of penalties – not more than 20%.

The following may be deducted from the pension:

• not more than 50% of its amount for the maintenance of family members (alimony), for compensation for theft of property of enterprises, institutions and organizations, for compensation for damage caused by injury or other damage to health, as well as in connection with death of a victim, for the return of an overpaid salary in cases provided by law;
• for other types of penalties – not more than 20%.

What Other Aspects of the Seizure Process Require Your Attention?

According to the Ministry of Justice, if the debtor does not have the funds and other valuables to meet the plaintiff‘s claims, the foreclosure applies to the property belonging to the debtor, excluding the property that cannot be recovered by law. The recovery of the debtor’s property does not stop the recovery of the debtor’s funds. The order of recovery of funds and other property of the debtor is determined by the executor.

The seizure will also be imposed on the debtors’ funds placed in the accounts that were opened after the seizure warrant had been issued. A separate court decision on the seizure is not required.

Links to bills and a post on social networks:

https://zakon.rada.gov.ua/laws/show/z0399-19#n20

https://zakon.rada.gov.ua/laws/show/z0397-21#Text

https://www.facebook.com/minjust.official/posts/1222279041527104

Read more:

How Executives Collect Debts under New Rules