How to prevent debtors from disposing of their assets

In order to improve enforceability of claims, the court can impose a pledge on debtors’ assets.

The main aim of recodifying the Judicial Procedural Rules is to solve one of the most pressing social problems: the enforceability of law.

During ongoing proceedings over a long period, debtors often start to dispose of their assets when faced with negative developments. And so, at the end of the day, creditors cannot satisfy their claim despite having a court decision in their favour.

One instrument to help improve this situation is a new interim measure of protection introduced to our legal system under the Judicial Procedural Rules.

An interim measure of protection is imposed by the court upon application. The court can order a measure of protection not only before and during the proceedings, but also in justified cases after their termination. Contrary to the previous legal regulation concerning interim measures, the court does not have to oblige the applicant to file an action on the merits of the case within a set period when imposing an interim measure. This step should prevent trials that are often artificially enforced, lessen the administrative burden on courts and help in obtaining the desired protection sooner.

With an interim measure of protection, the court can, upon application, establish a pledge which has the character of a regular pledge. In the case of two or more pledges it guarantees the pledgee a ranking according to the day of its establishment. However, it can only be enforced after a valid court decision awarding a secured claim.

When imposing an interim measure of protection, the court relies mainly on the facts claimed by the applicant. If the interim measure of protection ceases to exist for any other reason than because the application on the merits of the case was granted or because the applicant’s claim has been satisfied, then strict procedural liability applies. The creditor is liable for damages towards everyone who suffered damage as a result of the interim measure.

We should also point out that if the application does not comply with legal requirements, the court will not ask the applicant to correct it. It will simply dismiss the application. Since in the case of interim measures of protection speedy protection is of essence, we recommend consulting an attorney.

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