Enforcement and Bankruptcy Law

Enforcement proceedings begin when the creditor files a request for enforcement with the enforcement office. The request for enforcement states the parties' identity and address information, the amount and basis of the claim, the starting date of interest, and the type of enforcement requested. The enforcement office then sends a payment order to the debtor.

Choosing the correct type of enforcement determines the entire process. A creditor holding a court judgment uses enforcement of a judgment; a creditor holding a cheque, promissory note or bill of exchange uses enforcement specific to negotiable instruments; a creditor holding only a contract, invoice or current account record uses enforcement without a judgment.

Each type has a different objection period, effect of the objection, and subsequent stage. Enforcement initiated by the wrong method is usually cancelled, and the fees and costs must be paid again.

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The general rule is that enforcement is initiated at the enforcement office in the debtor's place of residence. For claims arising from a contract, the enforcement office of the place where the contract is to be performed is also competent.

In İzmir, enforcement offices operate at the İzmir Courthouse and the district courthouses. If the debtor resides in Karşıyaka, enforcement is initiated at the Karşıyaka Enforcement Office; if in Bornova, at the Bornova Enforcement Office.

A debtor may raise a jurisdictional objection within seven days against enforcement initiated at an office lacking jurisdiction. If the objection is accepted, the file is sent to the competent enforcement office, which causes a loss of time.

Before initiating enforcement, all documents showing the basis of the claim must be gathered. This includes the contract, invoice, delivery note, receipt of delivery, current account statement, original cheques or promissory notes, demand letters sent, and service certificates.

Commercial book records are also important evidence. Books kept and certified in accordance with the required procedure can constitute evidence in favor of their owner. For this reason, it is advisable to check the certification of the books and the order of the records.

The debtor's current address, tax number and, if available, bank details directly affect the speed of the enforcement. Incomplete address information can cause delays of months at the service stage.

The costs of enforcement are initially deposited by the creditor. This includes the application fee, the advance fee, service costs and attachment costs. At the end of the enforcement, these costs are charged to the debtor and are covered first out of the money collected.

The advance fee is charged at a certain percentage of the claim subject to enforcement and is later offset against the collection fee. If the enforcement produces no result, refunding these amounts to the creditor is, as a rule, not possible.

For this reason, it is advisable to investigate the debtor's ability to pay before initiating enforcement. In a file with no realistic prospect of collection, the burden of costs remains with the creditor.

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The type of interest applied depends on the nature of the claim. If interest was agreed in the contract, that rate applies first. If it was not agreed, default interest applies; in commercial transactions where both parties are merchants, advance interest becomes relevant.

The starting date of interest also matters. For debts with a due date, the due date is taken as the basis; for debts without a due date, the date of service of the demand is taken as the basis. Failing to correctly state the starting date of interest in the request for enforcement later becomes grounds for objection.

For negotiable instruments, interest begins to run from the maturity date of the instrument. For a cheque, the date of presentation is decisive.

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In enforcement without a judgment, the debtor may object to the enforcement office within seven days of service of the payment order. An objection made within this period automatically stops the enforcement; for the creditor to continue the enforcement, an application must be made to the court or the enforcement court.

The objection may relate to the whole debt or to part of it. In a partial objection, the enforcement becomes final as to the part not objected to, and attachment may be requested for that part. If the debtor objects to the signature, this must be stated separately and explicitly; otherwise the signature is deemed accepted.

The seven-day period is a preclusive period. If it is missed, the enforcement becomes final. In this case, the remaining option for the debtor is to file a negative declaratory action to establish that no debt exists, or, if payment has been made, an action for restitution.

Removal of the objection is heard before the enforcement court and may only be requested on the basis of documents listed in the law. Annulment of the objection, on the other hand, is an action filed before the general court and allows proof by any type of evidence.

Removal of the objection is faster but involves a narrow review; if the documents are found insufficient, the request is rejected. This rejection does not mean that the claim does not exist, only that it could not be proven through this procedure.

The removal procedure is suitable for a creditor holding a note whose signature has been acknowledged, or a notarized document. If the claim can only be proven by invoice, email or witness testimony, the action to annul the objection should be preferred.

Under Article 67 of the Enforcement and Bankruptcy Act, the creditor may, within one year of service of the objection, apply to the court and file an action to annul the objection by proving the existence of the claim. If the action is accepted, the enforcement continues from where it left off.

Under the same article, a debtor found to have been unjustified in the objection is ordered to pay compensation of not less than twenty percent of the adjudicated amount. If the enforcement is found to have been unjustified and in bad faith, the creditor is instead held liable for compensation to the same extent.

If the one-year period is missed, the action to annul the objection is no longer available; however, the creditor's right to file an ordinary claim action under the general provisions remains reserved. In that case, compensation for denial of enforcement cannot be claimed, and the enforcement must be restarted.

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A negative declaratory action is filed by a person who claims not to owe a debt, in order to have this established. It may be filed before or during the enforcement proceedings. In an action filed before enforcement, the court may order the enforcement to be suspended against security of a certain percentage of the claim.

If the debt has already been paid as a result of the enforcement proceedings, an action for restitution is filed instead of a negative declaratory action. In this action, the return of the money paid is sought. The action must be filed within one year of the date the money was paid.

If the conditions are met, compensation may be awarded in favor of a debtor who wins the negative declaratory action. Conversely, if the action is found to have been filed in bad faith, compensation against the debtor becomes an issue.

A complaint procedure is used against actions of the enforcement and bankruptcy offices. The complaint is filed with the enforcement court and, as a rule, must be raised within seven days of the date the action became known.

Where a right is not fulfilled or is left pending without justification, the complaint is not subject to a time limit and may be filed at any time. No time limit applies either to actions that constitute a violation of public order.

A complaint is different from an objection. An objection concerns the claim itself and is filed with the enforcement office, while a complaint concerns the procedure of an action and is filed with the enforcement court. Confusing this distinction leads to loss of rights.

Once the enforcement becomes final, the creditor may request attachment. The right to request attachment lapses after one year from service of the payment order. If attachment is not requested within this period, the file is removed from active processing and must be reactivated by a renewal request.

Attachment may be placed on the debtor's movable and immovable property, as well as on rights and claims held against third parties. In practice, the most common methods are attachment of bank accounts, vehicle registration, title deed records, and salary.

During attachment, property of the debtor that is exempt from attachment is set aside. Furthermore, if the value of the attached property is sufficient to cover the claim, attachment cannot be placed on the excess; this principle is called the prohibition of excessive attachment.

Under Article 83 of the Enforcement and Bankruptcy Act, salaries, allowances and all kinds of wages may be attached after deducting the amount the enforcement officer considers necessary for the subsistence of the debtor and their family. However, the amount attached cannot be less than one quarter of this income.

Under the same article, the deduction for a subsequent attachment does not begin until the deduction for the attachment ahead of it in order is completed. For this reason, in files with multiple attachments, the order of deduction is important.

The situation is different for maintenance (alimony) claims. Attachments made for maintenance claims are not subject to this limitation and take priority in order.

The law fully exempts certain assets from attachment. This includes the personal belongings of the debtor and family members living under the same roof, together with the bedding, kitchenware and heating equipment necessary for the household. Tools and equipment necessary for the debtor to continue their profession are also exempt from attachment within certain limits.

Student scholarships, certain social assistance payments, payments made during military service and certain compensation items are also exempt from attachment. As for retirement pensions, the rule is that they cannot be attached without the debtor's written consent.

If attachment is placed on an asset that cannot be attached, the debtor may file a complaint with the enforcement court within seven days of learning of the attachment. If this period is missed, the attachment becomes valid.

A claim the debtor holds against a third party is attached, under Article 89 of the Enforcement and Bankruptcy Act, by a garnishment notice. The first garnishment notice is served on the third party, who may thereafter pay the debt only to the enforcement office.

If the third party does not object within seven days of service of the first notice, the property is deemed to be in their possession or the debt deemed to be owed by them. In that case, a second garnishment notice is sent requesting payment of the debt or delivery of the property.

If the second notice is also not objected to, a third garnishment notice is served. At this stage, the third party must, within fifteen days, pay the money to the enforcement office, deliver the property, or file a negative declaratory action. If they lose that action, they are ordered to pay compensation of not less than twenty percent.

Under Article 106 of the Enforcement and Bankruptcy Act, the creditor may request the sale of attached property within six months of the attachment if it is movable property, or within one year of the attachment if it is immovable property. A claim the debtor holds against third parties is treated as movable property.

If sale is not requested within these periods, or is requested but the necessary costs are not deposited, the attachment is lifted. In practice, this is one of the most common points at which creditors lose their rights.

A valuation is carried out before the sale. The assessed value may be objected to before the enforcement court by way of a complaint, within seven days of service of the report. Since an undervaluation can harm both the debtor and the creditor, this stage should not be skipped.

Annulment of an auction is requested from the enforcement court on the grounds of unlawfulness in the sale process. The main grounds are procedural irregularities in preparing for the auction, failure to properly serve the sale announcement, an incorrect valuation, and unlawfulness in the conduct of the auction.

The request must be made within seven days of the auction date. For interested parties who learn of the irregularity after the auction date, the period runs from the date they learn of it; however, in any event this right lapses after one year from the auction.

If the request for annulment is rejected, the requesting party may be ordered to pay a fine of a certain percentage of the auction price. For this reason, the request must be based on a concrete and documentable irregularity.

For claims based on a cheque, promissory note or bill of exchange, the attachment procedure specific to negotiable instruments is used. In this procedure, the payment order sent to the debtor requires payment of the debt within ten days; the objection period is five days.

The most important feature of this type of enforcement is that the objection does not automatically stop the enforcement. The debtor files the objection with the enforcement court, and the enforcement can only be stopped by a decision of the court.

It is essential that the instrument qualify as a negotiable instrument. If one of the mandatory elements is missing, the instrument loses its status as a negotiable instrument; in that case, the enforcement is cancelled and the claim must instead be pursued through enforcement without a judgment.

For a dishonoured cheque, two separate remedies can be pursued together. The first is enforcement specific to negotiable instruments to collect the claim. The second is filing a criminal complaint for the offence of causing a cheque to be dishonoured.

The complaint must be filed with the enforcement criminal court within a certain period from the date the cheque is found to be dishonoured. The sanction is a judicial fine, which may be converted into imprisonment if not paid.

When the amount of the cheque is paid together with interest and costs, the right to complain lapses, the case is dismissed, or the penalty is lifted. For this reason, the criminal route serves as an important source of pressure for collection.

The payment order notifies the debtor that, if the debt is not paid, they must submit a declaration of assets. The declaration of assets is a statement by the debtor of the assets and income sufficient to cover the claim subject to enforcement.

A debtor who fails to submit a truthful declaration of assets within the time limit may face a sanction before the enforcement criminal court. A false declaration is subject to a separate sanction.

The declaration of assets must cover the debtor's entire estate. Assets acquired subsequently must also be declared; this obligation continues for as long as the enforcement proceedings continue.

Transfers made by the debtor for the purpose of concealing assets from the creditor may be subject to an action for the annulment of dispositions. This action does not render the transfer void; rather, it enables the creditor to exercise the power of compulsory enforcement over that asset.

In order to file the action, the creditor must hold a provisional or definitive certificate of insolvency. A certificate of insolvency is a document showing that the claim could not be satisfied as a result of the attachment carried out.

The law treats certain dispositions as subject to annulment from the outset. This includes gifts, certain transfers made by the debtor to their spouse, ascendants and descendants, and sales involving a difference in value. The time limit for the action is five years from the date of the disposition.

A certificate of insolvency is an official document showing that, as a result of the enforcement carried out, the claim could not be collected in full. It grants the creditor important rights.

The document is a prerequisite for the creditor to file an action for the annulment of dispositions. It also provides a fee advantage when initiating new enforcement proceedings for the debt, and extends the limitation period applicable to the claim.

When the debtor acquires new assets, the creditor may continue the enforcement on the basis of this document. For this reason, in files where collection has failed, it is recommended not to close the file without obtaining a certificate of insolvency.

A precautionary attachment is a temporary measure that secures the debtor's assets before the enforcement becomes final. It may be requested from the court for claims that have fallen due and are not secured by a pledge.

As a rule, the court decides against the provision of security. If enforcement of the precautionary attachment order is not requested within ten days of obtaining the order, the order automatically lapses. After it is carried out, enforcement proceedings or an action must also be initiated within a certain period.

A precautionary attachment should not be confused with an interim injunction. A precautionary attachment applies to monetary claims, while an interim injunction is applied to protect the subject matter of a dispute in matters other than money.

Composition with creditors is a mechanism that allows a debtor who cannot pay their debts when due, or who is at risk of being unable to pay them, to restructure their debts by reaching an agreement with their creditors. Both the debtor and a creditor entitled to request bankruptcy may apply for it.

Upon application, the court first grants a temporary moratorium and appoints a temporary composition commissioner. If the conditions are found to be met, a final moratorium is granted. During the moratorium, no enforcement proceedings may be initiated against the debtor, and enforcement proceedings already begun are suspended.

The composition plan must be accepted by creditors with the majority required by law and ratified by the court. A ratified composition also becomes binding on creditors who did not take part in the plan.

In enforcement by attachment, the creditor secures seizure of specific assets of the debtor only for their own claim. In bankruptcy, however, the debtor's entire estate is liquidated, and the proceeds are distributed among all creditors.

Bankruptcy proceedings may only be pursued against persons subject to bankruptcy. This includes merchants and other persons listed in the law. Bankruptcy cannot be requested against a person who is not a merchant.

The creditor's choice depends on the debtor's situation. If the debtor has a single valuable asset, attachment produces a faster result; if the debtor owes many creditors and their assets are insufficient, bankruptcy becomes the relevant option.

If the time limits for requesting attachment or sale are missed, the file is removed from active processing. This does not mean the claim ceases to exist; the right to enforce continues, but the file must be reactivated.

The file is reactivated through a renewal request. A renewal fee is paid and a renewal order is served on the debtor. This service does not give the debtor a new right of objection; it merely notifies them that the enforcement continues.

The situation is different if the claim itself has become time-barred. In that case, the debtor may apply to the enforcement court requesting suspension of the enforcement. The limitation period varies according to the nature of the basis for enforcement.

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A limitation period does not extinguish the claim on its own; it merely gives the debtor a defence. If the debtor does not raise this defence, the enforcement continues and collection takes place.

Limitation periods vary according to the type of claim. As a rule, ten years applies to claims arising from contracts, five years to periodic obligations such as rent and interest, and shorter periods apply to cheques depending on the underlying instrument relationship.

The limitation period is interrupted by filing an action, initiating enforcement, the debtor acknowledging the debt, or making a partial payment, and it then begins to run afresh. For this reason, records should be kept of correspondence and partial payments made during collection efforts.

For commercial claims and compensation demands concerning payment of a sum of money, as well as for actions to annul the objection, negative declaratory actions and actions for restitution, applying to a mediator before filing the action is a condition for filing the action. An action filed without applying to a mediator is dismissed on procedural grounds.

The enforcement proceedings themselves, however, are not subject to the mediation requirement. The creditor may initiate enforcement directly; the mediation obligation only arises at the litigation stage.

This distinction is important in practice. If the debtor objects to the payment order and the creditor intends to file an action to annul the objection, the mediation process must be completed before filing the action, and the final report must be attached to the petition.

An enforcement proceeding does not directly create a credit score record; however, if the debt subject to enforcement is owed to a bank or financial institution, the delay in payment is reflected in credit registry systems and affects the credit score.

If the debt is paid, updating the record may take time. Obtaining a document confirming that the enforcement file has been closed after payment, and forwarding it to the creditor institution, speeds up the process.

A dishonoured cheque record, on the other hand, is kept in a separate registry and has longer-lasting consequences. If the amount of the cheque is paid, a separate application must be made to have the record deleted.