If you live abroad and are unsure about how to recover a debt in Italy, you’re in the right place. In this brief guide, we will explain how to initiate a procedure to recover a debt from an Italian debtor.
When to recover a debt in Italy?
The most common scenario involves a foreign creditor (typically a company) that has entered into a contract with an Italian debtor. Consider the foreign company supplying goods or services to an individual or Italian company, who fails to make the owed payment. In such cases, if the Italian debtor does not make the payment despite reminders, it may be necessary to start a debt recovery procedure.
How is debt recovered in Italy?
Debt recovery in Italy can be divided into several stages:
Notice of Default
The process begins with putting the debtor into default, as set out in article 1219, paragraph 1 of the civil code. This is done by sending a formal notice letter, typically giving 7-10 days for payment.
What are the consequences of putting an Italian debtor into default? This action results in:
- The right to compensation for damage caused by the delay;
- Halting the statute of limitations;
- The right to default interest;
- The ability to initiate legal proceedings to recover the debt.
Who can send a notice of default?
The notice can be sent by the creditor themselves, an Italian attorney specializing in debt recovery, or a debt collection agency. We advise consulting with an Italian legal firm specializing in debt recovery. Indeed, when the debtor receives a letter from an Italian attorney, they will understand that legal action will follow in the event of non-payment.
What happens after the notice of default? Options include:
- The debtor pays the owed amount;
- Negotiations between the creditor and debtor;
- The debtor doesn’t pay.
In the last scenario, the legal route becomes necessary. If the claim is clear, liquid, and enforceable (e.g., an unpaid invoice for supplied goods), the creditor can pursue a payment order against the debtor, using the “decree for payment” tool.
What is the “decree for payment” application?
It’s a method through which the creditor asks the judicial authority to issue a payment order against the debtor. If the debtor receives this order, they have 40 days to oppose. If they don’t, the decree becomes enforceable.
What does this mean?
If the Italian debtor believes the payment request is unfounded, they can object, triggering a regular judicial procedure. If they don’t oppose the decree, it becomes final and enforceable. In other words, the creditor will have a legal title to forcibly recover the debt.
What if the debt isn’t clear, liquid, and enforceable?
The creditor cannot use the “decree for payment” application. Instead, they must begin a standard procedure to obtain a judgment against the Italian debtor.
The final phase of debt recovery in Italy involves starting an execution procedure against the debtor. To do this, the creditor must have an enforceable title, like a final judgment or an unopposed “decree for payment”. The creditor will then serve the debtor with a formal payment order.
What is a formal payment order?
It’s a document ordering the debtor to make payment within a specific period. If the debtor doesn’t pay despite this notice, the creditor can begin seizing assets.
Depending on the type of asset the creditor intends to use to settle the debt, execution procedures in Italy can be classified into movable property, real estate, and third-party procedures.
Movable Property Execution The creditor notifies the debtor of a seizure of movable property. These assets are then auctioned off to settle the debt.
Real Estate Execution The creditor will request a seizure of the debtor’s real property, which is then auctioned off to settle the debt.
Third-Party Execution The creditor will notify a seizure to a third-party who owes the debtor money. A classic example is seizing funds held by the debtor in a bank or garnishing their salary.
In Summary Although this brief introduction to debt recovery in Italy touches on many aspects, the process begins with putting the Italian debtor into default. While this stage can be managed by the creditor or a debt collection agency, our advice is to consult an Italian attorney specializing in debt recovery.
If the out-of-court phase doesn’t result in debt recovery, the legal phase begins. This phase must be managed by an Italian legal firm.
The legal phase begins with the “decree for payment” application if the debt is clear, liquid, and enforceable (in 80% of cases). Otherwise, a regular procedure is initiated to obtain a final judgment.
Finally, the execution phase can only be managed by an Italian legal firm, starting with notifying the Italian debtor of the asset seizure.
If you have questions or need further clarification, please contact our Italian attorney specializing in debt recovery for a consultation.