Enforcement in Poland
- Debt Collection in Poland
- Injunctions / order for payment
- Debt collaterals / securities
- Enforcement of foreign judgements
- Enforcement procedure
- Late Payment Interest Rate in Poland
- Insolvency & Restructuring in Poland
- Limitation periods
- Debt collection in Polish cities
Initiation of enforcement procedure
The enforcement procedure in Poland is run by a specialized public official called a debt enforcement officer or enforcement bailiff (in Polish: komornik). The debt enforcement may be initiated by the creditor by filing formal an application accompanied by the relevant enforcement order.
In accordance with Polish Code of Civil Procedure, there are three basic types of the enforcement procedure:
- the enforcement of monetary claims;
- the enforcement of non-monetary claims;
- the enforcement to terminate the co-ownership of a property by way of a public sale.
The enforcement procedure may target any and all of the debtor’s assets. When the debt enforcement officer receives the application for commencement of enforcement, they can carry out an asset search by themselves but, if the creditor has any information about the assets held by the debtor, they can specify in the application the preferred debt enforcement methods, for instance, by requesting the attachment of specific bank account numbers kept by the debtor. The only exception is the enforcement against immovable property – the debt enforcement officer will not take any actions to enforce the creditor’s claims against immovable property unless the creditor requests them to do so. It is important to remember that debt enforcement officers are required by law to use debt collection practices that will be the least burdensome for the debtor.
Jurisdiction of enforcement officer
The application for commencement of enforcement cannot be filed to just any debt enforcement officer. Typically, the application should be submitted to the debt enforcement officer operating at the court in whose district the debtor resides or is seated.
The creditor may choose a debt enforcement officer from a different district subject to material restrictions. Firstly, if the creditor wants to enforce their claims against the debtor’s immovable property, the application must be filed with the debt enforcement officer for the district where the immovable property is situated. Secondly, the debt enforcement officer cannot accept an application filed by a creditor from outside the district if the officer has a backlog of cases, has crossed the limit of cases or the ratio of cases accepted by the debt enforcement officer and ones successfully handled by them is unsatisfactory.
Enforcement title and enforcement orders
The debt enforcement officer initiates the debt enforcement procedure upon an application filed by the creditor. The creditor may file the application for the debt enforcement procedure after obtaining the enforcement order.
Enforcement order = Enforcement title + the declaration of enforceability
Enforcement title is a most usually a final court judgement or other public document which demonstrates the existence of the debt and the balance of the debt, as well as specifies who the debtor and the creditor are.
Polish law considers as enforcement title the following documents:
- a final and non-appealable or immediately enforceable court judgement,
- a court settlement,
- a notarial act including the debtor’s statement on submission to enforcement,
- judgements issued by courts of the EU Member States, settlements executed before these courts or approved by them or public documents drafted in the EU Member States and certified as a European Enforcement Order,
- arbitration awards,
- a settlement executed before a mediator,
- an extract from the claims register created under the bankruptcy proceedings or the restructuring proceedings.
Declaration of enforceability
The declaration of enforceability is what turns an enforcement title (e.g. court judgement) into an enforcement order and as such it is the basis for initiation of enforcement in Poland.
In practice it is an annotation on the enforcement title that approves the commencement of enforcement and names the debtor. It should also state whether the decision is final and non-appealable or immediately enforceable and, if needed, specify the object and the scope of enforcement.
The declaration of enforceability is issued by the competent court ex officio or upon an application. The decision on whether or not an enforcement title should be declared enforceable is made by the court no later than within 3 days from receiving the application. In practice, this time limit is rarely complied with. Generally, the declaration of enforceability is issued by the first-instance court that heard the case or the second-instance court as long as it holds the case files.
Once the creditor obtains the declaration of enforceability he can proceed to file the application for the debt enforcement procedure to the competent debt enforcement officer.
Restrictions on enforcement
The recent years have seen a tendency to improve the protection afforded to the debtor under enforcement proceedings. The increased protection of creditors reduces the effectiveness of the debt enforcement procedure for obvious reasons. This is especially evident in debt enforcement cases against individual debtors.
The first material restriction is the principle whereby a part of the debtor’s remuneration for work corresponding to the statutory minimum remuneration for work is exempt from attachment. So, if the debtor earns (or reports to earn) remuneration for work equal to the statutory minimum remuneration for work, the debt enforcement officer cannot enforce the creditor’s claims against this asset, except for claims for maintenance. In addition, the debt enforcement officer is not allowed to seize home appliances and furniture that are necessary for the debtor and other persons living with them, such as a refrigerator, a washing machine, etc.
There is also a number of items that restrict the enforcement options against property owned by a farmer running a farm.
Moreover, the law sets out several groups of preferred creditors who have priority in being paid the money from the debtor’ assets, which in some cases means that the sum left for non-preferred creditors is negligible.
It is also worth noting that the court may refuse to declare an interim payment order enforceable if it includes a claim barred by the statute of limitation, unless the creditor can provide a document showing that the running of the statute of limitation period has been interrupted.
Enforcement of monetary claims
In Poland, the most frequent reason for debt enforcement procedure are monetary claims. A monetary claim is the debtor’s obligation expressed as a sum of money. The obligation resulting from a debt is simply the obligation to pay a specific sum of money to the creditor. Monetary claims may be enforced against:
- movable property
- remuneration for work
- bank accounts
- receivables (e.g. remuneration to be received on account of a specific-work contract)
- immovable property
- other proprietary interests (e.g. company shares)
- animals (subject to animal protection regulations)
You can read more about each of the most popular methods of monetary claims enforcement below.
Enforcement against movable property
The Polish legal framework contains no definition of movable property, however, it is usually defined as all things other than immovable property (land, buildings permanently fixed to the land and parts of such buildings – dwelling units).
Attachment of a movable. Drafting an attachment report. Effects of attachment
At the first stage of the debt enforcement procedure, the debt enforcement officer attaches the movable property. The debt enforcement officer places a special label on the attached item to show that it has been attached under the debt enforcement procedure. The debt enforcement officer may attach a movable that remains in the debtor’s possession, as well as one which is in the possession of the creditor who commenced enforcement against this movable. In practice, this usually means that the debt enforcement officer labels all movables susceptible of enforcement that can be found in the debtor’s apartment or business premises. A third person whose movable has been attached may bring a court action for the release of the attached movable.
Following the attachment, the debt enforcement officer drafts a report containing a list of the attached movables and their estimated value.
Generally, attached movables remain within the debtor’s possession and can be handed over to a third person, including the creditor, in specific cases only.
The transfer of the title to a movable that has been attached has no impact on the debt enforcement procedure, with the debt enforcement officer being authorized to enforce the creditor’s claims against the new owner of the movable. This means that enforcement against the attached movable can continue even when the debtor disposes of the movable, for instance, by selling it.
Selling an attached movable
If the debtor fails to satisfy the creditor in spite of the pending enforcement procedure, the debt enforcement officer can sell the movables attached. However, the sale cannot take place before the expiry of 14 days from the day when the attachment of the movables became final and non-appealable. The exceptions include attached perishables (e.g. foodstuffs), high-maintenance items and livestock, if the debtor refuses to take them into custody. If this the case, these items can be sold right after the attachment.
There are three types of sale that can take place under debt enforcement procedure.
The first type is sale is referred to as private sale. The debt enforcement officer may sell a movable privately if the debtor agreed to this type of sale and specified the minimum price of the movable. The movable can be sold if none of the creditors participating the enforcement objected to this type of sale. Private sale offers a simpler procedure and faster satisfaction of at least a portion of the claims.
Sale to a business (non-auction sale)
The second type of sale is referred to as the non-auction sale. Upon an application by either the debtor or the creditor, the debt enforcement officer may sell the attached movables which are unused and which are traded to a business trading in such movables, at wholesale prices or, where such prices are not documented, at 25% lower than the estimated value of movable properties. The sale depends on whether the business expresses the intention to buy the movables.
The third and the most popular type of sale of movables under the debt enforcement procedure is the auction sale.
Notice of auction
An auction sale is divided into several steps. The first step is to display the notice of auction in the building of the district court with jurisdiction over the venue of the auction and on the website of the National Council of Debt Enforcement Officers (Krajowa Rada Komornicza). The notice of auction specifies the time, venue, object and terms of the auction, the estimated value and the asking price, as well as the time and place for the inspection of movables. This is also the last chance for third parties whose movables have been attached in the enforcement procedure to challenge the debt enforcement officer’s actions. If they fail to produce proof before the auction that they brought a court action for the release of the attached movable and obtained an order staying the enforcement procedure, the attached movables belonging to them will be sold at the action. On the first date of the auction, the asking price should equal to three-fourths of the estimated value. If the first auction is not successful, the movables attached may be sold on the second auction date. The asking price on the second auction date will be half the estimated value. Movable property may not be sold for a price lower than the asking price.
The bidders are required to place a deposit amounting to one-tenth of the estimated value, no later than the day preceding the auction. Deposits placed by the bidders who did not win the action will be returned to them. If the purchaser fails to timely comply with the auction terms regarding payment of the purchase price, they will forfeit the deposit and the effects of the award of the bid will expire. No deposit is required from a creditor (bidder) whose claim equals or exceeds the deposit and if its claim and any privileged claims are covered by the asking price.
Finally, when all bidders place the required deposits, the public auction can start. The following persons may not participate in the bidding: the debtor, the debt enforcement officer, their spouse, children, parents and siblings, persons who attend the auction in an official capacity and a bidder who did not comply with the terms of the previous auction.
The auction is run verbally by the debt enforcement officer who offers for sale individual movables or groups of movables of the same type, one by one, indicating the estimated value and the asking price. At an auction, the bidders compete against each other, with each subsequent bid being higher than the previous bid. A bid ceases to be binding as soon as a higher bid is placed by another bidder. An action can be held even if there is only one bidder.
Award of a bid
The debt enforcement officer will award the bid to the bidder offering the highest bid price if no higher price is offered after three calls for a higher bid. The award of the bid is noted in the auction report. A movable is sold as soon as the highest bid is awarded, unlike in the case of an auction of immovable property.
The creditor or the debtor may appeal against the award of the bid in the event of violation of the provisions on the public nature of auctions, the lowest bid price and disqualification of bidders. Any appeal should be noted in the auction report. Following the appeal, the court will issue a decision, which may be appealed, as well. If an appeal is not decided within two weeks, the purchaser may withdraw from the purchase of movable property and collect the money paid.
Payment of a bid price
Generally, the purchaser pays the bid price as soon as the bid has been awarded. However, if such price exceeds five hundred Polish zlotys, the purchaser promptly pays one-fifth of the price, but in no event less than five hundred Polish zlotys, while the balance is paid until 6 p.m. on the immediately following day.
If the purchaser fails to meet the deadlines set, the debt enforcement officer resumes the auction sale of the same movable property, and the bidder does not acquire the title to the movable.
Second auction. Discontinuance
If an auction is not successful because no one was interested in bidding, the creditor may, within two weeks of receipt of the debt enforcement officer’s notice, demand that another auction be scheduled, or take possession of the whole or part of movable property offered for sale at a price not lower than the asking price. If enforcement is conducted by more than one creditor, the creditor who offered the highest price shall have priority in taking possession of movable property.
If another auction is not successful, the creditor may take possession of the movable property for a price not lower than the asking price within two weeks of receipt of the debt enforcement officer’s notice. If the creditor fails to exercise the right to take possession of the movable property, the debt enforcement officer will discontinue proceedings with respect to the things which have not been sold or which have not been taken in possession.
Movable property can also be sold by way of an electronic auction. The debt enforcement officer conducts sale by an electronic auction if the creditor so requests after the movable is attached. If enforcement is conducted by more than one creditor, the type of sale is selected by the creditor who requested the first attachment.
Sale by an electronic auction shall be conducted via the ICT system, namely the platform elicytacje.komornik.pl. All auction-related actions, such as the placement of the deposit or a bid, are performed online.
Enforcement of a claim against a bank account
Simply put, the enforcement of a claim against a bank account is the attachment of cash in the debtor’s bank account and the forwarding of the cash to the debt enforcement officer. Although, in theory, the debt enforcement officer may attach all the debtor’s bank accounts using the OGNIVO system or sending enquiry letters to individual banks to determine the bank account numbers, the creditor is recommended to indicate the bank account numbers in the application, provided that they know what these numbers are. If the debt enforcement officer is provided with the bank account numbers by the creditor, the costs of the enforcement are lower and the procedure runs faster. If the debtor is registered as a VAT payer, the creditor can try to determine the debtor’s bank accounts using the so-called white list, although there is no guarantee that the list will include all the debtor’s accounts.
Attachment / seizure of bank account
In order to conduct enforcement against receivables in bank accounts, the debt enforcement officer sends a notice of attachment of the debtor’s receivables in the bank account up to the value of the debt plus enforcement costs to the bank which maintains the debtor’s account. From that moment on, the bank may not disburse money up to the value of the claim attached from the account and will freeze all sums deposited in the account after the attachment up to the value of the claim.
Forwarding the attached / seized money
Once the bank receives the notice of attachment, not only is it prohibited from making disbursements from the account without the debt enforcement officer’s approval, but it is also obligated to forward the attached sum of money to the debt enforcement officer within 7 days or notify the debt enforcement officer about any obstacles that prevent the forwarding of the attached money within the same time limit. However, the bank forwards the attached money from the account to the debt enforcement officer promptly in the case of the enforcement of current maintenance or disability pensions paid as compensation.
Bank account enforcement exemptions
Not all types of receivables in bank accounts can be attached as part of enforcement. Enforcement cannot be conducted against:
- an escrow account,
- a VAT account,
- a special type of a savings and checking account, called a family account, dedicated to payments exempt from enforcement.
The bank will also refuse to forward money when, among others:
- there is no money in the bank account,
- the bank account has been attached to the benefit of another creditor and the money available in the account is insufficient to satisfy all the creditors,
- the administrative enforcement procedure is conducted concurrently,
- the bank’s claims have been set off against the receivables in the bank account, such set-off being valid provided that it took place before the attachment.
Amount of exemption from enforcement
The law provides for a certain amount of money in the bank account to be exempt from enforcement (which is de facto an amount viewed by the lawmakers as necessary for the individual debtor to cover living expenses). This amount is equal to 75% of the statutory minimum gross remuneration for work of a person working full-time. In 2021, this amount was equal to PLN 2100. This amount applies monthly.
It is worth noting that the amount exempt from enforcement applies to money in personal bank accounts (and not business bank accounts) kept by natural persons. This exemption does not apply to money in business accounts and to debtors who are not natural persons.
Bank account enforcement exceptions
The following benefits are exempt from the enforcement against bank accounts and cannot be attached and forwarded to the debt enforcement officer: benefits from the Maintenance Fund, maintenance paid as compensation, family benefits, child benefits (Rodzina 500+, Dobry start), family allowance, nursing allowance, childbirth allowance, double orphan allowance, social services benefits.
The burden of proving that the attached receivables should be exempt from enforcement lies with the debtor. If the debtor fails to prove that a receivable is covered by the exemption, the debt enforcement officer will forward the attached money to the creditor.
Enforcement against a joint bank account
The debt enforcement officer may attach receivables in bank accounts belonging to two or more persons only one of whom owes money to the creditor. Keeping a joint account is a popular choice among, for instance, civil-law partnerships and marriages.
If the debt enforcement officer attaches a bank account kept for two persons who are not married, enforcement shall be conducted up to the value of the debtor’s share in the joint account specified in the bank account agreement executed between the bank and the debtor and another person (persons) for whom the bank account is maintained, which the debtor is obliged to submit to the debt enforcement officer within one week of the attachment. If no agreement was executed or the one that has been executed does not specify the shares of the individual bank account owners, it is presumed that all owners of a bank account hold equal shares. This presumption cannot be rebutted, e.g., by way of an internal agreement between the bank account owners. In the case where the actual shares in a bank account differ from the ones agreed, the only protection available to third parties against attachment is a court action for exemption from enforcement.
Enforcement can also be conducted against the joint bank account of spouses. If the creditor obtained an enforcement order issued against a married debtor, the receivables in the bank account of the spouses may be attached, provided that the couple has been married under the matrimonial property regime (if not, the procure described above applies).
That said, the debtor’s spouse is not completely defenceless in this situation. They can bring a court action to be exempt from enforcement, asserting that the joint bank account holds money that is not the debtor’s personal property or money other than the debtor’s remuneration for work, earnings otherwise generated by the debtor or income from the debtor’s copyrights or related rights, industrial property rights and other creator’s rights. In such a case, the money that is the personal property of the debtor’s spouse or the money that constitutes marital property, but has been collected or earned by the debtor’s spouse should be exempt from enforcement.
Enforcement against real estate
In theory, enforcement against immovable property allows the creditor to obtain a relatively large sum of money owed by the debtor, however, the enforcement procedure concerning immovable property is long and entails numerous formal requirements.
The debt enforcement officer will initiate this type of enforcement procedure only at the creditor’s request.
Enforcement against immovable property is conducted by a debt enforcement officer operating at the court in whose district the immovable property is located. In the case of enforcement against immovable property, the creditor cannot choose the debt enforcement officer as the exclusive jurisdiction applies. The only exception is where the immovable property is located within the judicial districts of several courts. Then, the creditor has the right to choose the debt enforcement officer, but only from among the officers operating at the courts in whose district the immovable property is located.
Determining the debtor’s real estate
Theoretically, the debt enforcement officer should determine if the debtor has any immovable property and, if so, identify them. However, a creditor who has this information before the enforcement procedure starts stands a better chance of obtaining satisfaction of their claims (for instance, the creditor can verify if the debtor is not trying to dispose of their assets to prevent the satisfaction of the debt).
Unfortunately, a single central register of immovable property owners has not been created in Poland. To check if the debtor owns any immovable property, the creditor can carry out their own research by taking the following steps:
- studying the records in the land and building register (ewidencja gruntów i budynków) – the creditor can contact individual starosts (local government bodies) and demonstrate that they have a legitimate interest in learning the numbers of land and mortgage registers for immovables owned by a specific individual; the drawback of this solution is the numerous offices, and the need to demonstrate the legitimate interest; in addition the President of the Personal Data Protection Office (Urząd Ochrony Danych Osobowych) expressed an opinion several years ago which placed restrictions on the disclosure of this kind of information to third parties,
- applying for disclosure of information about assets – this application can be submitted by the creditor even before the enforcement procedure is commenced; theoretically, if the court awards the application, the debtor is legally required to produce a statement of all assets they own under the penalty of perjury.
- engaging a professional entity collecting business intelligence.
Participants in enforcement procedure concerning real estate
Apart from the creditor and the debtor, the procedure can be joined by holders of limited real rights or claims or personal rights secured against immovable property and, when enforcement is conducted against the perpetual usufruct right, the public body which executed the perpetual usufruct agreement. This means that the ring of participants is wider than in the case of the ordinary enforcement procedure. This is because immovable property can be used as collateral in various forms of security arrangements, e.g., a mortgage. Usually, due to the nature of the procedure, enforcement against immovable property involves more than one creditor.
Attachment / seizure of real estate
Upon receipt of a creditor’s application to commence enforcement against immovable property, the debt enforcement officer must request the debtor to repay their debt within two weeks form the request. Once the debtor receives the request for payment, their immovable property is attached / seized under the enforcement procedure. The debt enforcement officer simultaneously sends the request to the debtor and applies to the land and mortgage register court for an entry of the commencement of enforcement in the land and mortgage register.
Description and appraisal
If the debtor fails to pay the debt within the time limit specified in the request sent by the debt enforcement officer, the debt enforcement officer will proceed with the description and appraisal of the real estate.
The description and appraisal report is an official document drafted by the debt enforcement officer setting out the technical condition and the legal status of the immovable property. To determine (appraise) the value of the immovable property, the debt enforcement officer will appoint a court expert licensed to appraise immovable property under separate legal regulations.
Appeal against description and appraisal
Similar to any other action undertaken by the debt enforcement officer, the description and appraisal can be challenged. The appeal can be submitted within two weeks following the completion of the description and appraisal.
Appeal against the description and appraisal is heard by the court which will decide if the appeal is justified by issuing a relevant decision. If the court awards the appeal, the debt enforcement officer must repeat the action to the extent appealed, for instance, by requesting a supplementary opinion regarding the appraisal of the immovable property. The court’s decision may also be appealed to the second-instance court.
Who can appeal? The appeal can be submitted by the debtor, as well as the other participants in the enforcement procedure, namely the creditors (including collateral creditors). The appeal is typically submitted on the grounds that the value stated in the appraisal is inaccurate. If the court agrees, the appraisal must be supplemented or repeated. Unfortunately, this significantly extends the duration of the enforcement proceedings concerning immovable property. The description and appraisal are the last step before the auction, so debtors often challenge the description and appraisal even without any reasonable grounds for doing so only to delay the sale of the immovable.
Real estate auction date
The date of the first public auction may be fixed by the debt enforcement officer no sooner than two weeks after the description and appraisal are approved, nor may it be fixed before the judgement on whose basis the enforcement was commenced becomes final and non-appealable. Importantly, if the auction concerns a dwelling unit or a land lot with a residential building which serve the debtor’s housing needs, the auction date is fixed at the creditor’s request. What is more, public auctions of immovable property serving the debtor’s housing needs may be held if the value of the principal debt is equal to or higher than one-twentieth of the estimated value. Where there is more than one creditor, the total value of their claims is taken into account. This regulation is meant to prevent cases where an individual debtor and their family lose their home because of a relatively small debt. It does not, however, apply where the debt is owed to the State Treasury or results from a judgement issued under criminal proceedings or, despite the fact that the conditions specified above are not met, the debtor who owns the immovable property or the court under separate proceedings agreed to the auction date being fixed.
Restrictions on auctions of immovable property resulting from COVID-19
An auction of a dwelling unit or a land lot with a residential building which serve the debtor’s housing needs cannot be held as long the state of epidemic threat or the state of epidemic continue and 90 days thereafter. This regulation has been introduced as an element of the protective measures put in place in the wake of the spread of SARS-CoV-2 in 2020 and has remained in force ever since with no exceptions.
Notice of auction of immovable property
In order to hold an auction of immovable property, the debt enforcement officer displays the notice of auction on the website and the notice board of the court overseeing the enforcement against immovable property, in the municipality office proper for the location of the immovable property and on the website of the National Council of Court Enforcement Officers. The notice should specify the immovable property to be auctioned, the estimated value and the asking price, and the value of the deposit to be placed by bidders and the date and place of the auction.
The estimated value. The asking price
The estimated value is equal to the value determined in the description and appraisal by the court expert licensed to appraise immovable property. The asking price, which is the minimum price that has to be paid by a bidder to purchase the immovable at the first auction, is equal to three-fourths of the estimated value of the immovable. If, for any reason, the first auction is unsuccessful, the asking price at the next auction amounts to only two-thirds of the estimated value of the immovable property (unless the auction is repeated because of the expiry of the award of the bid).
A person or an entity interested in bidding at an action are required to place a deposit amounting to one-tenth of the estimated value, no later than the day preceding the auction. A deposit is a type of a security in the event that the winning bidder fails to fulfill the terms of the action related to the payment of the price. The requirement to place a deposit ensures that an auction is attended by entities who are serious about purchasing the immovable property and prevents the sale price from being artificially driven up. In the event that the winning bidder fails to fulfill the terms of the auction, the deposit they paid is forfeited to the benefit of the State Treasury. The deposits placed by other bidders are returned promptly.
Calling an auction. The course of an auction
An auction is held by the debt enforcement officer in the presence and under the supervision of a judge or judicial officer whose task is to ensure the integrity of the procedure and address any concerns that may potentially be raised by the participants.
An auction in run verbally. At an auction the bidders compete against each other, with each subsequent bid (offer to buy) being higher than the previous bid. The first bid may not increase by less than one percent of the asking price. A bid ceases to be binding when another bidder offers a higher bid. An auction can be held even if there is only one bidder.
An auction ends when no more bids are placed after the debt enforcement officer announces the last highest bid three times. The debt enforcement officer closes the bidding and names the bidder who offered the highest price.
Award of a bid and court’s decision to transfer the title
Unlike in the case of an auction of a movable property, the acquisition of the title to real estate by a public auction is divided into two stages.
When the bidding closes and the auction ends, the judge (judicial officer) who supervises the auction issues a decision to award the bid to the bidder who offered the highest price. Generally, the decision should be issued as soon as the auction ends, but it may be issued at a later date if an appeal is filed which cannot be considered promptly.
The most important effect of the award of a bid is that the bidder whose bid is awarded acquires the right to have the transfer of the title to the immovable property approved under a court’s decision, provided that the bidder fulfills the terms of the auction (pays the rest of the price).
If the bidder fails to fulfill the terms of the auction, the deposit that they paid is forfeited and the effects of the award of a bid expire.
The decision to award a bid can be appealed by any person whose rights have been infringed as a result of the failure to comply with the procedure regulations during the enforcement procedure.
Once a decision to award a bid becomes final and non-appealable and the bidder pays the sale price, the court issues a decision to transfer the title to the immovable property to the buyer. This decision as well may be appealed, although it is much more difficult than in the case of a decision to award a bid.
When all challenges (if any) have been dealt with or the deadline to challenge has expired, a decision to transfer the title to immovable property becomes final and non-appealable and the buyer officially becomes the owner of that property. A final and non-appealable decision to transfer the title to immovable property is the basis for the registration of a new owner in the land and mortgage register kept for the property.
Other methods of enforcement against immovable property
A public auction sale held in the courthouse is not the only way to enforce a debt against immovable property. Other methods of enforcement against immovable property include:
- private sale – this option is available only in the case of undeveloped land which is not encumbered and land with a residential or commercial building, where the estimated price has not been challenged by the debtor; the immovable property will be sold at a price no lower than the estimated price after two weeks from the date of the description and appraisal;
- sale by an auction – immovable property which has not been sold privately may be sold by an auction, the auction will be held in accordance with the regulations relating to an auction of a movable property which require a significantly less formal procedure,
- sale by an electronic auction – this type of sale takes place upon the creditor’s application.
Electronic auction against real estate
Online auctions held by the debt enforcement officer have been available for several years, but the option to conduct enforcement procedure online against any type of property has been introduced only recently.
Generally, online auctions have been introduced to facilitate and speed up enforcement against immovable property by, among others, opening it to a wider circle of bidders from across the country and preventing bidding conspiracy thanks to improved transparency.
An online auction of immovable property has the following features:
- it is held only upon the creditor’s application,
- where there are several creditors one of whom applies for an online auction, the application produces effects for and is binding on all of them,
- the notice of auction must be displayed on the website of the National Council of Debt Enforcement Officers,
- a bidder’s access to documents has been limited to the description and appraisal protocol,
- the registration as a bidder and the placement of bids take place via an ICT system set up by the National Council of Debt Enforcement Officers.
This is a relatively recent solution, so it is still too early to evaluate its effectiveness.
Enforcement against other intangible assets. Enforcement of monetary claims against other assets of the debtor
In addition to movable and immovable property, enforcement may be conducted against intangible assets belonging to the debtor. Enforcement against other receivables is conducted against receivables owed to the debtor by other entities. These receivables may include, among others, money owed to the debtor by their clients on account of the business ran by the debtor, the services the debtor provided or sale agreements they executed, claims for the payment of rent, claims for repayment of loans, claims for the payment of dividends by a company, etc.
Jurisdiction of debt enforcement officer
Enforcement against receivables is conducted by the debt enforcement officer of the court of general jurisdiction for the debtor. The only exception is the case where the exercise of a right involves possession of a document (e.g. where the debtor’s receivable is secured against a promissory note or a bill of exchange). Then, the debt enforcement officer of the court in whose district the document is located shall be competent to handle the enforcement. The creditor has the right to choose the debt enforcement officer subject to the relevant restrictions.
The object of enforcement against receivables
The object of enforcement against receivables are receivables that exist and are owed to the debtor on the basis of a specific legal relationship. This means that enforcement against future receivables is impossible; the debt enforcement officer must expand enforcement to include these receivables as soon as they arise.
The process of enforcement against receivables. Attachment
The debt enforcement officer conducts enforcement against receivables through attachment. In order to attach the receivable, the debt enforcement officer notifies the debtor that they may not collect any object of performance from a third party and orders the third party (debtor of the receivable attached) not to submit the object of performance due from them to the debtor but instead to deposit it with the court enforcement officer. Moreover, the debt enforcement officer requests the debtor of the receivable to make, within one week, a statement whether and to what extent the debtor is entitled to the attached receivable or whether and why he refuses to pay, whether other persons claim their rights to the receivables, whether and in what court or before what authority a case involving the attached receivables is or was pending and whether and on the basis of what claims other creditors commenced enforcement against the attached receivable.
Effect of refusal to comply with the debt enforcement officer’s request
The debtor of the attached receivable has a duty to submit the statement requested by the debt enforcement officer even if the attached receivable does not exist. In the case where the third party fails to comply with the request, the debt enforcement officer may impose a fine. The debt enforcement officer is entitled to impose as many fines as necessary to compel the debtor of the attached receivable to submit the requested statement. The debtor of the receivable is obligated to notify the competent authorities about the concurrence of enforcements. The debtor of the receivable cannot choose the attaching authority at their own discretion in order to pay the receivable.
Attachment of sums payable periodically
Although, as discussed above, the debt enforcement officer may conduct enforcement only against specific receivables that exist at the time of enforcement, the law allows exceptions in the case of sums payable periodically. This is understandable as the debt enforcement officer should not be expected to repeat the attachment procedure every month for sums payable in instalments. Periodic payments covered by this solution include, for instance, rent or social insurance benefits.
Enforcement against receivables related to the possession of a document
If the debtor has receivables related to the possession of a document (such as a promissory note, a bill of exchange or another security, an insurance policy, a lottery ticket, a passbook), the debt enforcement officer may conduct enforcement against such a receivable provided that the document has been taken from the debtor and is in the custody of the debt enforcement officer. The document is taken from the debtor in accordance with the regulations on enforcement against movable property. In the next step of this type of enforcement against a receivable, the debt enforcement officer is entitled to request the payment of the relevant sum from the debtor of the attached receivable. What is more, if the receivable owed to the debtor becomes due after the termination of a legal relationship, the debt enforcement officer may effect termination; the debt enforcement officer may also sell the receivable related to the possession of a document.
Attachment of receivables arising from tax overpayment or refund
Attachment of receivables arising from tax overpayment or refund also applies to future claims arising from tax overpayment or refund.
Enforcement against claims to hand over movable or immovable property
It may turn out in the course of enforcement proceedings that the debtor has claims for the handover of a movable or immovable property against a third party. If this is the case, the debt enforcement officer requests the third party who possesses the movable or immovable property to hand over the property and conducts enforcement against the property in accordance with regulations on enforcement against movable or immovable property. Importantly, if the third party refuses to hand over the property, the debt enforcement officer has no legal tools that would allow them to take possession of the property from the third party. However, if the third party refuses to hand over the property, action can be taken by the creditor, who may bring a court action for the handover of the property on the debtor’s behalf.
Enforcement against IP or other property rights
Enforcement may also be conducted against the following property rights:
- copyrights and related rights,
- industrial property rights,
- a partner’s rights to which they are entitled in the event of withdrawal from or dissolution of a civil-law partnership,
- a partner’s/shareholder’s share in the partnership/company or partner’s/shareholder’s disposable rights related to their share in the partnership/company,
- a shareholder’s property rights,
- financial instruments in the securities account or any other account,
- rights to an Internet domain,
- timesharing rights,
- legal expectancy.
The above list is not exhaustive.
The attachment of other property rights is similar to the attachment of receivables. The debt enforcement officer notifies the debtor that they must not dispose of, encumber or exercise the attached right, or receive any benefits due to them in connection with the right attached and advises the debtor’s obligor of the right attached not to perform their obligations to the debtor, but instead to pay amounts due to the debt enforcement officer or the court deposit account.[KP2] This means that the creditor is entitled to receive all income and proceedings related to the right attached (dividends, royalties, profits, etc.).
The creditor’s rights
By operation of attachment, the creditor may exercise such debtor’s property rights arising from the attached right as may be necessary to satisfy the creditor’s claims by way of enforcement; they may also take any actions which are necessary to preserve the right (the so-called preservation actions).
This means that the creditor may take such actions related to the attached right as may be taken by the debtor, but only as far as they are property-related and necessary to satisfy the creditor. As far as the preservation of the right is concerned, the creditor may take any and all actions, both legal and factual.
Appointment of a receiver
If there is a need for the exercise of rights to which the creditor is not entitled by operation of law, the creditor may apply to the court for the appointment of a receiver who will take actions they deem necessary in connection with the attached right. The application for the appointment of a receiver may be submitted by the debtor, as well. The court may also issue an ex officio decision on the appointment of a receiver.
Enforcement against shares in a limited liability company or a joint-stock company
In practice, enforcement is often conducted against the debtor’s rights related to a share in a limited liability company or a joint-stock company. In order to determine if the debtor owns any shares, one can use the search engine of the Online Court and Commercial Gazette (Internetowy Monitor Sądowy i Gospodarczy). In the search engine, shareholders can be searched by first and last name, company name, the Polish resident’s number (PESEL) or the tax identification number (NIP). Details of shareholders with a stake of 25% or higher in a company are also available in the Central Beneficial Owner Register.
This type of enforcement of monetary claims allows the creditor to not only seek the payment of, for instance, the dividend, but also to have the debtor’s shares sold and, in certain cases, even to perform some of the preserving actions, such as challenging the resolutions of the General Meeting which reduce the chances of obtaining satisfaction from the company shares by the creditor.
Enforcement against remuneration for work
Enforcement against remuneration for work is one of the most popular ways of enforcement of monetary claims against individual debtors. This type of enforcement is conducted by the debt enforcement officer operating at the district court of general jurisdiction for the debtor.
Attachment / seizure of remuneration
The procedure of attachment of remuneration for work is relatively simple. The debt enforcement officer attaches remuneration for work by sending a relevant notice to the employer and requesting the employer to provide details of the sum of the remuneration, its components, payment dates and any potential obstacles to the payment of the remuneration for work. The employer is responsible for ensuring that the attached portion of the remuneration for work is forwarded to the debt enforcement officer’s account and not paid to the debtor. If the employer fails, they are liable to a severe fine.
Restrictions on enforcement from remuneration
Although enforcement against remuneration for work is a convenient option of monetary claims enforcement for the creditor, this enforcement method is subject to certain restrictions resulting from the fact that the debtor must be left with funds necessary to meet living expenses. Remuneration for work may be attached subject to the following limits:
- in the case of enforcement of maintenance – up to three-fifths of remuneration may be attached,
- in the case of enforcement of other claims – up to a half of remuneration may be attached.
It should also be noted that the debt enforcement officer cannot attach a portion of remuneration for work that is equal to the statutory minimum remuneration for work less taxes, social insurance contributions and employee capital scheme contributions.
This means that enforcement against remuneration for work is basically impossible in the case of a debtor working on the basis of an employment contract and earning a statutory minimum remuneration for work, unless the creditor’s claim is related to maintenance.
Cost of enforcement
The enforcement of cash benefits in Poland is associated with the necessity to incur certain costs, both by the creditor and the debtor. A distinction should be made between expenses and enforcement fees.
Taking steps by a bailiff in enforcement proceedings is not free. The costs of bailiffs’ activities include, among others:
- costs of announcements,
- costs of remuneration of experts and specialists appointed in the course of enforcement proceedings,
- travel costs,
- costs of obtaining documents or information necessary to conduct the proceedings;
- costs of delivering correspondence,
- costs of transferring funds by postal order or bank transfer.
Of course, what costs will have to be incurred depends on the type and scope of the enforcement activities carried out. However, it should be remembered that the bailiff will not take any action if he does not receive an appropriate advance for them.
Advance payment for bailiffs’ expenses
The burden of making the advance payment rests with the applicant, usually the creditor. Before taking actions that involve certain expenses, the bailiff calls on the creditor to pay them within not less than 7 days for persons residing or having a seat in Poland and not less than one month for persons residing or having a registered office abroad. If the advance payment is not enough to cover the entire costs of the activities, which may turn out during their performance, the bailiff will cover the difference and then download the missing part to the debtor or creditor. The bailiff is obliged to return the unused amount of the advance.
The amount required and depends on each activity. The most common is an alley for correspondence costs in the amount of PLN 60, which will correspond to about 10 shipments with a return confirmation of receipt. If the amount of the advance is used, the bailiff will call the creditor once again to pay it.
Failure to make the advance payment on time
Failure to pay the requested advance payment within the prescribed period results in the refusal to act by the bailiff. Moreover, the creditor’s inactivity within 6 months may lead to the discontinuation of the enforcement proceedings.
Bailiff costs – enforcement fees
Enforcement fees are another category of costs related to the conduct of enforcement proceedings in Poland. They are collected for the execution of enforcement proceedings, the execution of the securing of a claim or the European Account Preservation Order, or the execution of an order freezing evidence or ordering the issuance of evidence in cases of intellectual property.
The enforcement fees are either relative or fixed
In a case for the enforcement of cash benefits, the bailiff charges the debtor a relative fee in the amount specified as a percentage of the value of the enforced benefit. The enforcement fee charged in relation to the enforced receivables may be 3, 5 or 10%, the latter value is most often charged, because lower fees can be charged only in strictly defined cases (e.g. when the debtor pays the debt voluntarily to the bailiff’s bank account). even before the enforcement of any amounts by the bailiff). At the same time, the relative fee may not be lower than PLN 150 (at a 3% relative rate),PLN 2 00 in case of enforcement based on receivables, bank accounts, remuneration for work or social security benefits or remitted on the basis of an application or the fault of the creditor and PLN 300 in other cases accidents. The fees cannot exceed PLN 50,000.
Fixed fees are provided primarily for the enforcement of non-cash benefits.
Who bears the costs of enforcement in Poland?
In Poland, the costs of bailiff enforcement are generally borne by the debtor. Pursuant to the provision of Art. 770 of the Code of Civil Procedure, the debtor reimburses the creditor for the costs necessary for the deliberate enforcement. These costs are collected along with the enforced benefit. Their amount is determined by the bailiff upon completion of the enforcement proceedings. The costs, at the request of the creditor, may also include the costs of representing a lawyer or attorney-at-law.
Previously, however, as described above, the creditor must cover some of the costs in the form of advance payments. However, in the event that the debtor is insolvent, the creditor must take into account that the advances made will not be recovered.
When must the creditor cover the costs of the bailiff’s enforcement?
There are situations when the creditor has to bear some or even all of the costs of bailiff enforcement. this takes place when:
- the enforcement proceedings will be discontinued at the request of the creditor, unless the submission of the application is related to the performance by the debtor directly to the creditor or the conclusion of a settlement with the debtor,
- the enforcement proceedings will be discontinued due to the creditor’s inactivity – if the creditor within six months did not perform the action necessary to continue the proceedings (e.g. did not pay the advance payment requested by the bailiff) or did not request the suspended proceedings.
The fee imposed on the creditor in the above situations is 5% of the value of the outstanding benefit.
A special sanction is provided for creditors who institute enforcement proceedings that are obviously ineffective – i.e. when the application to initiate the proceedings related to a performance already provided by the debtor or when the creditor uses a title that is not enforceable, as well as when it was initiated against a person who is not the debtor. In such cases, the bailiff may charge the creditor with a proportional fee of 10% of the enforced benefit.
Debt and enforcement costs as a tax cost
Bad debt and the costs of enforcement incurred in connection with the recovery of debts by the creditor are undoubtedly a loss to the creditor’s property. However, even in such a situation, the creditor may take steps to minimize the damage suffered by checking whether it is possible to recognize it as tax deductible costs.
Tax deductible costs in Poland are expenses necessary for running a business, such as office maintenance, marketing expenses, telephone charges or office lease, etc. By law, they are defined as costs incurred in order to achieve revenues from the source of revenues or to maintain or secure the source of revenues.costs allow you to reduce the income tax due.
In order for the debts and the costs of the enforcement to be included in the costs allowing for the reduction of the tax due, it is necessary to:
- such a claim as income due,
- write off in the records as uncollectible,
- obtain a decision on irrecoverability issued by a bailiff or a court decision dismissing the bankruptcy petition, when the assets of the insolvent debtor are insufficient to cover the costs of the proceedings or are sufficient only to cover these costs, a decision to discontinue or terminate the bankruptcy proceedings.
It should be emphasized that the decision to discontinue the proceedings issued as a result of withdrawing the creditor’s application to conduct enforcement proceedings may not be the basis for including the unrecovered receivables and enforcement costs as tax deductible costs.