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Debt collection in Italy

Out of court actions.

The creditor can decide to engage in a pre-judicial procedure in order to obtain payment without detriment to his relationship with the debtor. The first step is to send a letter with notice of default to the debtor by registered mail.

If debtor is a company the dunning letter can be sent too by PEC (Electronic legally certified email).

The letter, sent by the creditor or by a debt collector on the creditor’s behalf, solicitates the payment of the amount of the debt and indicates that, if the debt remains outstanding, legal action will follow.
There is no prescribed form for said default notice.
If an out-of- court solution is not possibile, legal action can be taken.

Legal procedure.

a) Summons (atto di citazione).

In this procedure the lawyer of the creditor will file a subpoena with the competent Court in order to register the debtor’s obligation to pay the claim.
For claims under € 2,500 the Giudice di Pace is the competent Court; in all other cases the claim will be referred to the Tribunale where the debtor has his place of business.
The subpoena states the date prior to which the debtor must file a written contestation (opposizione).
After the filing of a subpoena, the debtor has three options:
1) - The debtor does not contest the summons, in which case an application for default judgment will be filed which can take several months. Then an atto di precetto (writ) can be applied for.
2) - The debtor can request an extension to the time in which he must respond to the subpoena.
3) - Finally, the debtor can file a contestation (opposizione) with “appearance of constitution and answer” (comparsa di costituzione e risposta) prior to hearing of conclusions (precisazione delle conclusioni). It might take several years before a decision is reached. Parties can request witness examinations, expert opinions, et cetera. The unsuccessful party can appeal against final decision.
There are two requirements for initiating a summons procedure:
a) - a power of attorney from the creditor;
b) - clear and legible copies of the outstanding invoice(s).
These proceedings are extremely lenghty and take 2-5 years, depending on the region.
There is also a faster procedure, the so called “demand for legal action” or “summary judgment”.

b) Demand for legal action or summary judgment (ricorso per decreto ingiuntivo).

In this procedure, the creditor files a demand for payment with a in Italy.
In order to do so, the creditor must submit the following:
1 - good and legible copies of outstanding invoice(s);
2 - the original or a very good (authenticated) copy of the waybills (or bill of lading):even the debtor does not contest reception of the goods;
3 - a written acknowledgement of the claim by the debtor;
4 - a power of attorney;
5 - in some courts, a copy of the purchase order is also required, just as, not so often fortunately, some courts may require a notarially authenticated extract of the accounting records, even when the proceeding creditor is a foreigner and, therefore, not subject to Italian tax law.
After the debtor has been notified of the demand, there are two possibilities:
a) - if the debtor wishes to contest the demand, he should do so within 40 days upon notification. After contestation, the procedure will follow that of an Atto di Citazione ( i.e. the long procedure including hearings et cetera).
b) - If the debtor does not contest, the creditor asks the judge for a confirmation of the decree, after which an Atto di Precetto can be applied for.
The advantage of the above procedure is that the debtor cannot draw out the procedure for a long time.
If the debtor does not contest within 40 days, he loses the case. However, depending on the region, the court’s confirmation can take 1 - 9 months.

c) Writ - Atto di precetto

A writ can be issued:
1) - when a creditor is in possession of a confirmed Atto di citazione or decreto ingiuntivo; or
2) - on the basis of an unpaid cheque or draft ( the segnature should be legible and the document must bear the company’s stamp).
If the buyer fails to pay within 10 days after notification, a bailiff can be instructed to seize all assets of the debtor.
Before any enforcement proceedings may begin, the party seeking enforcement shall issue a formal demand of payment to the losing party, asking it to abide by the decision within 10 days, after which the judgment will be enforced. If the losing party fails to comply with the formal demand in due time, the judgment creditor must serve the debtor (through a court bailiff) with the notice of attachment, triggering enforcement. Afterwards, the judgment creditor has 90 days to start the proper enforcement proceedings, under penalty of ineffectiveness of the attachment (which shall be served again).
In general terms, monetary judgments can be enforced throughout:
* (i) attachment of the debtor’s movable assets;
* (ii) attachment of the debtor’s movable assets under third parties’ availability or possession;
* (iii) attachment of the debtor’s receivables toward third parties; and
* (iv) attachment of the debtor’s immovable assets.
Having regard to mandatory and prohibitory judgments, enforcement is regulated by Article 612 and ff. of the Italian Code of Civil Procedure. Following service of the formal demand of execution of the judgment, the interested party shall resort to the Italian Court of the place where enforcement is sought to determine the modalities of enforcement. The debtor has the right to be heard in these proceedings
The bailiff will make a report, which is called Verbale di Pignoramento. An appeal against the Atto di Precetto is usually rejected by the Court.

- Immediate request for bankruptcy (Istanza di Fallimento)

It is possibile for a creditor to file an immediate request for bankruptcy proceedings against the debtor.However, insolvency must be proved by way of a Verbale di Pignoramento Negativo.
By the way, the laws on bankruptcy introduced in Italy in 2006 restricted the possibilities of filing in bankruptcy a debtor company, in absence of the respect of particularly high level of debts or other linking parameters.