Blog » THE 5 MOST EFFICIENT LEGAL WAYS OF DEBT COLLECTION IN HUNGARY
THE 5 MOST EFFICIENT LEGAL WAYS OF DEBT COLLECTION IN HUNGARY
22 March 2023
If you have a debtor in Hungary, there are more legal options to recover your claim. In this short summary we provide a brief overview of the most efficient legal ways of debt collection in Hungary.
In Hungary you can choose between the following debt collection procedures:
1. Liquidation (insolvency) procedure
You can start liquidation (insolvency) procedure with the aim of pressuring your debtor to pay the debt, so that he can avoid the declaration of insolvency and the closing its business.
Liquidation is available if you have a contract with the debtor, upon which he failed to pay your due invoice which was not contested by him earlier.
Before initiating liquidation procedure, you have to send a properly drafted notice letter to debtor. In the notice letter you should identify at least your claim (e.g. by contract or invoice number, amount, payment date) and you should set a final deadline after that you will start legal proceeding.
Your debtor has to contest your claim in writing, on the merits of the claim, before your properly drafted notice letter arrives to him. Hungarian courts do not accept contesting claims by only formal complaints, without mentioning the grounds of objection.
Moreover, you can start liquidation only if your claim is more than HUF 200.000. If your undisputed claim is above HUF 3,5 Million, liquidation is the most cost-effective way to recover undisputed debt.
Costs: court duty: HUF 80.000, publication fee: HUF 25.000.
Time frame: 6-18 months
2. Payment warrant procedure
You can initiate a payment warrant procedure (PWP) for claims not exceeding HUF 30 million (appr.: EUR 75.000) before the public notary. The PWP is obligatory for claims less than HUF 3 million (appr. EUR 7.500).
If the debtor raises an objection within 15 days after the receipt of the payment warrant, the PWP turns into litigation, in other cases the payment warrant will be enforceable, in other words it will have the same legal force a final court judgement.
Costs: duty: 3 % of the litigated amount; if the procedure turns into litigation, an additional 3%
Time frame: 1-2 months
3. European payment warrant procedure
If your foreign company has a claim against the Hungarian company, it cannot start a Hungarian order for payment against the Hungarian debtor, but it can start a European payment warrant procedure (EPWP).
Similar rules are applied to EPWP as to PWP, but important differences are that there is no upper limit to the amount of the claim and the debtor can raise an objection within 30 days after the receipt of the European payment warrant instead of 15 days.
If the debt is more than HUF 3 Million (appr. EUR 7500) you can directly sue the debtor before the competent court.
It is important to note that you can claim back the court duties and the attorney’s fee paid in the procedure if you win the case.
Costs: court duty: 6% of the litigated amount.
Time frame: 12-36 months
If your contract concluded with your business partner contains a valid arbitration clause, or your business partner agrees in writing to resolve the dispute via arbitration, you can start arbitration procedure which is faster than litigation.
If the speed of the dispute resolution is important for you, arbitration is the most suitable way of settling business disputes.
Costs: arbitration fees: cca. 5-10% of the litigated amount
Time frame: 6 -12 months
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