Importance of Understanding Debt Collection in Turkey

The debt collection process in Turkey is a complex interplay of legal intricacies, cultural dynamics, and economic factors that require meticulous examination. Beginning with the initial stages, the importance of comprehensive documentation during the debt initiation phase cannot be overstated. Turkish law places a significant emphasis on clear and detailed documentation, and understanding the local expectations and requirements is fundamental for effective debt collection.

The intricacies of Turkish negotiation etiquette, which often emphasizes building trust and personal relationships, are explored. Highlighting the importance of face-to-face interactions and understanding the hierarchical structures within Turkish businesses, this article offers practical insights for debt collectors navigating this critical stage of the process.

Overview of Turkish Debt Collection Laws

Legal frameworks play a pivotal role in shaping debt collection strategies in Turkey. This section extends its focus to dissect specific legal aspects, including the Turkish Execution and Bankruptcy Law. An in-depth exploration of court proceedings, from filing a lawsuit to the execution of judgments, provides a comprehensive understanding of the legal landscape. The article also addresses the alternative dispute resolution mechanisms available, emphasizing their growing importance in resolving debt disputes efficiently.

Turkish debt collection laws involve several key legal entities, including the courts and regulatory authorities. Here’s an overview:

1. Courts and Judicial System:
   • Civil Courts: Debt collection cases in Turkey are typically handled by civil courts. These courts have jurisdiction over monetary disputes between parties.
   • Enforcement Offices: Once a court issues a judgment in favor of the creditor, enforcement proceedings are carried out by enforcement offices. These offices play a crucial role in the actual collection of debts by enforcing court decisions.
2. Regulatory Authorities:
   • Ministry of Justice: The Ministry of Justice oversees the legal framework related to debt collection and enforcement of court decisions. It plays a role in the development and implementation of laws and regulations relevant to debt collection practices.
   • Banking Regulation and Supervision Agency (BRSA): In cases involving financial institutions or banks, the BRSA may have a role in overseeing and regulating debt collection processes to ensure compliance with banking regulations.
   • Capital Markets Board (CMB): For debts related to capital markets, the CMB may be involved in overseeing debt collection practices to ensure compliance with regulations in the financial markets.
3. General Legal Framework:
   • Execution and Bankruptcy Law: The Execution and Bankruptcy Law (No. 2004) is a key legal framework that governs debt enforcement procedures in Turkey. It provides guidelines for the enforcement offices and procedures for the collection of debts after a court judgment.
   • Code of Obligations: The Turkish Code of Obligations includes provisions related to debt and the legal obligations of parties involved. It serves as a fundamental legal basis for debt collection cases.
4. Debt Collection Process:
   • Debt collection in Turkey typically involves filing a lawsuit in civil court.
   • Once a judgment is obtained, enforcement proceedings are initiated through enforcement offices.
   • The enforcement office has the authority to seize and sell the debtor’s assets to satisfy the debt.
   • The process is governed by the Execution and Bankruptcy Law, ensuring a legal and regulated approach to debt collection.

It’s important to note that specific details and procedures may vary, and it is advisable to consult legal professionals or authorities for the most accurate and up-to-date information on Turkish debt collection laws.

Debt Collection Process in Turkey

When enlisting the services of a Turkish debt collection professional, the following steps are generally taken to maximize the likelihood of debt repayment:

At first, the collection professional observes the documents of the case, if the provided documents or the information about the debtor are not enough, they’ll be requested from the client. The collection professional will then start their collection efforts by doing research online and from databases.

If information is found about the debtor, for example, an ID number, the collection expert can use a program that can send a text message to their phone registered under the ID number even if their phone number is unknown. If the phone number is found, calls to the number are made until contact with the debtor has been established. If an email address is known, e-mails are sent to the address, basically every way possible is tried to get in touch with the debtor and talk.

Once contact is made, the collection professional explains the situation to the debtor and tries to settle the payment or settle on a payment plan. If the debtor avoids the collection expert or tries to stall them, or if the collection expert cannot talk to the debtor and the collection expert has a complete address (from the researchers) they’ll often send a demand letter.

If nothing can be found out about the debtor, the collection professional will conduct an investigation, doing a more detailed and more Professional research and investigation. During this investigation, they’ll do additional searches in many databases, with name and date of birth. If they find information, the collection expert will try to contact the debtor and follow the same steps. First, an attempt to settle the payment is made. If the debtor does not comply, we send a demand letter and follow the steps.

If the expert cannot find useful information, then either they’ll recommend closure of the account or conduct a  ‘Skip Trace’. And if the creditor wants Skip Trace, they’ll process it based on the result of the Skip Trace.

If a debtor does not pay despite collection efforts, then with the creditor’s confirmation legal actions can commence. We start our legal action with the execution process and we will follow the next steps. If a decision to start with legal action is made, it’s recommended to conduct a Credit Report to see the debtor’s assets. The decision regarding whether or not to start legal action depends on the results of the report. This way the creditor can understand the likelihood of collecting on the debt. 

When the legal process begins, it consists of two general steps. First, the proceeding in Bailiffs, and second, the proceeding in Civil-Commercial Courts. Most cases start with a bailiff procedure and if the debtor objects to the claim, the creditor has to initiate the second proceeding in Court.

Debt Collection Agencies in Turkey

Role and Functionality: Debt collection agencies in Turkey play a crucial role in assisting creditors in recovering outstanding debts. Their primary function is to act as intermediaries between creditors and debtors, employing various strategies to ensure the timely repayment of debts. This can involve communication, negotiation, and, if necessary, legal actions.

These agencies often start with amicable negotiations, attempting to reach an agreement that suits both parties. If these negotiations fail, they may escalate the matter legally, utilizing the Turkish legal system to enforce debt repayment.

How to Choose the Right Agency:

1. Reputation: Look for agencies with a solid reputation for ethical practices and successful debt recovery.
2. Legal Compliance: Ensure the agency complies with Turkish debt collection laws and regulations.
3. Specialization: Consider agencies specializing in your industry, as they may better understand the specific challenges and regulations.

Understanding Fees and Contracts:

1. Fee Structure: Clarify the agency’s fee structure, whether it’s a flat fee or a percentage of the recovered debt.
2. Contract Terms: Review contract terms carefully, focusing on exclusivity clauses, termination procedures, and any hidden fees.

Protecting Creditors’ Rights:

A. Securing Collateral:

1. Collateral Documentation: Clearly document any collateral provided by the debtor to secure the debt.
2. Perfection of Security Interests: Ensure that procedures for perfecting security interests in collateral are followed, as per Turkish laws.

B. Documenting Agreements Properly:

1. Written Agreements: Always have written agreements detailing the terms and conditions of the debt.
2. Legal Review: Have legal professionals review and ensure the legality and enforceability of agreements.

C. Utilizing Guarantees and Sureties:

1. Guarantees: Consider obtaining personal or corporate guarantees to strengthen the debtor’s commitment.
2. Sureties: Explore the use of sureties or third-party pledges to add an additional layer of security.

In summary, selecting the right debt collection agency, understanding fees and contracts, securing collateral, proper documentation, and considering international factors are essential elements in protecting creditors’ rights in Turkey. It’s crucial to work closely with legal professionals to navigate the complexities of debt collection effectively.

International Debts and Cross-Border Challenges in Turkey:

1. Legal Expertise: Seek legal advice with expertise in international debt collection for cross-border cases.
2. Enforceability: Understand the enforceability of foreign judgments in Turkey and vice versa.
3. Cultural Awareness: Be aware of cultural nuances that might impact negotiations and legal proceedings in an international context.

Case Studies

In this case, the creditor initially agreed to a one-year repayment plan due to their long cooperation with the debtor. However, despite the creditor’s persistent reminders, four years had passed, and the debtor showed no intention of fulfilling their payment obligation. Feeling a sense of despair, the creditor turned to Ibrahim on Expert Planet for a final attempt at resolving the situation.

Ibrahim Genc 
Turkey

International Debt Recovery Specialist at Istanbul Credit Consultancy.
Focus on international debt collection, handling and sending claims worldwide.
ICC is your first and only stop if you have any dealings in Turkey.

Learn More

Ibrahim Genc admitted that the debt collection was challenging, but he promised his team could handle getting the debtor to pay soon. After conducting thorough research on the debtor’s background, Ibrahim’s team initiated discussions with the debtor’s finance personnel who proved to be difficult to negotiate with. After many hours of negotiations, the debtor finally agreed to a monthly payment of $5,000, which would take over two years to settle the debt. This was unacceptable to Ibrahim and his team.

Determined to find a better solution, Ibrahim decided to directly communicate with the debtor’s CEO. After meeting face-to-face, Ibrahim and the CEO reached a compromise. They agreed on a monthly payment between 12K-15K USD. Thanks to the relentless efforts of Ibrahim’s team, the creditor received the first installment payment successfully after just one month of working with Ibrahim Genc. And this February, the ninth installment payment was received by the creditor on time.

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Conclusion

In conclusion, navigating the complex terrain of debt collection in Turkey requires a multifaceted approach. From understanding legal intricacies and types of debts to incorporating cultural intelligence and embracing technological advances, creditors can enhance their strategies for successful debt recovery. By continuously adapting, seeking professional guidance, and staying informed about industry developments, creditors position themselves for success in the intricate landscape of Turkish debt collection. This comprehensive guide serves as a roadmap for creditors aiming to navigate, understand, and succeed in the dynamic field of debt collection in Turkey.