What should I do if I have encountered financial difficulties?
You have financial difficulties, your expenses are higher than your income, and you are therefore unable to fulfil an obligation undertaken by concluding a loan, instalment, or service agreement fully or partially.
Finances in Order website of the Consumer Protection and Technical Regulatory Authority includes various different examples of finding oneself in financial difficulties and tips for finding solutions without assistance. The My Money consumer website of the Financial Supervision and Resolution Authority lists ten tips for dealing with financial difficulties.
Everyone has the right to turn to a debt advisor. You should get in touch with a debt advisor if you need help in determining your financial situation or coping with your debt. Contact a debt advisor as soon as possible, for example as soon as you encounter first signs of financial difficulties or if your income decreases and you need to reconsider your expenses and income.
Who is a debt advisor and what is debt counselling?
Those who find themselves in financial difficulties may seek assistance from a debt advisor. A debt advisor must give the person in need of assistance a full picture of their situation and show them different options for overcoming their financial difficulties. In the course of debt counselling, an overview is formed of the situation and potential solutions for eliminating the debts are found in cooperation with the client.
The debt counselling service is a service provided by the local municipality and is usually provided to the person in need free of charge. In order to receive the service, please contact the social welfare board of your local municipality and you will be referred to a debt advisor.
The Unemployment Insurance Fund may also refer those who are registered as unemployed individuals or have been served a layoff notice to a debt advisor. You should mention your need for debt counselling to a consultant at the office of the Unemployment Insurance Fund. They will tell you more about the service and refer you to a debt advisor.
You can also seek debt counselling independently, without involving the local municipality or the Unemployment Insurance Fund. Without referral, you must cover the costs of debt counselling yourself. The price list of the service is established by the provider of the debt counselling service. Depending on the needs of the individual seeking the service, the local municipality or the Unemployment Insurance Fund may also refer an individual to debt counselling. In this case, the service is provided free of charge.
Read more about eliminating debt and debt counselling on the My Money consumer website of the Financial Supervision and Resolution Authority and on the website of the Estonian Creditors Association.
What happens if you fail to pay your debt?
If you have undertaken an obligation, but are unable to perform the obligation, debts inevitably arise. Once you are in debt, the situation does not simply solve itself. In the case of a late payment, your creditor may charge an interest on arrears. Creditors usually send you reminders and warnings for you to pay your debt. The cost of sending the reminders and warnings may be added to the debt.
In the event of several consecutive overdue payments, the creditor may cancel the agreement prematurely. Premature cancellation of the agreement may also be accompanied by a contractual penalty. In the event of loan or instalment agreements, the entire outstanding loan balance will become payable, which means that you will have to pay the entire outstanding loan balance at once.
The creditor may turn to courts to collect the debt and obtain an execution document. There are two forms of court proceedings available for debt collection in Estonia: expedited order-for-payment procedure and action-by-claim proceedings.
Before turning to a court, the services of a debt collection agency may also be used to collect a debt. The creditor may transfer the claim against you to a debt collection agency or conclude a cooperation agreement with them for the collection of the debt. Upon transferring of the debt, your legal relationship with the initial creditor is terminated and you will need to continue to communicate with the debt collection agency which will be your new creditor. The agency usually gets in touch with the debtor and coerces them to pay the debt and/or conclude a payment schedule. Debt collection agencies usually also add collection costs to the initial debt.
Upon concluding payment schedules or certificates of indebtedness, you should always check the amount of the debt and the amounts of the interest on arrears and other ancillary claims.
What is an expedited order-for-payment procedure?
An expedited order-for-payment procedure is a form of a legal procedure. Expedited order-for-payment procedures are conducted by the Department of Orders for Payment of the Pärnu County Court.
Claims for the payment of specific amounts of money may be filed for settlement by an expedited order-for-payment procedure. The expedited order-for-payment procedure is faster than the action-by-claim proceedings, and the burden of proof and costs are also lower.
The claims filed to the court for an expedited order-for-payment procedure are settled within ten working days. During this period, the court only checks the claim filed for an expedited order-for-payment procedure from the formal perspective – whether or not the procedure is permissible and compliant with the law. If the claim is satisfied, the court submits a proposal for payment to the debtor. The proposal for payment includes the details of the claim, a proposal for the payment of the debt with the interest on arrears and the procedural costs referred to in the proposal for payment, and the details on how to submit objections and explanations.
What should I do if a claim has been filed against me for an expedited order-for-payment procedure?
Having received a proposal for payment from the court, the debtor must check whether the information specified in the proposal is correct – who filed the claim and on which grounds. All documents must be read carefully, the rights of the debtor must be identified, and the court must be responded to in a timely manner.
If the claim was filed because the debtor failed to pay their debt due to financial difficulties, it would be reasonable to notify the court of the intention of the debtor to conclude a payment schedule with the petitioner.
The debtor is provided an opportunity to pay the debt with the interest on arrears and the case costs specified in the proposal for payment within fifteen days. In the case of an expedited order-for-payment procedure, a state fee is added to the debt, the amount of which depends on the amount of the debt, as well as the procedural fee in the amount of 20 euros.
It the claim is fully or partially unsubstantiated, the debtor must submit an objection to the court within fifteen days after receiving the proposal for payment. If a counter-claim is filed, the court will transfer the claim to an action-by-claim procedure or close the proceedings, if requested by the petitioner.
The claim of a creditor can only be disputed by sending an objection to the court. In the event of the debtor failing to object to a proposal for payment in a timely manner or failing to pay the amount referred to in the proposal for payment, the court will draw up a court order or order-for-payment.
The order-for-payment is an execution document which can be used by the creditor to turn to a bailiff for opening a enforcement procedure. In the case of execution of an order-for-payment, bailiff’s fees are added to the debt.
What should I do if a claim has been filed against me in action-by-claim proceedings?
In action-by-claim proceedings, the county court settles the claims (actions) in the case of which one person (the plaintiff) has filed an action against another person (the defendant) to enforce their legal or contractual rights.
Action-by-claim proceedings begin:
- when a debtor submits an objection to a proposal for payment in an expedited order-for-payment procedure and the Department of Orders for Payment transfers the claim for action-by-claim proceedings.
- if a debtor files a claim with the court (without prior expedited order-for-payment procedure).
The court accepts a proper action and delivers it to the defendant. The defendant must notify the court whether they agree with or object to the action. In the event of objecting, the debtor must submit all of their objections to the claim and also prove all their statements. In order to defend one’s rights, it is very important to observe all deadlines specified by the court.
In action-by-claim proceedings, a state fee is added to the debt the amount of which depends on the amount of the debt, as well as other case costs (that is fees payable to the lawyer). If the action is satisfied, the defendant must usually also cover the case costs of the other party, that is the plaintiff.
If the defendant fails to respond to the court or responds too late and fails to observe the deadlines, the court grants the action by a default judgment. A default judgment is an execution document by which the creditor may contact a bailiff for initiating an enforcement procedure. If a default judgement is enforced, the bailiff’s fees are added to the debt.
A compromise agreement may be concluded with the plaintiff in action-by-claim proceeding, as well as a payment schedule for payment of the debt. The court will approve the compromise agreement by an order which is deemed an execution document.
What should I do if enforcement proceedings have been initiated against me?
Enforcement proceedings are initiated by a bailiff on the basis of a petition and an execution document submitted by the creditor. An order-for-payment, a court ruling or a decision of a rent committee or a labour dispute committee, a notarial agreement, or an administrative deed issued by a tax administrator may be used as the execution document.
In the beginning of the enforcement procedure, a deadline is granted for the debtor for voluntary compliance. This is the last chance for the debtor to reach an agreement with the creditor for drawing up a payment schedule. During the term of voluntary complying, the debtor must contact the bailiff and submit their proposal for the payment of the debt.
If the debtor fails to submit a proposal for the voluntary payment of the debt within the period specified, the enforcement proceedings continue. The bailiff is entitled to seize the bank account, movable and immovable property, remuneration, disability allowance, wages, etc. of the debtor.
In enforcement proceedings, the costs of initiating the proceedings, enforcement costs, and the bailiff’s fee are also added to the debt and the case costs. The amount of the fees is regulated by the law.
Explanations and instructions on which claims expire, how to find information about your enforcement proceedings, and how to apply for the closure of enforcement proceedings can be found on the website of the Ministry of Justice.
Forms
References
- Contact details of debt advisors
- Office of the Unemployment Insurance Fund
- My Money – consumer website of the Financial Supervision and Resolution Authority
- Expedited order-for-payment procedure
- Enforcement procedure
- Action-by-claim proceedings