When a customer or business partner fails to fulfill its payment obligations for an extended period and it is clear that the business relationship will not continue, most companies seek to recover their receivables as quickly as possible.
At that point, enforcement proceedings often appear to be the most logical and straightforward solution. However, practice shows that these proceedings may also involve certain complexities, and recovery is not always quick or easy. Misconceptions can lead to an inappropriate legal strategy, additional costs, and unnecessary delays.
Below are seven of the most common misconceptions encountered in practice.
1. “We have a contract. That is enough to start enforcement proceedings.”
It is not uncommon to hear the following: “We have a duly signed contract. The other party accepted all of its obligations by signing it, so we can immediately initiate enforcement through a public enforcement officer.“
A signed contract, no matter how detailed and precise, does not automatically allow compulsory enforcement. It defines the parties’ mutual rights and obligations, but in most cases it is not, by itself, an enforceable instrument.
Consider the following examples:
Example 1: Company A lends RSD 5,000,000 to Company B. The parties execute a detailed loan agreement specifying the loan amount, repayment deadline, and interest. The repayment deadline expires, the loan is not repaid, and the creditor believes that submitting the agreement to a public enforcement officer is sufficient because all relevant terms are clearly stated. However, an ordinary loan agreement is generally not, in itself, an enforceable instrument allowing direct enforcement.
Example 2: A construction contract provides that the contractor must pay contractual liquidated damages of EUR 10,000 if it fails to complete the works within the agreed deadline. The deadline is missed, and the investor believes that referring to the contract alone is sufficient to initiate enforcement for the recovery of the contractual penalty. However, the mere fact that liquidated damages have been agreed does not automatically entitle the creditor to direct enforcement.
Example 3: A tenant stops paying rent, and the landlord assumes that, because there is a duly signed lease agreement, all outstanding claims can immediately be recovered through enforcement proceedings. However, an ordinary lease agreement is generally not, by itself, an enforceable instrument.
An exception exists where the agreement itself has the legal status of an enforceable instrument. This may be the case, for example, if it has been executed in the appropriate notarial form and satisfies the statutory requirements for direct enforcement. In such circumstances, the creditor may, subject to the applicable legal requirements, initiate enforcement proceedings without first obtaining a court judgment.
2. “The public enforcement officer will determine whether the debt exists.”
One of the most common misconceptions is that the public enforcement officer determines whether a claim actually exists. This is not the officer’s role.
A public enforcement officer does not decide who is right, does not examine witnesses, and does not determine whether goods were delivered or services performed in accordance with the contract. The officer’s task is to conduct enforcement where the statutory requirements have been met.
If there is a dispute between the creditor and the debtor regarding the existence of the claim itself, that dispute will not be resolved within the enforcement proceedings. In such cases, the court must first determine whether the claim exists and, if so, in what amount.
It is therefore important to distinguish between litigation proceedings and enforcement proceedings. Litigation establishes legal rights, whereas enforcement serves to compulsorily enforce rights that have already been established or rights for which the law permits direct enforcement.
3. “I have an invoice. The enforcement officer will recover the debt immediately.”
Certain monetary claims may be enforced on the basis of an authentic document, but this does not mean that every claim will automatically be recovered.
If the debtor contests the claim in the manner prescribed by law, the existence of the debt will become a matter for judicial determination. In other words, although an invoice is an important document that may facilitate a faster recovery process, it does not guarantee that no dispute will arise or that the parties will not ultimately end up in litigation.
For this reason, creditors should maintain proper business documentation, including contracts, delivery notes, handover records, email correspondence, and other relevant evidence that may prove essential if the debtor disputes the claim. Where the creditor possesses sufficient evidence supporting the invoice, the court may establish the validity of the claim, after which the debt may be enforced without unnecessary delay.
4. “Once I initiate enforcement proceedings, the money will quickly be transferred to my account.”
Enforcement proceedings are designed to be more efficient than litigation, but their duration does not depend solely on the creditor.
Recovery may be affected by numerous factors. The debtor’s bank accounts may be blocked, the debtor may own insufficient assets, or enforcement may need to be carried out against different categories of assets. In some cases, time is required to identify the debtor’s assets or to complete procedural steps prescribed by law.
Accordingly, initiating enforcement proceedings does not automatically result in immediate recovery. It merely marks the beginning of a legal process whose outcome depends on the specific circumstances of each individual case.
5. “If the company has no money in its bank account, the debt is uncollectible.”
If the debtor’s bank account contains no available funds or has been blocked, concluding that enforcement proceedings are pointless may be premature.
Funds held in bank accounts represent only one possible means of enforcement. Depending on the circumstances of the particular case, enforcement may also be carried out against other assets of the debtor where the statutory requirements are satisfied.
For example, a company may have blocked bank accounts while simultaneously owning commercial real estate, construction machinery, company vehicles, or other valuable equipment. Some companies also hold significant receivables against their own customers or business partners, which may likewise be subject to enforcement under the conditions prescribed by law.
On the other hand, it is also possible that the company genuinely possesses no assets from which the creditor could recover the debt.
Only a comprehensive assessment of the debtor’s assets can provide a realistic picture of the prospects for recovery.
6. “If the debtor objects, I lose any chance of recovering the debt.”
Many creditors expect enforcement proceedings to result in prompt recovery, particularly where they believe their claim is indisputable. Consequently, when the debtor files an objection, they often conclude that the entire process has failed and that recovery is no longer possible.
However, filing an objection does not automatically mean that the creditor is wrong or that the debt cannot be recovered. It simply means that the debtor disputes the existence or amount of the claim, in which case the dispute will, subject to the applicable legal rules, be resolved in the appropriate court proceedings.
For example, a company initiates enforcement proceedings to recover payment under an unpaid invoice for delivered goods. The buyer then alleges that the goods did not conform to the agreed quality and disputes the debt. This does not in itself mean that the claim is invalid; rather, it means that it will be necessary to determine whether the buyer’s allegations are justified and whether the creditor can prove its claim.
This is why we consistently emphasize the importance of maintaining proper business documentation. Contracts, delivery notes, handover records, email correspondence, and other documentation often constitute key evidence if a dispute arises between the parties.
An objection is therefore not the end of the process but rather an indication that the existence of the claim will be examined in subsequent legal proceedings. Creditors should not abandon the protection of their rights merely because the debtor has disputed the debt.
7. “I only need a lawyer if the case goes to court.”
One of the most costly misconceptions is that legal counsel becomes necessary only after a dispute has arisen. In reality, the opposite is true.
Obtaining legal advice much earlier—when drafting contracts, selecting appropriate security instruments, assessing documentation, or deciding whether enforcement proceedings or another legal remedy is appropriate—may help prevent disputes altogether and significantly improve the prospects of recovering the claim more quickly and efficiently.
Conclusion
Enforcement proceedings are an important legal mechanism for protecting creditors, yet their purpose and scope are often misunderstood.
It is not enough for a debt simply to exist. Equally important are the manner in which the claim has been documented, whether the statutory requirements for enforcement have been satisfied, and what responses may reasonably be expected from the debtor.
For this reason, the decision to initiate enforcement proceedings should not be based solely on the amount of the debt or the fact that an invoice remains unpaid. A proper legal assessment of the situation and timely professional advice often make the difference between efficient recovery and lengthy proceedings with an uncertain outcome.
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