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Substantial Changes in Debt Enforcement and Bankruptcy Law

SUBSTANTIAL CHANGES IN DEBT ENFORCEMENT AND BANKRUPTCY LAW

The proposal on the Law Regarding Debt Enforcement and Bankruptcy Code and the Amendment of Certain Laws, which is also called the fifth judicial package, was accepted by the Grand National Assembly of Turkey. The Law was published in the Official Gazette on 30.11.2021 and entered into force with its publication. The regulations and innovations made in the Debt Enforcement and Bankruptcy Code No. 2004 (“DEBC”) are as follows:

  • With the amendment made in the Article 1 of the DEBC, a head debt enforcement director can be appointed by the Ministry of Justice among the debt enforcement directors and deputy debt enforcement directors in the debt enforcement offices where the workload or the number of personnel is high.
  • With the Article 3/A added to the DEBC, the Ministry of Justice can establish directorates of debt enforcement offices, with determining the jurisdiction, in provinces where workload or the number of debt enforcement offices are high.
  • With the amendment made in Article 4 of the DEBC, the duties and powers of the directorate of debt enforcement offices established pursuant to the new article 3/A are determined as the supervision and control of the debt enforcement offices, and overseeing the administrative affairs.
  • With the amendments made in Article 36 of the DEBC, first instance courts where the debt enforcement proceedings have been filed, has been empowered to decide on stay of execution; while this power was exercised by Regional Appelate Courts (Bölge Adliye Mahkemesi) and the Court of Cassation (Yargıtay). The requirement to demand for stay of execution separately for each of appeal and cassation phases has been preserved. With the amendment made in the Paragraph 6 of the Article, it has been clarified that if the application for appeal is rejected on the merits and bringing of the judgement to the cassation is possible, the effect of the decision to suspend the execution of the debt enforcement will continue until the expiry of term for cassation application.
  • With the amendment made in Article 87 of the DEBC, the appraisalof the seized registeredproperty will be made by experts instead of the debt enforcement officers.
  • With the amendment made in Article 88 of the DEBC, the seized but not retained property needs to be retained or made ready for delivery to the tender buyer upon the request of sale, otherwise the sale will not take place.
  • With the article 97/A added to the DEBC, if the debtor and the third party accept the receivership of the seized property, the property will not be preserved.
  • With the amendment made in article 106 of the DEBC, it has been made possible for the debtor to request the sale of the seized property. The period for the sale request of seized property  is one year for movable and immovable properties, without differentiation.
  • With the article 111/A added to the DEBC, the debtor may be authorized to sell the seized property with his/her consent upon request. It has been regulated that if this authority is given, the debtor can also demand for appraisal. In the event that the debtor request for sale with his consent, the sale price cannot be less than ninety percent of the estimated value of the properties or the sum of the receivables that are secured by that property and that have priority over the receivables of the persons requesting the sale, whichever is higher, and in addition to this amount, the sum of the debt enforcement proceedings costs of the seized property up to this stage.
  • With the article 111/B added to the DEBC, the hybrid system adopted for the sale of seized goods by auction is abandoned and auction sales will be made electronically as a whole.
  • With the amendment made in article 118 of the DEBC, even if the annulment of the tender is requested, the sales price will have to be paid in cash within seven days from the announcement of the auction result report.
  • With the amendment made in article 134 of the DEBC, upon the request of the tender buyer, the debt enforcement office will order to pay the monthly usage fee, to be determined by the experts, to the debt enforcement office by the person residing, under lease agreement and in other cases, in the immovable to be sold.With the amendment made in the second paragraph, the persons who can file an action for the annulment of the tender have been expanded as "related persons in the official registry" instead of "related persons in the land registry". With the fourth paragraph to be added, in order to prevent unfair and malicious demands; it is obligatory for persons other than debtees, debtors, related persons registered in the official registry and limited rights holders to deposit a security of five percent of the tender price in order to request the annulment of the tender.
  • With amendments made, it is foreseen that the issues regarding fulfilment of the decision or injunction regarding the establishment of personal relationship with the child are removed from the debt enforcement system by considering the best interest of the child. The procedures and principles regarding the issue are included in the scope of the Child Protection Law No. 5395.

In summary, the amendments aimed to ensure that the debt enforcement and bankruptcy offices operate faster and more orderly. In order to follow today's information technologies, innovations are included such as auction sales made electronically at all stages. New regulations have been made to increase the efficiency of the debt enforcement and bankruptcy system and these regulations are based on the principle of maintaining the balance of interests between the debtee and the debtor. Issues related to establishing a personal relationship with the child are excluded from scope of the debt enforcement system and the best interest of the child is taken into consideration.

@Kesikli Law Firm

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