In one social network group, a person who wished to remain anonymous asked what debts bailiffs can apply statute of limitations to and how long it takes for them to be canceled.
He asked if there is a statute of limitations for state, administrative debts, such as fines for illegally parked cars, speeding or debts for mandatory health insurance.
Uncollected tax debts disappear after 5 years
Eugenijus Markevičius, lawyer of the professional association of lawyers “Markevičius, Lukoševičius ir partnersiai”, explained that if the deadline for paying fines, contributions, tax obligations is missed, the relevant institution (e.g. the State Tax Inspectorate) transfers the collection to the bailiffs, who start forced collection.
He mentioned that the debts to VMI and “Sodra” are forcibly written off from the funds in the accounts of the debtors’ credit institutions.
If the debtor does not have accounts in credit institutions or there are no funds in them, the debt is collected from the property.
The lawyer emphasized that the collection of both fines and tax liabilities must be started within the statutory limitation period, calculated from the day when the right to collect arose.
And, when the period of limitation for compulsory recovery expires, the period of limitation for compulsory recovery of amounts related to it also expires, so the tax administrator has no right to take any recovery actions.
Markas Dobrovolskis, a lawyer from the Glimstedt law firm, stated that, according to the Law on Tax Administration, the statute of limitations for forced recovery – 5 years – applies to taxes paid to the Lithuanian state:
- added value;
- excise duties;
- personal income;
- Real Estate;
- land;
- for compulsory health insurance premiums;
- profit;
- for state social insurance contributions;
- for customs;
- for other fees and related amounts, such as late fees.
When will the collection not stop after the deadline?
However, according to M. Dobrovolski, once enforcement procedures have been initiated before the statute of limitations, they are continued and completed despite the fact that the statute of limitations expires during their execution (ie, 5 years have passed):
“So, just because the statute of limitations has expired, the bailiff will not stop the enforcement. If it is not possible to collect the tax debt, and the forced collection will be terminated already after the 5-year period has expired, it will no longer be possible to start this process again.”
According to M. Dobrovolski, fines according to the Code of Administrative Offenses (ANK) are somewhat different.
Unlike in the case of tax arrears, enforced fines for administrative offenses cannot be recovered after the expiration of the statute of limitations for enforcement, i.e. after 5 years.
According to the Criminal Code, according to the interviewee’s interpretation, the fine imposed for a misdemeanor must be collected forcibly within 2 years, for a crime – within 3 years.
“If the convicted person did not voluntarily pay the fine, but did not avoid serving the assigned sentence and did not commit a new criminal act, and the sentence was not executed within the prescribed period (2 or 3 years), the state could not apply any coercive mechanisms against him.
If the judgment is already being executed, the recovery of the fine is continued until there is a reason to stop the enforcement actions. For example, the convict dies or 15 years have passed since the sentence,” the lawyer taught.
What are bad debts?
According to E. Markevičius, if the taxpayer cannot recover the debts after at least 1 year or if the debtor is dead, or declared dead, or the debtor is liquidated or bankrupt, the debt is considered hopeless.
Thus, if the debtor has neither assets nor income, recovery is not possible, and the bailiff returns the enforcement document to the debt collector.
However, even in this case, if the statute of limitations has not expired, the creditor can apply to the bailiff again if he finds out that the debtor has taken up a job or acquired property.
According to the lawyer, in such a case, even the fines under the Criminal Code are no longer subject to the statute of limitations, and such fines can be replaced by public works at the request of the offender.
M. Dobrovolskis added that the tax payer’s debt to the state, which cannot be recovered for objective reasons or which forced recovery would be inappropriate from a social and economic point of view, can be recognized as hopeless:
“T. i.e. the taxpayer’s assets are not found or the assets found are illiquid (poorly liquid); enforcement costs – higher than the debt; it is inappropriate to forcibly collect a debt due to a person’s difficult economic (social) situation.”
According to E. Markevičius, it is important not to forget that the recovery can still be directed to the debtor’s spouse, if there is no marriage contract between them.
If the debtor is, for example, in prison, this does not mean that the person has no assets from which recovery is not possible.
And, if the debtor hides assets, income, etc., he may be fined.
What debts cannot be “written off”?
M. Dobrovolskis stated that, according to the general rule, debts cannot be canceled, written off or canceled in other ways:
- for telecommunications companies;
- for companies providing communal services;
- banks and other credit institutions;
- insurance companies;
- to natural or legal persons for services provided, goods sold;
- inherited debts that can be recovered from the successors of the deceased person’s rights and obligations;
- etc.
E. Markevičius added that in the event of bankruptcy of a debtor natural or legal person, the creditor is included in the list of creditors and the creditor’s claims satisfaction plan specifies the extent to which he will be settled.
If the bankrupt person properly implements the plan, he is released from the remaining part of the debt – the debt is “written off”.
However, even in this case, according to the lawyer, not all obligations can be written off. Unwritten requirements are:
- regarding compensation for damage caused by a criminal act;
- funds to support a child (alimony);
- obligations to pay fines to the state imposed for administrative offenses committed by a natural person, or criminal acts, violations of other laws;
- claims of creditors secured by pledge and/or mortgage, if these creditors and the natural person have agreed on the preservation of the pledged property during the natural person’s bankruptcy process.
When will it be too late to recover the debt through the court?
If an attempt is made to recover the debt by extrajudicial means, according to E. Markevičius, there is no time limit after which the person cannot recover it:
“Creditor debts are even hereditary, so even in the event of the death of the creditor, the debt will be taken over by the heir who inherited his property.”
If the person did not recover the debt out of court, the lawyer advises not to wait for the statute of limitations to expire and to defend his violated rights through court.
According to the interviewer’s interpretation, the statute of limitations for the claim is 10 years from the time the person became aware of his violated right.
After this deadline, the court can consider the claim only if the debtor agrees, otherwise the claim is rejected and the debt cannot be recovered.
And M. Dobrovolskis added that the law sets shortened statute of limitations for certain types of claims:
“For example, a 6-month statute of limitations applies to claims for fines and interest. It is true that due to important reasons, the statute of limitations for a claim that has been missed can be renewed by the court.”
Inheritable and non-inheritable debts
M. Dobrovolskis pointed out that some debts are hereditary, ie:
- debts for communal services;
- debts to telecommunications companies;
- debts to natural and legal persons for goods and services;
- child support debt, alimony;
- debts to banks and other credit institutions;
- debts to insurance companies, if inherited property was insured;
- etc.
The lawyer emphasized that one cannot inherit the deceased’s property without inheriting his debts.
“There may be cases when the amount of debts of the deceased will be greater than the value of the assets left behind.
In this case, the entire inherited property would go to cover the debts, and if it is not enough to fully cover the debts, the remaining part of the debt should be covered by the heir’s funds”, commented the specialist.
However, he indicated that there is a means for the heir to protect his property from the decedent’s debts – if he accepts the inheritance according to the description of the property drawn up by the bailiff, he is responsible for the decedent’s debts only with the inherited property.
Only fines (administrative or criminal cases) are non-inheritable, as this is a personal punishment.
According to M. Dobrovolski, the right to claim compensation for non-pecuniary damage (personal physical pain, spiritual experiences, etc.) also does not transfer to the successors of rights, as it is inextricably linked to the person who suffered this damage. However, this right can be taken over in exceptional cases.
The lawyer said that there was a case when the court deviated from this rule and awarded non-pecuniary damage compensation to the spouse and daughter of a person who died in a pre-trial detention center, in prison:
“The Constitutional Court explained that the heirs of persons who died before they could claim non-pecuniary damages due to illegal quota, interrogation, prosecution and court actions applied to them have the right to claim compensation for non-pecuniary damages caused to the deceased.”
