How do you secure your claim?

18 lipca 2021
/ Wiktoria Ronc

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Debtors do not always settle their debts voluntarily. Often the creditor is left with the question of whether he will recover his claim. Enforcing payment through the courts can be time-consuming and often costly. This is why many creditors use security to reduce unnecessary risk. As a rule, they make it possible to recover money effortlessly. Well-applied debt security makes it possible to gain an advantage over other creditors of a particular debtor. How do you secure your receivables? Which methods are most effective? Find out here!


In person and in kind security interest


Polish law provides several ways to secure claims.  In person securities allows the creditor to pursue his claim from the principal debtor, as well as from the assets of the person who established the security for the creditor. The creditor has the right to enforce his claim from the subject of the security, no matter to whom it belongs.  The most common in person security are bills of exchange, voluntary submission to enforcement at the notary’s office, sureties, bank or insurance guarantees, or transfer of claims. In-kind security is usually a classic pledge or mortgage.


How to secure a claim?


The choice of debt security depends on the size of the transaction, as well as the relationship between the parties to the obligation. If we have been doing business with someone for a long time, we will use different ways of securing receivables than in the case of an entity with which we have just begun working. However, such security must be taken into account already at the stage of concluding the contract.


What about voluntary submission to execution by the debtor?


In this case the debtor makes a statement on voluntary submission to execution at a notary. This allows the creditor to obtain an enforcement title without the need for litigation. The notarial deed replaces the court verdict if the debtor does not pay the debt voluntarily. It is possible to submit the case immediately to a bailiff if an enforcement clause has been issued.


What does security look like with a promissory note?


In this case, one of the parties undertakes to pay the other party a specific sum of money on a specific date. The bill of exchange is an unconditional promise to pay the specified amount of money. However, a blank bill of exchange remains a separate issue, which is issued if the parties signing the agreement do not know the exact dates and amounts of liabilities, but want to secure their claims. It should be emphasized that a bill of exchange surety is irrevocable.


What are bank and insurance guarantees?


The essence of security is that the bank, as the guarantor, undertakes to pay a specified sum of money to the beneficiary of the guarantee, who is the creditor, if the principal who enters into the obligation fails to pay. Moreover, the agreement may include other conditions, apart from non-payment, which will make the guarantor liable. An insurance guarantee looks quite similar. In its case the insurance company is the guarantor, which undertakes in writing to pay the benefit to the creditor if a fortuitous event occurs, as specified in the contract.


Guarantors, that is bank or insurance institutions, often offer guarantees suited to the needs of entrepreneurs. These may include tender guarantees, which replace a cash deposit, advance payment guarantees, payment guarantees or performance bonds, which replace security deposits.


Security of claims in the form of mortgage


A mortgage may be established on real estate, perpetual usufruct or a cooperative right to premises. A mortgage encumbers real estate and the mortgage creditor has the right to demand payment from each owner of the real estate that has been encumbered. Additionally, the mortgage creditor has priority over other personal creditors. In order for a mortgage to be valid, it must be entered in the land ragister.


How do I secure a receivable with a pledge?


A pledge operates on principles somewhat similar to those of a mortgage. The creditor may demand satisfaction of his claim from the property on which the security has been established. It doesn’t matter who currently owns the property, as with a mortgage. The pledge agreement is signed by the debtor, who is the owner of the thing, and the creditor. Moreover, the pledged object must be delivered to the creditor or to a third party selected by the parties to the agreement.


Autor: Kamil Hupajło