Discontinuance of enforcement proceedings – causes, effects and possibility of reopening

The discontinuation of enforcement proceedings results in their complete termination and the annulment of any enforcement measures already taken. However, this does not mean that the debt is written off, nor does it prevent enforcement proceedings from being initiated again in the future. The creditor retains the right to demand repayment of the debt.

When are enforcement proceedings discontinued?

The provisions governing enforcement proceedings in the Code of Civil Procedure provide for two ways of discontinuing enforcement proceedings – ex officio or upon application.

In the case of judicial enforcement, the general rule is that such proceedings are initiated upon application – in most cases, the creditor’s application is an absolute prerequisite for enforcement, meaning that the withdrawal of the application obliges the authority to discontinue the enforcement proceedings in accordance with the creditor’s wishes.

Exceptionally, enforcement proceedings may be discontinued at the debtor’s request, provided that the claim covered by the enforcement order had become time-barred before the date of filing the application to initiate enforcement, and the creditor has not demonstrated that an event interrupting the limitation period has occurred.

Enforcement proceedings may also be discontinued on application if the creditor holds a pledge securing full satisfaction of the claim being enforced, unless the enforcement is directed at the pledged asset. In practice, this means that the creditor may again apply for enforcement against assets other than the subject of the pledge, including those in respect of which the enforcement authority has previously discontinued enforcement proceedings.

There are further grounds for the ex officio discontinuation of enforcement proceedings, which are governed by Article 824 of the Code of Civil Procedure. Pursuant to the aforementioned provision, proceedings must be discontinued, inter alia, where the creditor or debtor lacks legal capacity, when the costs of enforcement proceedings would exceed the amount recovered through enforcement, or when enforcement is directed at property exempt from enforcement under specific provisions or a court ruling. The latter example necessitates the discontinuation of enforcement in any case where it would involve the attachment of, for example, maintenance payments or social assistance benefits.

The effect of discontinuing enforcement proceedings

The effect of discontinuing enforcement proceedings, in the form of the revocation of actions already taken, covers all enforcement measures – including the seizure of fines imposed on the debtor and not yet paid, as well as the absolute necessity to remove from the land register any entry regarding the initiation of enforcement proceedings against the property.

Once the decision to discontinue the proceedings becomes final, the debtor regains the ability to freely dispose of the assets against which enforcement was directed.

The discontinuation of enforcement proceedings at the creditor’s request is further distinguished by the fact that, as a consequence, the order issued during the proceedings awarding the creditor legal costs from the debtor is set aside.

Among the consequences of discontinuance, it should also be noted that enforcement proceedings may only be recommenced once the cause for which the proceedings were discontinued has ceased to exist. In exceptional circumstances, however, this period may be strictly defined.

One such case is regulated by Article 985 § 1 of the Code of Civil Procedure. It concerns circumstances in which enforcement proceedings are discontinued when, following the second auction, the property has still not been sold and none of the creditors has taken ownership of it. Dismissal under Article 985(1) of the Code of Civil Procedure means that new enforcement proceedings against the property may only be initiated after a period of six months has elapsed from the date of the second auction.

In the context of the consequences of the discontinuation of enforcement proceedings, it is also important to bear in mind that the limitation period, which was originally interrupted upon the commencement of enforcement proceedings, begins to run anew. This is significant from the perspective of both the creditor and the debtor, as once the limitation period has expired, the debt becomes a so-called ‘natural obligation’. This means that whilst the creditor may seek enforcement of the debt owed to them in court, if the debtor raises a defence of limitation, the claim will be dismissed in any event.

Rights acquired by third parties

If the enforcement proceedings conducted to date have led to third parties acquiring certain rights (e.g. the right of ownership of property acquired by a successful bidder), then even the discontinuation of such proceedings cannot lead to a breach of the rights acquired by those persons. Once the decision to discontinue enforcement proceedings becomes final, the bailiff is obliged to notify third parties whose rights and obligations were affected by the attachment of the lifting of the attachment.

Summary

In summary, the discontinuation of enforcement proceedings, regardless of whether it was carried out ex officio or upon application, results in the automatic revocation of the enforcement measures taken and the restoration of the debtor’s assets to their state prior to the seizure. Once the obstacle has been removed, enforcement proceedings may be recommenced unless enforcement is not permissible for other reasons. Actions taken in the discontinued proceedings do not have procedural effects in the new proceedings, unless specific provisions provide otherwise.