Turkish Law and Direct Bankruptcy to Collect Debts in Turkey

In the presence of certain factors, the creditors can file cases of bankruptcy after the debtor's enforcement process without any need for a pre-execution procedure. In addition, Articles 177 and 178 of the Act on Enforcement and Bankruptcy ("EBL") provide the basis for initiation of direct insolvency proceedings.

Other clauses in other laws, in addition to these Articles, permit the borrower to take the debtor into direct bankruptcy.

Four reasons for filing direct bankruptcy proceedings against a borrower are provided for in Article 177/1 of the EBL. The first is when it is impossible to determine the debtor's home. The definition of "residence" is defined wider than its civil law sense and therefore requires the debtor's domicile. In effect, the provision shall not be met where the debtor temporary residence. Therefore, the obligation is not deemed to be met in the event of the debtor having a domicile abroad because the clause does not differentiate the domicile in or outside of the state. Such criteria are believed to be sufficient evidence.

The basis applies only to real persons as the residence of the valid persons is listed in their  articles of assocations and is therefore defined.

Another explanation is that if the borrower escapes for the purpose of avoiding the creditors[1], the creditor can file a direct bankruptcy case. It means that, in order to avoid his due or unjust obligations, the borrower has abandoned his residence and has thus harmed his creditors. In some cases the debtor's new address can be identified, but pursuing a  proceeding may be disadvantageous for the debtor. In these cases, some academics claim that there would be enough probable evidence to demonstrate the creditor's purpose.

Some others, however, argue that the burden of proof lies with the debtor; the creditors then show that the debtor's change of residence, and it proves that it was not his or her debt that was aimed at escaping it and not destroying it[2].

The event or attempt by the borrower of fraudulent transactions that violate the interests of lenders is another explanation for a direct default case. This crime does not need to be reported as a criminal offense as a criminal offense nor does the debtor need to be charged. A fraudulent transaction which has a direct or indirect negative effect on the debtor's property is considered sufficient, or attempts to conduct it. In the presence of the cases laid down in Articles 278-280 of the EBL concerning the commencement of proceedings to annul the disposal transaction[3] the creditors that initiate a direct bankruptcy. Likewise, a case of direct bankruptcy[4] may also be viewed as an excuse for fraudulent bankruptcy provided for in Article 311 of the EBL.

In the course of an attachment proceedings, the last ground given by Article 177/1 EBL is to cover the debtor's property. This justification applies only when the borrower is asked to report his assets[5]. This provision shall be deemed to have been fulfilled if the compliance process for attachment purposes is not adequately disclosed or if the borrower fails to disclose his property or if the total amount of the receivable, interest and expenditures are not covered by the declared assets. That provision is not met even though the borrower has not reported the total amount of the receivable, interest and expenditures for compliance.

In compliance with Article 177/2 of the EBL, a further justification for a particular bankruptcy case is the termination of payments. Payment discontinuance means that the borrower will not pay the debts indefinitely or generally. The suspension of payment is not the same thing as insolvency; the borrower does not have enough cash to pay off its liabilities, irrespective of its property, in the case of a suspension of its payments. The borrower must announce expressly that his payments have been suspended. In addition, many measures of suspension payments are present, including the presence and non-paymentof debts in various ongoing civil proceedings against the debtor. But if the borrower tries to settle the creditors ' debts it does not mean the debtor's termination of his payments.

The enforcement proceedings shall therefore be suspended during this period, if the enforcement court grants the debtor an arrangement period, but this suspension is not deemed to be a direct bankruptcies suspension of payments. The Court of Cassation also finds that the direct bankruptcy case[6] is focused on the suspension of payments:

"According to the records in the file, the facts that the decision was based on art. 177/2 of the EBL, in general, suggests that the termination of payments is a cause for immediate bankruptcy; that the claimant, as the plaintiff, did not make any payments as it is known from the compliance files; That the trustee assigned to the corporation announced to the court that they would make the payment and that the suspension of payments was determined by the expert report; it is therefore agreed that (...) the decision in compliance with the process and law is comfirmed."

Under Article 177/3 of the EBL, refusal of the offered arrangement with creditors, removal of the arrangement period and dissolution of the arrangement are grounds for direct bankruptcy; however, refusal of its arrangement period would not constitute a ground for direct bankruptcy under Article 177/3 and Article 301 of the EBL[7]. Nonetheless, the compliance court's denial of application for agreement period could be viewed as suspending the debtor's payments. Moreover, in the case of reconciliation restructuring, the courts declare the debtor's bankruptcy if the debtor fails to fulfill his project obligations or the financing creditor's rights are not met[8].

The last reason given by Article 177 of the EBL is the non-payment of a debt approved by a court decision, although requested by a statutory request, and also accepted by the Court of Cassation's decisions:

"According to the fact that the legal requirement was informed, it is appropriate to agree that a petition for bankruptcy and a court decision are made pursuant to Art. 166 EBL; and that no additional payment order is needed because Art. 177/4 EBL offers grounds for immediate bankruptcy. To start the case for personal bankruptcy, the previous court decision need not become final. By fact, however, the courts delay the case of immediate default until the Court of Cassation's order is issued if the borrower obtains a suspension decision. It is disputed among historians whether a formal bankruptcy lawsuit can be launched if the legal action is based on a report reversing a court decision, and the Court of Cassation has made different rulings in this respect."

Debt Collection Legal Action in Turkey

For contrast to the above, there are several other similar restructuring provisions for mutual partnership and limited partnership) (firms as well as share equity businesses. Under Article 238/2 of the Turkish Commercial Code, a creditor may initiate a direct insolvency proceeding against a general partnership and its partners if the creditor has initiated an enforcement proceeding with a prior court decision and the debtor has not repaid the debt despite payment order.

This provision also applies to imited partnership shareholders. Of stock equity firms, over-indebtedness is a cause of immediate restructuring. The over-indebtedness was assessed by the court-appointed experts.


In the presence of the above-mentioned grounds, creditors may file a direct bankruptcy case before the first-instance commercial court where the debtor is located, without any need for prior enforcement for bankruptcy purposes.

The bankruptcy case is subject to a simple procedure and fixed fee regardless of the amount of the receivable, as the subject of the case is the debtor's bankruptcy and not debt payment. Nonetheless, the creditor pays the court's advance costs. The court uses the advance on liquidation assets during and after bankruptcy.

The petitioner shall specify the ground for direct bankruptcy. Since the conditions of personal bankruptcy vary from each other, amending this basis is subject to a ban on extending claims. Claimant shall prove admissible and basis of immediate bankruptcy. In some cases, however, definitive evidence is not needed and probable evidence is considered sufficient; any form of evidence may be presented to trial.

Turkish Debt Collection Law

The commercial court announces the bankruptcy request in the trade registry gazette and daily newspapers after receiving the petition. In compliance with Article 178/2 of the EBL, other lenders may, within fifteen days of the date of notice, warrant the denial of the petition before the court by arguing that the borrower negotiated the default in order to delay the enforcement proceedings pending against him and the payment of his debts. The court will examine whether bankruptcy is appropriate; if further examination is needed, the case will be examined. Otherwise, the request will be rejected at the very beginning.

With respect to the rules specific to the particular bankruptcy case at the creditor's request, Article 181 of the EBL makes reference to the general bankruptcy proceedings regulations. However, the last order for payment provisions will not apply and the court will declare bankruptcy once the presence of the receivables and the ground for direct bankruptcy is proven.


Creditors are allowed to bring compliance cases for bankruptcy purposes and seek the debtor's default, as well as to launch a formal bankruptcy case where the judge believes that the lender is at risk for non-performance or that the debtor's financial situation is unstable.

In this regard, the EBL provides some general grounds for direct bankruptcy, and the Turkish Commercial Code specifies certain grounds for partnerships. In the face of these grounds, the debtor can file a lawsuit before the commercial court and prove his receivable and the basis for the immediate bankruptcy case.

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