What is an Insolvency Certificate and How to Obtain it?

The certificate of insolvency is an important legal document that officially proves that the debtor has insufficient solvency and cannot meet his debts. This document, which clarifies the processes between the creditor and the debtor, is based on the seizure report prepared by the enforcement office.

The document that officially proves that a debtor is insufficient to pay and cannot meet his debts is called an insolvency certificate. This document plays an important role in legal processes between the creditor and the debtor. It is issued to clarify legal proceedings in cases where the debt cannot be collected. When obtaining the document, the seizure report prepared by the enforcement directorate is taken as basis, and the relevant process is carried out meticulously. The certificate of insolvency can be obtained for the debtor as a result of enforcement proceedings and is requested by the creditor from the enforcement office.

During the request for a certificate of insolvency, the financial situation of the debtor is examined in detail. When the request is rejected, other legal remedies, such as the debtor's payment plan or an action for annulment of disposition, may be put into action. 

What is the use of an Insolvency Certificate?

The certificate of insolvency has important functions in the legal processes between the creditor and the debtor. These are respectively:

• By providing legal documentation of the debt, it officially proves that the debt cannot be covered with the debtor's assets. 
• It is a prerequisite for the creditor to file a lawsuit for cancellation of the disposition. 
• While the temporary document carries the possibility that the debt can be collected; The certificate of absolute insolvency states that the debt cannot be collected.
• It is accepted as a legal basis in Supreme Court decisions and enforcement processes. 
• The creditor can better track the debtor's assets and use his legal rights, such as enforcement complaints, more effectively. 
• It may result in some reductions in the debtor's tax liabilities. For example, insolvency certificate tax deduction plays an important role in reducing the debtor's payment obligations.

Types of Insolvency Certificate

It is basically divided into two: Certificate of absolute and temporary incapacity. What is certain is that it is a document documenting that the debt cannot be collected in any way. This document indicates that the debtor is bankrupt or that his assets are completely insufficient. The certificate of temporary insolvency states that there is a possibility of collection, but the processes are continuing.

Certificate of Absolute Insolvency

In cases where the debt cannot be collected, a certificate of absolute insolvency is issued. This document, issued by the enforcement office, is a prerequisite for lawsuits for cancellation of disposition that creditors can file against the debtor. The debtor's assets are fully determined and it is clarified that his debts cannot be met.

Creditors who have the document can initiate broader legal action against the debtor. For example, the dismissal of the file for which the insolvency certificate was obtained indicates that the debt cannot be collected legally and reduces the debtor's obligations. However, this does not mean that the debtor is completely relieved of his financial obligations. In certain cases, re-evaluation may be made within the legal period.

Temporary Insolvency Certificate

The document showing that there is a possibility of collecting the debt depending on the debtor's current situation is called a temporary insolvency document. However, within the scope of Article 105 of the Enforcement and Bankruptcy Law, this report does not contain definitive results. It provides an important basis for creditors to continue enforcement proceedings against the debtor. Conditions include the borrower providing a payment plan or declaring assets.

It is issued as a result of a detailed examination of the debtor's assets and debt situation. If the debtor does not fulfill his payment commitments, the provisional document may become final. Thus, creditors can exercise their legal rights in line with the conditions of cancellation of the disposition.

Conditions for Temporary Insolvency Certificate

According to Article 105 of the Enforcement and Bankruptcy Law, a certificate of temporary insolvency is issued in cases where the debtor's assets do not cover the receivable amount. During the foreclosure process, if it is determined that the debtor's existing assets are not sufficient to cover the debt, this is added to the foreclosure report. Without the need to prepare a separate document, the report replaces the temporary insolvency certificate. Thus, the document is a prerequisite for the creditor to file a lawsuit for cancellation of the disposition.

During the seizure, the value of the goods is determined by the seizure officer. However, support can be obtained from an expert when necessary. If the value of the seized goods does not cover the debt, this information is recorded in the minutes. There is a possibility that the goods can be collected at a higher value after valuation. Therefore, the document only allows the creditor to file a lawsuit for cancellation of the disposition.

For example, imagine that you want to buy a house for sale in Sarıyer that you like, and during the sales process you learn that there is a lien on the property. In such a case, creditors' protection of their legal rights based on the relevant minutes may affect the progress of the process. It is of great importance to get expert support to learn the details of the process, clarify the legal status of the real estate and carry out the transactions safely. To minimize such legal and financial risks, you can benefit from professional services and secure your transactions by visiting Makro Life.

How to Obtain an Insolvency Certificate?

Creditors must apply to receive the relevant document. The steps to be followed in this process are as follows:

• Application to Enforcement Offices: First, the creditor must make an official application to the enforcement office.
• Determination of Debtor's Assets: The debtor's assets are examined in detail and a seizure report is prepared.
• Submission of Documents: Documents proving that the debtor cannot pay his debt must be submitted to the enforcement directorate during the application.
• Review and Document Editing: As a result of the examinations carried out by the enforcement directorate, the document is prepared and delivered to the parties.
• Legal Obligations of the Debtor: While taking the transaction, the debtor is expected to fulfill its legal obligations.

The above-mentioned transactions are of great importance for creditors to secure their receivables in cases where the debtor has difficulty paying. For example, let's assume that you have started the sales process to buy a flat in Fatih, but the transactions are disrupted due to the lien on the assets of the seller who is in debt. In such a case, issuing an insolvency certificate ensures that the transactions proceed on a legal basis and possible disputes are prevented. To get detailed information about the process and to ensure legal security in real estate transactions, you can get professional support by visiting Makro Life, one of the expert platforms.

Legal Consequences of Certificate of Insolvency

In prosecution law, substantive law and criminal law, the certificate of insolvency is a document that produces various consequences. However, in order for these results to be implemented, the minutes must be prepared in accordance with the law.

1. Consequences for Pursuit Law

• The definitive insolvency document proves that the debtor accepts his debt. The creditor can remove the objection using this document, even if the debtor objects.
• When the person pursues the debtor again within one year after the report, he can directly initiate a foreclosure process without notification of a payment order. However, after this period has passed, a payment order must be sent.
• It allows the creditor to file a lawsuit to cancel the debtor's property abduction or disposition transactions.
• The creditor may participate in the seizure proceedings of other creditors by meeting certain conditions in accordance with Article 100 of the Enforcement and Bankruptcy Law.

1. Consequences in terms of substantive law

• The statute of limitations for debts subject to a certificate of absolute insolvency is 20 years. During this period, the creditor may request collection from the debtor.
• No interest is charged for the specified debts. Thus, it creates an advantage in favor of the debtor.
• According to Article 245 of the Turkish Code of Obligations, forgiveness agreements terminate automatically in case the debtor becomes insolvent.

1. Consequences for Criminal Law

• Penal sanctions come into play if the debtor reduces his assets, spends excessively, or makes false statements in order to harm the creditor.
• Sanctions within the scope of criminal law are evaluated according to the details of the concrete incident, and in serious cases, it is recommended to consult an expert lawyer.

The results above create different effects for the creditor and the debtor, making it easier to direct the legal processes. For example, if you want to buy a house for sale in Göztepe, Istanbul, but find out that there is a lien on the real estate, you can see that the creditors have initiated the process of protecting their legal rights with a certificate of final or temporary insolvency. This may affect the progress of transactions. It is important to get professional support to ensure that the legal process proceeds transparently and smoothly. In this process, Makro Life can make it easier for you to access accurate information and secure the process in your real estate transactions.