Recovering a Debt from a Company – How a Creditor Can Collect

When one company fails to pay another on time, their relationship is governed by the general rules of the Obligations and Contracts Act and by the special commercial provisions of the Commerce Act. This combination gives the creditor a range of out-of-court and court methods of debt recovery, from a simple demand for payment to enforcement through a bailiff or a petition for the debtor to be declared insolvent. The choice of method depends on the amount of the debt, the availability of written evidence and the debtor's financial position.

Main Provisions

Unless the parties have agreed otherwise, a monetary obligation between businesses under a commercial transaction must be performed within 14 days of receipt of an invoice or other request for payment. Even where the parties have expressly agreed otherwise, the payment period may not exceed 60 calendar days, and where the debtor is a contracting authority in a public procurement, 30 days, save for expressly provided exceptions. This rule derives from Art. 303a of the Commerce Act, introduced when Directive 2011/7/EU on combating late payment in commercial transactions was transposed.

In the event of delay, the debtor owes compensation equal to the statutory interest from the day of default, whether or not the creditor has suffered actual loss (Art. 86 of the Obligations and Contracts Act). The statutory interest rate is set by the Council of Ministers. Since 1 January 2026, following the introduction of the euro, the formula has changed significantly. Instead of the former Bulgarian National Bank base rate plus 10 points, statutory interest is now calculated as the European Central Bank's interest rate on its main refinancing operations plus 8 percentage points, updated twice a year, on 1 January and 1 July. The change was adopted by a decree of the Council of Ministers published in State Gazette No. 115 of 30 December 2025.

Claims are not payable indefinitely. The general limitation period is five years (Art. 110 of the Obligations and Contracts Act), but for claims for interest and other periodic payments, the limitation period is only three years (Art. 111). Since 2021, there has also been an absolute ten-year limitation period under Art. 112, which cannot be suspended or interrupted except in the cases expressly provided for by law. Delaying recovery action therefore carries a real risk that the creditor will lose the ability to enforce the claim.

Out-of-Court Methods of Recovery

Before going to court, the creditor has several faster and cheaper options.

• Demand for voluntary payment – a written request to the debtor with a specific deadline for payment. Besides its practical effect, the demand is often legally necessary to put the debtor in default where the due date has not been expressly agreed.
• Negotiation and rescheduling – an agreed repayment plan, secured by additional guarantees (a promissory note, a suretyship), is often more advantageous than litigation against an uncertain and insolvent debtor.
• Set-off – if the creditor also owes the debtor a counter-obligation, the two claims may be extinguished up to the amount of the smaller one by a declaration of set-off under Art. 103–104 of the Obligations and Contracts Act, without any cash payment.
• Assignment – the sale or transfer of the claim to a third party (a factor or debt collection agency) in return for immediate payment of an agreed sum, under Art. 99 of the Obligations and Contracts Act. This is a convenient way for the creditor to recover part of the funds at once, transferring the risk and burden of collection to someone else.
• Factoring – a specialised form of assignment in which a factoring company finances the creditor in advance against invoice receivables, usually with or without recourse to the seller.

Court Methods of Enforced Recovery

When out-of-court efforts fail, the law offers two main procedures.

Order for Payment Proceedings

For monetary claims that are by their nature undisputed, Bulgarian law provides a simplified and fast procedure, order for payment proceedings under Art. 410 and Art. 417 of the Civil Procedure Code. In an application under Art. 410, no evidence of the claim needs to be submitted, and the court issues an order for payment on the basis of the creditor's statement alone. If the creditor holds a signed invoice, an extract from accounting records or another document on the exhaustive list in Art. 417, it may apply for an order for immediate enforcement, which allows a writ of execution to be obtained directly, before the debtor has even objected.

If the debtor does not file a written objection within the statutory time limit, the order becomes final and serves as an enforceable title. If an objection is filed, the dispute moves to ordinary claim proceedings, in which the creditor must prove its claim in the usual way.

Enforcement Proceedings

Once the creditor has obtained a writ of execution (or a final order for payment), it may instruct a private or state bailiff to collect the debt. The bailiff has a range of enforcement measures at its disposal, including

• garnishment of the debtor's bank accounts;
• garnishment of the debtor's receivables from third parties (for example, its own customers);
• attachment of shares in companies and of the commercial enterprise as a whole;
• inventory and public sale of movable and immovable property.

Enforcement proceedings are expensive for a slow debtor. Fees and interest continue to accrue, and information about pending enforcement proceedings is visible to future counterparties checking the debtor.

Interim Relief

Where the creditor fears that the debtor will try to transfer or conceal its assets before the case ends, the Civil Procedure Code allows interim relief to be sought before or together with the claim, by garnishment of bank accounts or movable property, or by attachment of the debtor's real property. An application for interim relief requires a convincing case on the merits and usually the payment of security set by the court, but it gives the creditor a real opportunity to have the claim covered by specific assets rather than waiting for the outcome of a lengthy trial with the risk that the debtor will meanwhile be left with no assets.

When the Debtor Is Insolvent – Insolvency Proceedings

If the debtor systematically fails to pay not only the particular creditor but many of its counterparties, a more effective tool may be a petition to open insolvency proceedings under the Commerce Act. There are two grounds.

• Inability to pay (Art. 608 of the Commerce Act) – where the trader is unable to perform a monetary obligation that has fallen due under a commercial transaction, or a public-law obligation connected with its business. The law introduces an irrebuttable presumption of inability to pay where payments have been suspended.
• Over-indebtedness (Art. 607a of the Commerce Act) – a special ground applicable only to capital companies (limited liability companies, joint-stock companies and partnerships limited by shares), where the company's assets are insufficient to cover its monetary obligations.

A petition to open insolvency proceedings may be filed by the debtor itself, a creditor under a commercial transaction, the National Revenue Agency, and the General Labour Inspectorate Executive Agency for unpaid wages. Opening the proceedings brings all creditors into a collective procedure for realising the debtor's assets and satisfying them in the statutory order of priority, a process in which individual enforcement proceedings are as a rule stayed.

Criminal Liability of the Managing Director – Art. 227b of the Criminal Code

Apart from civil remedies, the Criminal Code also provides for a criminal penalty for a trader who systematically conceals its insolvency instead of seeking the opening of insolvency proceedings. Under Art. 227b(1) of the Criminal Code, a trader that has become unable to pay and fails to declare this to the court within 30 days of suspending payments is liable to imprisonment of up to three years or a fine of up to BGN 5,000. Under paragraph 2, the same penalty applies to the persons who manage and represent the debtor, such as managing directors of limited liability companies, executive directors of joint-stock companies or the representatives of a cooperative, if they have not applied to the court to open insolvency proceedings within the same 30-day period, and under paragraph 3 to the procurator who has failed to perform a similar duty.

This is a publicly prosecuted offence that does not require a private complaint. Any person, including a creditor, who has information that the debtor has suspended payments and its managers are inactive may file a report with the competent district prosecutor's office. The prosecution service must carry out a check and, if there is sufficient evidence of an offence, open pre-trial proceedings. The report does not replace or ensure recovery of the claim itself, but in practice it is often used as an additional lever against a debtor acting in bad faith, especially where the managers deliberately postpone declaring insolvency in order to continue running up debts to new counterparties.

Preventive Security for Future Claims

The most reliable way to avoid a long and uncertain recovery process is to secure the claim when the transaction is concluded.

• A special pledge over the debtor's commercial enterprise, receivables, goods or movable property, created under the Special Pledges Act and entered in the Central Register of Special Pledges. The order in which pledgees are satisfied is determined by the order of registration, so timely registration is essential.
• A mortgage over the debtor's real property, the classic security in rem, with priority in satisfaction from the value of the property.
• A bank guarantee or an aval on a promissory note from a solvent third party, which gives the creditor a fast and relatively undisputed enforceable title in the event of non-payment.
• Prior checks on the counterparty in public registers, namely the Commercial Register and Register of Non-Profit Legal Entities, the Central Register of Special Pledges and the National Revenue Agency's public lists of persons with outstanding public debts. Regular monitoring of a regular counterparty's financial position allows a timely response before the debt becomes unrecoverable.

Practical Tips and Common Mistakes

• Do not delay action until the limitation period expires. The three-year limitation period for interest runs quickly, and after years of inaction the creditor loses the right to claim accrued interest, even if the principal remains due.
• Keep written evidence, such as signed invoices, delivery and acceptance records, correspondence and delivery confirmations. These documents determine whether the creditor can proceed directly to an order for immediate enforcement under Art. 417 of the Civil Procedure Code instead of awaiting the outcome of ordinary claim proceedings.
• Send a demand for payment promptly, with a return receipt or by email with confirmation of receipt. It is both evidence of putting the debtor in default and a precondition for charging interest from an earlier date.
• Assess the debtor's solvency realistically before investing in costly and lengthy court proceedings. A check in the Commercial Register for existing enforcement cases or terminated proceedings is cheaper than winning a case against an insolvent debtor that cannot pay.
• Consider security for every new, larger transaction, especially with a counterparty without an established credit history. A special pledge and a bank guarantee cost little compared with the risk of an unrecoverable claim.

Sound management of inter-company debt combines prevention (contractual clauses, security, counterparty checks) with decisive and timely action once a delay has occurred. The earlier a creditor seeks legal assistance on the specific case, the greater the chance of recovering the claim in full rather than only in part, or of not losing it altogether to an expired limitation period or the debtor's insolvency.