Lenders and debt collection firms often face problems with attachments to salaries of defaulting individual borrowers and to bank accounts to which the borrowers receive their salaries. Some of the more specific issues arising in these cases have recently been clarified in an interpretative resolution No 2/2013 (the “Resolution”) of the Supreme Court of Cassation (“SCC”).
1. What amounts can be attached and collected from the employee’s income?
The Bulgarian Civil Procedure Code states that in case of enforcement, natural persons are entitled to keep each month a minimum of funds necessary to meet their and their family’s needs.
Generally, the law prescribes that enforcement can be made against employment-related income and pension payments that exceed the statutory minimum wage for the country (BGN 380, or approximately EUR 185 as of 1 July 2015). Due to specific provisions in past legislation that were explicitly protecting pension payments, and due to the ambiguity in the text of the current law, some courts took the position that the threshold applies only to pensions. Respectively, these courts supported that salaries or other types of labour remuneration can be subject to enforcement, even if they are below this threshold. The Resolution now clarifies this issue and confirms that not only pension payments but also salaries and other labour-related remuneration of not less than the amount of the minimum wage for the country are protected.
Part of the income that exceeds BGN 380 may also be kept by the debtor depending on the exact amount of the income (after deduction of any due taxes and social security contributions) and whether he/she is taking care of any children.
In practice, some courts tended to allow attachment over the entire income of a debtor with the argument that the law specifies only the thresholds of the amounts that can be effectively collected in the enforcement, but not the amounts that can be attached. In this respect, the SCC had made it clear that the levels of protected income specified in the Civil Procedures Code apply both to attachments (as a security measure) and to the subsequent collection for satisfaction of the creditor.
We note that in case of enforcement proceedings under tax and social security legislation, the guaranteed amount that the debtor can keep remains fixed at BGN 250 (approximately EUR 130). Further, it is unclear whether severance payments are within the scope of the guaranteed amounts.
2. What happens if the attachment is to a bank account where the employee receives his/her salary?
It could be argued that once the payment enters into a bank account, it is no longer a salary but rather a receivable against the bank. Since receivables under bank accounts are not employment remuneration per se, in this case the whole salary could be collected for repayment of the employee’s debts. However, such an interpretation would prejudice the idea behind the law. Therefore, the SCC has stated that the guaranteed amounts remain protected even when they are in a bank account and even afterwards, when they are withdrawn as cash.
The SCC also made another important point: the funds are guaranteed only for the period until the next salary is received. Any part of the guaranteed monthly wage that remains in the bank account from the previous salary would no longer be protected. This remaining amount is considered as “savings” and could be subject to enforcement and collection by the enforcement agent for repayment of the employee’s debts.
3. How can the enforcement be effected?
In order to collect any amounts under bank accounts that are not protected, enforcement agents need information from the banks regarding the type of each incoming transfer and their amount. Such information becomes vital in case the person is receiving also non-labour related payments to the same bank account. The SCC states in its Resolution that enforcement agents could not possibly do their job without information from the respective bank and from the employer.
The Resolution stresses that it is an obligation of the enforcement agent to determine which part of the funds is protected and which is not. For this purpose, the enforcement agent is further obliged to request the necessary information from the debtor and any other third party. However, it is still unclear whether the general obligations for third parties to provide assistance and information to the enforcement agent prevails over the bank secrecy principle.
4. Proposed amendments to the Civil Procedure Code
The Council of Ministers has submitted to the Bulgarian parliament a draft law to amend and supplement the Civil Procedure Code. Part of the amendments concern the enforcement against employment-related remuneration received under bank accounts. Pursuant to the proposed new provisions, if there is an attachment order but it is evident that the funds incoming to a bank account are employment- or pension-related, the bank would need to transfer to the enforcement agent only such part of the salary/pension that exceeds the minimum wage for the country. Further, the bank would need to notify the enforcement agent that employment-related income is being received via its account.
The enforcement agent would then have to instruct the bank regarding the threshold above which funds can be attached and collected. The communications between the enforcement agent and the bank in relation to an attachment to a bank account would have to be done electronically through a unified environment for exchange of e-messages.
The amendments to the Civil Procedure Code still remain to be adopted and the unified environment for electronic attachments would have to be further detailed in an ordinance by the Ministry of Justice.
The Resolution and the proposed amendments to the Civil Procedure Code aim to bring much-needed clarification on the subject of attachment and enforcement against employment-related income and income received under bank accounts. However, neither the Resolution nor the proposed amendments give enough clarity as to how the enforcement agent would obtain the necessary information. Some other practical hurdles also remain unaddressed, such as the distinction between income and savings in cases where a person receives more than one salary, royalties, or other income, all of which with different due dates.