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Debtor's fraud

We often act on behalf of our clients by applying to the law enforcement bodies for opening criminal proceedings on various matters related to dishonesty of debtors. We file reports to the police or prosecutor's offices on the alleged criminal activity linked with debtor's frauds, dishonesty or embezzlement, criminal bankruptcy, dissipation of assets and other proprietary crimes.  

It is noteworthy that a civil claim can also be made in the course of criminal proceedings. Creditors might be interested in assisting law enforcement bodies to punish guilty persons so that a similar fraud crimes are not committed in the future. 

Knowledge & Insights

Debtor's dishonesty 

It is not unusual that debtors stop communication and does not answer phone calls or emails. Sometimes creditors realise that the assets of their debtors are transferred to unknown residents of the non-EU countries. Once checked, it appears that those persons have never arrived to Lithuania and have no links with Lithuania. The creditors are not able to reach such persons. Even if civil proceedings are opened and creditors receive a favourable court ruling, any court ruling is empty and will never be enforced in real life. Initiation of bankruptcy proceedings will not be a solution if the debtor has no assets. 

If you encounter any of such problems, one possible solution is to apply for criminal investigation. The cases when a debtor in light of economic hardship or insolvency without being able to meet all creditor's claims met only certain preferential claims or secured some of the claims only and so caused financial damage to other creditors can considered as dishonesty of debtor, which is a crime in Lithuania. The criminal act may have been conducted by creating such circumstances, under which a creditor has been denied the possibility to enforce it claim or this avanue is materially hindered. 

We can assist you in preparation of applications to the law enforcement bodies on the alleged criminal activity, when the debtor has consciously avoided his duty to refund debt. 

Debtor's fraud

It is a criminal act in the Republic of Lithuania to take good or services, whilst there is no intention to pay for them. If a person entered into commercial arrangement with the company that was actually empty and this fact has not been disclosed to a contract conterparty, then such activity can be qualified as fraud. The criminal intent not to pay for the service can emanate after the company enters into the transaction. Embezzlement is considered as a finished criminal act, once a perpetuator receives a right to such property irrespectively of whether the proprietary rights were actually enforced or not. 

Monetary damage can also be caused when persons abuse trust and dissipate assets, use a credit for different purposes, which results in the default and failure to return the debt. The practical problem is that the law enforcement bodies can be reluctant to initiate the criminal proceedings by arguing that this is the area of civil and criminal law should not intervene into commercial relations. The refusals to initiate criminal proceedings are often motivated that the criminal law should be considered as ultimate measure, and a victim should pursue civil law remedies. 

Šulija Partners Law Firm Vilnius, registered office Jogailos street 4, 3rd floor, Vilnius, LT-01116, Lithuania, fax +370 52051926, e-mail: info@SulijaPartners.com

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