Seizure of Value Against the Guarantor

Seizure of Enforcement Against a Guarantor | Lawyer in Izmir

Guarantee Agreement

A guarantor is a separate contract between a guarantor and a creditor that provides security for a second party to pay the debt in cases where the original debtor is unable to do so. It is independent of the main contract..

The Guarantor's Responsibility

The Guarantor's Responsibility TBK Article 589/1 It has been regulated. According to the relevant regulation; "The guarantor is liable in all cases up to the maximum amount specified in the guarantee agreement.".’’

While the guarantor's liability is often understood to be limited to the debtor's unpaid debt, the guarantor also has other responsibilities arising from the signed guarantee agreement and the law. The guarantor is liable for the principal amount of the guaranteed debt. Liability exceeding the principal debt amount is not permissible. Any decrease or increase in the principal debt affects the guarantor's liability. The guarantor is liable for positive damages resulting from the debtor's non-payment; however, if a penalty arises due to the debtor's fault in failing to properly perform the debt, the guarantor is not liable for it. The guarantor is responsible for paying the costs and expenses of the lawsuit filed by the creditor against the debtor.

TBK According to article 589/3, the guarantor is:’It is liable for accrued contractual interest for the past year and the current year, as well as, if necessary, for accrued interest for the past year and the current year on the principal lent against the bond.’

The guarantor's liability for the principal debt begins when the debt becomes due.

In cases where a notice is required for a debt to become due, the guarantor must also be notified. The debt becomes due for the guarantor as well upon receiving this notice. With this notification, seizure of assets can be carried out against the guarantor even while the debtor remains in custody.

TBK According to article 155 ‘"When the statute of limitations is interrupted against the principal debtor, it is also interrupted against the guarantor. However, when the statute of limitations is interrupted against the guarantor, it is not interrupted against the principal debtor."’

Article 590 of the Turkish Code of Obligations, which regulates the pursuit of the guarantor, states: "Even if the principal debt becomes due earlier due to the debtor's bankruptcy, no action can be taken against the guarantor before the determined due date.".

In all types of suretyship, the guarantor may request the court to suspend the proceedings against him/her in exchange for security in kind, until the existing collateral is liquidated and a definitive certificate of insolvency is obtained as a result of the proceedings against the debtor, or until a concordat decision is reached.

If the principal debt becomes due upon prior notice from the creditor or debtor specifying a time limit, then for the guarantee debt, this time limit begins to run from the date the notice is given to the guarantor.

Being a guarantor is considered to have the same status as the principal debtor under the Turkish Code of Obligations. Therefore, when enforcement proceedings are initiated due to an unpaid debt, the creditor has the right to take any action necessary to collect the debt within certain rules. This status applies not only to guaranteeing purchases or loans, but also to guaranteeing checks and promissory notes. In the event of an outstanding debt, the guarantor's assets can be seized while the debtor remains in custody.

Termination of Bail

Since a guarantee agreement is a debt dependent on the principal debt, the guarantee agreement terminates if the principal debt is extinguished for any reason (payment of the debt, assumption of the debt, release, etc.). Guarantee agreements made by natural persons are generally valid for 10 years, and therefore terminate upon the expiration of this 10-year period, or, if the guarantee agreement is for a fixed term, upon the expiration of that term. In addition to these, the guarantee agreement also terminates due to reasons such as rescission of the guarantee (Turkish Code of Obligations, Article 599), termination of an indefinite guarantee under certain conditions (Turkish Code of Obligations, Articles 601-602), the creditor's refusal to accept payment (Turkish Code of Obligations, Article 593), and the guarantor's release of the creditor.

Conditions that must be met for a guarantor to be able to stop enforcement proceedings.

A guarantor who wishes to have the enforcement proceedings stopped must file their objection with the court, not the enforcement office. Objections can be raised at any stage of the enforcement proceedings initiated against the guarantor (up to the commencement of bankruptcy proceedings or, if seizure has been made, the distribution of the proceeds). If the guarantor is not facing enforcement proceedings themselves, they do not have the right to request a stay of proceedings on behalf of the debtor.

The validity of guarantee agreements is subject to certain conditions under the Turkish Code of Obligations. Accordingly, the guarantor must write the maximum amount of debt for which they are liable, the date of the guarantee, and, if they are a joint and several guarantor, a statement to that effect, in their own handwriting on the agreement. Guarantee agreements that do not meet these conditions are invalid and have no legal effect on the guarantor. In such cases, the guarantor must raise the grounds of invalidity.

In order to halt enforcement proceedings initiated against a guarantor, the guarantor must also provide collateral in kind. This collateral may include real estate mortgages, movable property mortgages requiring delivery, or securities offered as security. The guarantor will determine the type of collateral to be provided to halt the proceedings. The judge will only decide whether the collateral provided or its amount is sufficient. However, the collateral provided must cover the principal amount, the interest accrued during the proceedings, and expenses, limited to the guarantor's maximum liability. Otherwise, the creditor will suffer damages. According to the clear provisions of the law, personal guarantees, sureties, and bank letters of guarantee cannot be used by the guarantor to halt enforcement proceedings.

The value of the collateral will be determined by considering the amount of liability subject to enforcement proceedings, taking into account potential interest and expenses. Accordingly, a simple guarantor will only provide collateral for their own share of the debt, and the same will apply to a joint guarantor if they have a defense of division of the debt. Otherwise, collateral covering the entire principal debt must be provided.

In some cases, favorable outcomes also arise for guarantors. For instance, various Supreme Court rulings have stated that the debt cannot be collected from the guarantor, while contracts may contain clauses that prevent the guarantor from fulfilling their responsibilities, depending on the circumstances. Therefore, it is essential to have the contract drafted through a lawyer. This is because the creditor can directly seize assets from the debtor, or they can seize assets from the guarantor while the debtor is present. To avoid such a situation, the duration, amount, and type of guarantee should be clearly specified in the contract when it is signed.

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