How Asset Tracing and Distraint Work in Enforcement
Tracing a debtor's assets and placing a distraint on them is among the most effective instruments of compulsory enforcement — it is here that it is decided whether the creditor's claim is satisfied in real value. This stage of Georgian enforcement procedure is regulated in detail by the Law on Enforcement Procedure — specifically its Articles 40, 44, 47, 48, 50, 54 and 56. On this page we explain how a distraint is placed on movable property, what is recorded in the act of description and distraint, how property is valued, how the auction proceeds and how the priority of multiple creditors is determined — and where our involvement can be decisive.
The Placing of a Distraint and Its Subject
As defined by Article 40 of the Law, placing a distraint on movable property means the description of the debtor's property, the declaration of a prohibition on the owner's disposal of it — alienation, pledging, or the conclusion of lease and rental contracts — and/or the transfer of the property for safekeeping. The enforcement officer records the distrained items in the act of description and distraint, and a transaction concluded after the distraint is void. Distrained money is deposited by the officer without delay into the respective deposit account, while securities and valuables are kept in a specially designated, secured room.
As to the subject of the distraint, Article 44 of the Law states that all items of the debtor are subject to distraint except the exceptions established by the Law, and it is presumed that items found with the debtor belong to him. If a third party claims a right to the property, the item is nevertheless entered in the act with an appropriate note, and the enforcement officer must explain to that person the right to apply to the court — a moment of particular importance where the case concerns assets moved abroad and ownership is often disputed.
Valuation and the Act of Description
Article 47 of the Law regulates valuation. At the time of the description, where it is possible to determine the market value, it is recorded in the act; where prices cannot be established, the National Bureau of Enforcement or, on its instruction, another competent person performs the valuation after registration of the distraint. In the case of tax arrears, a repeated valuation is not mandatory if the property was valued within one year before the start of the proceedings. A party to the proceedings may submit an expert's conclusion valuing the property within six months before the start — and the Bureau may rely on that conclusion.
The act of description and distraint — in the form established by Article 48 of the Law — contains the time and place of its compilation, the names of the bureau and the enforcement officer, the decision being enforced, the names of the creditor and the debtor, the designation of each item with its distinguishing features, its separate valuation, the numbers of seals where items were sealed, the data of the custodian, the explanation of the procedure of appeal and the remarks of the parties. The act is signed by the enforcement officer, the custodian, the creditor, the debtor and other persons present. A properly drafted act is the foundation of the process up to the auction, and its flaws often become grounds for challenge.
The Auction and the Priority of Creditors
Under Article 50 of the Law, the National Bureau of Enforcement, or another person contracting with it, announces a public auction within one month of placing the distraint on the movable property, or, for tax arrears, within two weeks of the start of the proceedings. If a pledge is registered on the distrained property, the Bureau notifies the pledgees of the start of the proceedings and sets a period for the submission of claims; another pledgee must submit monetary claims within ten calendar days of receiving the notice.
Article 54 of the Law regulates priority: property may simultaneously be distrained for the benefit of several creditors, and the order of enforcement is determined by the time of registration of the distraint — to the hour and to the minute. Where several enforcement officers act, realization is carried out by the one who first registered the distraint in the respective registry. The order of distraint — under Article 56 of the Law — is issued on the basis of the creditor's application, indicating the grounds of the creditor's claim and the claims themselves; upon delivery of the order to the obligated person, the distraint becomes effective within the limits of the creditor's claim.
Frequently Asked Questions
What is an order of distraint?
An order of the bureau issued on the basis of the creditor's application, indicating the grounds of the claim and the claims; upon its delivery to the obligated person the distraint becomes effective.
When is the auction announced?
Within one month of the distraint, or within two weeks of the start of tax enforcement proceedings.
How is the priority of creditors determined?
By the time of registration of the distraint, to the hour and to the minute; realization is carried out by the officer who registered the distraint first.
What can a third party whose property was distrained do?
Note the claim in the act, apply to the court for release from the distraint, or submit a document confirming ownership — with the creditor's consent the property may be removed from the act.
How We Help on Legal.ge
The Legal.ge team protects creditors and third parties at every stage of enforcement: we prepare distraint applications, verify acts of description, assess the need for expert valuation, track auction deadlines and defend your position in priority conflicts. Contact us — we will review your situation and build the sequence of steps that leads to the actual satisfaction of your claim.