How to freeze all your debtor’s bank accounts at once (“carpet” foreclosure)

It is possible to recover a debt with a “carpet” foreclosure by freezing all the debtor’s bank accounts. In this article, we will see how this procedure works:

1. What is a foreclosure?
2. How to freeze the debtor’s current accounts?
3. What is a “top-down Foreclosure”?
4. Are there limits to the “top-down Foreclosure”?
5. What happens if the amount foreclosed is greater than the claim?
6. How can one find out what the creditor’s banks are?

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1. What is foreclosure?

A creditor who possesses an enforceable title (invoice, bill of exchange, cheque, injunction, etc.) may recover his credit by foreclosing the debtor’s assets. The foreclosure can be:

• Immovable, if the assets being attached are real estate;
• Movable, if it concerns movable property in the debtor’s possession;
• With third parties, if it concerns debts or assets in the possession of third parties.

The foreclosure of bank accounts is indeed a case of third-party attachment. This is a very feared procedure, as it binds the debtor’s assets, freezing his liquid funds.

2. How to freeze the debtor’s current accounts?

As mentioned above, the creditor’s lawyer may file a writ of foreclosure with the bailiff (which will be notified to the debtor and the Banks) based on the title. Within 10 days from the receipt, the Banks must provide the creditor with a statement as to the existence or absence of the sums.

Once the statement is received, the creditor can either terminate the procedure or pursue it if the statement is positive.  Throughout the procedure, the banks are also obliged to prevent withdrawals from the account and to declare whether further amounts have been credited. The amount due (“increased by half” to compensate for interest and procedural costs) will be frozen until the judge assigns the amounts to the claimant.

Since the creditor cannot possibly know in advance the exact amount of the funds deposited with each bank, it is possible to proceed simultaneously with the foreclosure in several banks. This is the case of what is known as a “carpet” foreclosure. Here we will examine it in detail.

3. What is a “carpet” foreclosure?

The most experienced lawyers know that it is necessary to act aggressively to recover a debt in the shortest possible time and at the lowest possible cost. The “carpet” foreclosure is actually a very effective disruptive action.

A “carpet” foreclosure targets all credit institutions where the debtor is believed to have bank accounts. As mentioned above, since the creditor is unaware of the exact amounts deposited with each bank, he/she can act simultaneously against all the debtor’s banks.

The involvement of competent lawyers is essential: only a logical and reasoned choice of the banks to target considerably reduces the failure rate and/or the risk of the foreclosure procedure being declared unlawful.

4. Are there any restrictions to the “carpet” foreclosure?

In order to act effectively, it is necessary to gather every available evidence on the existence of bank accounts at the “target banks” and proceed by deduction. 

As a matter of fact, proceeding “blindly” might be deemed unlawful. An ordinance of the Court of Turin (3 November 2016), concerning a foreclosure at as many as 19 banks, helps us to clarify the limits of “carpet” foreclosure. According to the Court of Turin, there is no limit and no link between the amount of the claim and the number of third parties that would be possible to foreclose.

Although the debtor complains of a breach of the limits established in Article n.546 of the Italian Code of Civil Procedure (according to which it is possible to foreclose sums equal to the amount of “the claim subject to foreclosure increased by half”), it is nevertheless true that, after the first hearing, the exceeding sums can be released, returning to the availability of the debtor. According to the Turin judges, it is therefore perfectly legitimate to foreclose several bank accounts, provided that the legal limits are not knowingly violated.

5. What happens if the amount foreclosed is greater than the credit?

What happens if the amount declared available by the bank exceeds the claim stated in the notified deed? According to art. 546 par. 2 of the Italian Code of Civil Procedure, in this case the debtor may request the execution judge:

1. to order the enforcement to be concentrated with a single bank
2. to proportionally decrease each foreclosure at each bank.

In the latter case, the debtor must submit an application for “reduction” to the judge responsible for the enforcement procedure. The Judge makes a decision within 20 days by means of an order that the creditor must in turn notify the credit institutions listed in the order.

6. how to find out what the debtor’s banks are?

Our legislature has also introduced a new procedure to allow the creditor to know in advance certain information useful for the foreclosure.

Pursuant to article 492 bis of the Italian Code of Civil Procedure, it is now possible to gain access to the telematic databases of the Public Administration and, more specifically, to the tax registry, including the archive of financial reports, and to those of the social security authorities, in order to gather all the relevant information for the identification of assets and credits to be enforced, including that relating to the debtor’s relations with credit institutions, employers and principals.

The resulting information enables precise action to be taken, further reducing the costs and risks of the procedure. In order to proceed with this procedure, the creditor cannot act alone, but must have the assistance of a lawyer who will file the application with the office of the President of the relevant Court.