Many people with digital assets wonder if they can be seized by a bailiff in the event of debt. This guide provides answers to key questions about bailiff enforcement in the context of cryptocurrencies. You will learn how Polish law regulates this issue, what a bailiff can seize, and the consequences of hiding cryptocurrencies from enforcement authorities.
What is bailiff enforcement?
Bailiff enforcement is the final stage of the debt collection process aimed at recovering a creditor’s debt by seizing a debtor’s assets. The rules for bailiff proceedings in Poland are regulated by the Civil Procedure Code, specifically under Section III concerning bailiff enforcement. Acting upon a creditor’s request, a bailiff secures the debtor’s assets and subsequently sells them to settle financial obligations. During this process, a bailiff can seize various assets belonging to the debtor, such as bank accounts, real estate, cars, or valuable items. However, in recent years, a new question has arisen: can a bailiff seize cryptocurrencies?
What assets can a bailiff seize?
A bailiff has the right to seize the debtor’s assets to satisfy the creditor’s claims. In practice, bank account funds, wages, pensions, real estate, and movable assets such as cars, electronic equipment, or jewelry are often seized. A bailiff can also seize company shares, securities, and other property rights of the debtor. However, it is worth noting that a bailiff cannot deprive the debtor of essentials for daily living. Therefore, there is a list of items excluded from enforcement, such as clothing, food for two weeks, essential work tools, and social benefits like child support and family allowances.
What is exempt from bailiff seizure?
Although a bailiff can secure many types of assets, there are some exceptions. A bailiff cannot seize items essential for daily life, such as basic household appliances, work tools, or items with personal and sentimental value, like wedding rings. The debtor is protected by law, which ensures that the bailiff does not deprive them of necessary means of living.
Can a bailiff seize cryptocurrencies?
Although cryptocurrencies are relatively new, Polish law recognizes them as property rights, meaning their seizure by a bailiff is theoretically possible. Cryptocurrencies like Bitcoin are defined in the Act of March 1, 2018, on Counteracting Money Laundering and Terrorist Financing as a “digital representation of value.” Although cryptocurrencies are not physical assets, they may be treated as other property rights under the Civil Procedure Code (Art. 909 et seq.). Seizing cryptocurrencies, however, may be more complicated than traditional forms of enforcement. Cryptocurrencies are usually stored in digital wallets secured by private keys, so the bailiff would need access to these keys, which can be difficult if the debtor hides information about their cryptocurrency holdings.
How can a bailiff seize cryptocurrencies?
In practice, seizing cryptocurrencies by a bailiff is possible but involves a more complex process. Initially, a creditor may instruct the bailiff to search for the debtor’s assets, including cryptocurrencies. The debtor is required to submit a statement of assets, which should include information on held cryptocurrencies. Making a false declaration exposes the debtor to criminal liability. If the bailiff learns of the debtor’s cryptocurrency holdings, they can request that the cryptocurrency exchange seize the funds in the debtor’s account. In this case, the exchange may freeze the debtor’s account and transfer the funds to an account specified by the bailiff.
Is it possible to enforce cryptocurrency stored outside of an exchange?
If a debtor stores their cryptocurrencies in a wallet outside of an exchange, the situation becomes significantly more challenging. Private keys to cryptocurrency wallets are essential for sending funds, and if the debtor hides these keys, the bailiff may be unable to seize the assets. In this case, the creditor may struggle to recover the debt. However, under the Civil Procedure Code, the bailiff has the right to require full disclosure of the debtor’s assets, including cryptocurrencies. A debtor who fails to fulfill this obligation risks criminal liability for hiding assets.
Consequences of hiding cryptocurrencies from a bailiff
Hiding assets from a bailiff, including cryptocurrencies, is illegal and carries serious consequences. Under Art. 300 of the Penal Code, a debtor who deliberately conceals assets to obstruct enforcement may face imprisonment from 3 months to 5 years. Therefore, a debtor should always cooperate with the bailiff and disclose all assets, including cryptocurrencies.
What regulations govern the enforcement of cryptocurrencies?
Polish law does not yet have specific regulations regarding cryptocurrency enforcement. However, Article 909 et seq. of the Civil Procedure Code indicates that property rights are subject to enforcement, and cryptocurrencies are recognized as such assets. The Act of March 1, 2018, on Counteracting Money Laundering and Terrorist Financing also defines cryptocurrencies as a “digital representation of value,” allowing them to be seized in enforcement proceedings.
Can a bailiff seize Bitcoins?
To seize Bitcoins, a bailiff needs access to the debtor’s digital wallet and private keys. If the debtor stores their Bitcoins on an exchange, the bailiff can request that the exchange seize the funds. In this case, the exchange is obligated to freeze the debtor’s account and transfer the funds to the account specified by the bailiff. However, if the debtor stores Bitcoins in an offline wallet, seizure may be more difficult, especially if the bailiff does not have access to the private keys.
Can assets be hidden in cryptocurrencies from a bailiff?
Hiding assets in cryptocurrencies from a bailiff is illegal. A debtor is required to fully disclose their assets, and cryptocurrencies must be included in the asset statement submitted to the bailiff. Concealing information about cryptocurrencies may lead to criminal liability.
Bailiff auctions of Bitcoins and other cryptocurrencies
Although bailiff enforcement of cryptocurrencies is still rare, such cases are occurring worldwide. In countries like Sweden, Russia, and Poland, there have already been bailiff auctions of seized cryptocurrencies. In Poland, in 2018, a bailiff in Koszalin seized a debtor’s Bitcoins and conducted a sale to settle the debt.
Enforcement of cryptocurrencies from a foreign exchange
A Polish bailiff may enforce cryptocurrencies; however, if the cryptocurrency exchange where the debtor stores assets is located outside Poland, the process becomes more complex. This is because the bailiff has jurisdiction only within Poland, and their authority does not extend to exchanges based in other countries. In such cases, the creditor may have difficulty enforcing the debt, as effective enforcement may require using international legal mechanisms, such as bilateral agreements or conventions on mutual legal assistance. If there are international agreements on judicial and enforcement cooperation between Poland and the country where the cryptocurrency exchange is based, the bailiff may apply to the court to recognize and enforce the Polish decision abroad. However, this process may be lengthy and costly, and the success of enforcement depends on the regulations in the respective country and the cooperation of local authorities. Therefore, the creditor should consider consulting a lawyer specializing in international enforcement law to effectively realize their claims.
Summary
Bailiff enforcement of cryptocurrencies, although more complex than traditional asset forms, is possible. A bailiff can seize a debtor’s cryptocurrencies, especially if they are stored on an exchange. Hiding cryptocurrencies from a bailiff is illegal and carries serious consequences, including criminal liability. The debtor should always cooperate with the bailiff and disclose all assets to avoid additional legal issues.
