A number of economy analysts warn that 2020 is going to be the year of the next financial crisis. Experts from Forbes, Moody’s and JPMorgan are of the opinion that the world’s economy incoming recession is to be the direct consequence of aging Western population and Donald Trump’s trade wars both with China as well as with his traditional EU partners. The United Kingdom’s departure three years in the making also posits a number of unknowns for the Union’s economic future, causing many investors to wait it out until Brexit’s ultimate resolution.

At the same time, Europe’s economy faces its own problems. Germany, the Old Continent’s largest economy, prepares for a recession, and core industries such as the automotive, machinery and chemical industries are undergoing substantial restructuring and order reductions. The Italian economy, the EU’s fourth largest, entered into a recession during 2018’s second quarter, and has since maintained GDP growth of only 0,1%, which forced Banca d’Italia to conservatively revise its estimates for the coming years. Germany (15%) and Italy (9%) also happen to be the countries which receive the most Bulgarian exports. Economic stagnation will inevitably affect Bulgarian companies which rely on exports to the European markets, as well as their immediate suppliers.

Of course, the expected ‘cooling’ of Europe’s economy can also be attributed to the natural economic cycles. In any event, this slowing down will unavoidably affect Bulgarian markets. The European Commission estimates the Bulgarian economy’s growth at about 3% per year over the next three years but investments are expected to be affected by the increasing uncertainty.

If true that ‘a fly and a bank can be killed with a newspaper’, it wouldn’t be a stretch to add economic growth to that list. Even though estimates are not that scary, worried investors are influenced by the apocalyptic rhetoric reigning supreme among analyzers. Given such attitudes, every reasonable company would take measures to minimize the negative impact to its own production and business. Our clients increasingly point to atypical delayed payments by their partners, indicating that Bulgarian companies (in particulars whose business is poised towards exporting goods to the EU) are already feeling the aforementioned hesitation to invest, which in turn deprives them of new or even of current orders. If the projections prove true, these companies will have to downsize production or to adjust their short- and medium term business plans, which might make it impossible for a portion of these companies to honour their debts. Intercompany indebtedness increases during crises or recessions as a matter of principle, affecting not only companies that rely on exports, but all of their partners as well; therefore we at Obretenovi Law Firm advise our clients to take steps to determine and collect all outstanding debts.

This approach is incredibly useful for the so-called unsecured creditors – persons whose claims are not secured with the debtor’s particular property. Once commenced, the process of accruing debts can potentially make satisfying the ordinary creditors hard and sometimes downright impossible –the chances that over-indebted companies recover sufficiently to pay off their debts during recession are close to zero. Ordinary creditors have to get ahead of the curve by collecting their claims before the debtor could accrue exorbitant debts towards other partners or towards the state. These actions constitute a reasonable preventive measure on the creditor’s part which can provide him with relative security during debt collection as well as with the free financial resources needed in the event of a more severe recession.

Obretenovi Law Firm’s team has rich experience in the area – in voluntary as well as in forcible collection of debts – including negotiations with the debtors and legal representation in litigation and enforcement procedures against them. It is recommended that the collection of outstanding debts begin at least a year prior to the projected date after which the economic situation will make satisfying the creditor impossible.