When the debtor fails to repay the debt on time, in order to realize the secured property (i.e., auctioning or selling the secured property) to realize the creditor's rights, the common practice is for the creditor to file a lawsuit with the people's court to determine the main claim and then apply to the court for enforcement. However, realizing security interests through litigation is a complex and lengthy process. In this regard, the Civil Procedure Law stipulates a special procedure for realizing security interests. This is a non-litigation model for realizing security interests, which greatly facilitates the realization of creditors' security interests compared to litigation models. Specifically, the special procedure for realizing security interests has the following advantages:
1. Procedure simplification
The litigation model is the second instance final trial, and according to Article 178 of the Civil Procedure Law, the special procedure for realizing security interests is the first instance final trial. Therefore, a civil ruling for the special procedure to realize security interests takes effect from the date of issuance and can be immediately applied for compulsory enforcement.
2. Relatively short duration
To realize security interests through litigation, the period for ordinary first-instance proceedings is six months from the date of filing, and three months for second-instance cases, with special circumstances that may be extended. According to Article 180 of the Civil Procedure Law, except in special circumstances where the extension is approved by the court president, the special procedure for realizing security interest shall be concluded within thirty days from the date of filing.
3. Lower cost
To realize security interests through litigation, case acceptance fees must be paid according to the statutory proportion based on the amount of the claim. If applying to realize security interests through special procedures, creditors must prepay an application fee. Currently, the law does not clearly specify the prepayment standard for application fees. Different local courts have different fee standards. Some courts charge one-third of the litigation case acceptance fee (such as Shanghai Pudong Court), others charge half of the litigation acceptance fee (such as Shenzhen Futian District Court), and many courts charge a case acceptance fee of 50-100 yuan per case (such as Wuhan Maritime Court, Jiangsu Jingjiang Court, etc.). Therefore, the application fee required to be prepaid for the special procedure for realizing security interest is significantly lower compared to the case acceptance fee under the litigation model.
In addition, according to Article 204 of the "Interpretation of the Supreme People's Court on the Application of the Civil Procedure Law of the People's Republic of China," for special procedures for applying to realize security interests, if the court rules that for auctioning or selling secured property, the application fee shall be borne by the debtor or guarantor; If the court rules to dismiss the application, the application fee shall be borne by the applicant, but if the applicant files a separate lawsuit, the application fee already paid can be deducted from the case acceptance fee.
IV. Summary
Based on the above analysis, when encountering situations where security interests need to be realized, we recommend that creditors first apply to the court to realize security interests through special procedures. If the application is supported by the court, it greatly saves creditors time and costs; Even if the application is rejected by the court, according to Article 197 of the Civil Procedure Law, creditors may still file a separate lawsuit with the court to realize their security interest through litigation, and this will not increase the creditor's costs.