Prescription of Bank Loans in Bulgaria — When the Debt Expires (2026)

Legal framework

The institute of prescription is regulated by the Bulgarian Obligations and Contracts Act (OCA), Chapter “Prescription” — Articles 110 to 120. These provisions apply to all civil relationships, including bank loan agreements, mortgage loans, credit cards, and claims held by assignees (debt collection agencies).

The key provisions governing prescription of bank loans are:

• Article 110 OCA — general 5-year prescription period for all claims for which the law does not provide another period.
• Article 111 OCA — short 3-year prescription for an exhaustively listed set of cases, including interest and periodic payments.
• Article 112 OCA — the new 10-year absolute prescription for individuals, in force from 2 June 2021 (promulgated in State Gazette, issue 102/2020).
• Article 115 OCA — grounds for suspension of the limitation period.
• Article 116 OCA — grounds for interruption of the limitation period.
• Article 120 OCA — prescription is not applied ex officio; the court will not take it into account without an objection raised by the debtor.

To this body of rules must be added the interpretative decisions of the Supreme Court of Cassation, which are of key importance for the practical application of prescription to bank loan agreements — notably Interpretative Decision 3/2011 and Interpretative Decision 8/2017 of the General Assembly of the Civil and Commercial Chambers.

General prescription — 5 years (Article 110 OCA)

Article 110 OCA provides: “All claims for which the law does not prescribe another period shall be extinguished by the expiration of a five-year limitation period.” This is the default period in Bulgarian civil law — it applies whenever no special rule under Article 111 or any other statute is applicable.

For bank loan agreements the general 5-year prescription applies to the principal — i.e., to the amount the borrower owes as repayment of the funds received from the bank. This interpretation has been clearly adopted by the SCC in Interpretative Decision 3/2011 (discussed below), which is the key reference for all subsequent case law.

The 5-year period begins to run from the moment the claim becomes due — i.e., from the maturity date of each instalment, or from the moment of acceleration under the relevant conditions.

Short 3-year prescription (Article 111 OCA)

Article 111 OCA introduces a reduced 3-year limitation period for an exhaustively listed set of claims. Under the text of the law, the following are extinguished by a three-year prescription:

• Letter “a” — claims for remuneration for labour for which no other period is provided (e.g., wages).
• Letter “b” — claims for damages and penalties arising from non-performance of a contract.
• Letter “c” — claims for rent, interest, and other periodic payments.

As regards bank loan agreements, the application of the 3-year prescription has the following particularities:

• Contractual and statutory interest — in all their forms (remuneration interest, default interest under Article 86 OCA) are extinguished by the 3-year prescription under Article 111(c).
• Default interest and penalty clauses for late payment — are also extinguished by the 3-year prescription, either under Article 111(b) (penalty) or (c) (interest).
• The principal of the loan — does NOT fall within the short prescription and is extinguished by the general 5-year period under Article 110 OCA, pursuant to Interpretative Decision 3/2011.

This distinction has significant practical importance: in relation to old bank debts, a substantial portion of accrued interest may turn out to be time-barred even while the principal is still within the 5-year window.

Interpretative Decision 3/2011 of the SCC

Interpretative Decision No 3 of 18 May 2012 in interpretative case No 3/2011 of the General Assembly of the Civil and Commercial Chambers of the Supreme Court of Cassation is one of the most important acts defining the applicable prescription for bank loan agreements. The decision answers the central question: do the monthly instalments under a bank loan constitute “periodic payments” within the meaning of Article 111(c) OCA, i.e., are they extinguished by the 3-year prescription?

The SCC gave a categorical negative answer. The reasoning is as follows: under a bank loan agreement the borrower owes repayment of one single aggregate amount (the principal), which is rescheduled for payment in separate monthly instalments according to a repayment plan. Each instalment is not an independent, recurring performance (as with rent or maintenance payments), but part of the performance of one and the same obligation to repay the borrowed amount.

The consequences of this interpretation are substantial:

• The principal is extinguished by the general 5-year prescription under Article 110 OCA, not by the short 3-year period.
• Each individual instalment begins to run from its own maturity date — meaning that the prescription for instalments overdue by more than 5 years has already expired, while more recent ones are still enforceable.
• Interest retains the 3-year prescription under Article 111(c) — that part of the ruling has not been amended.

Interpretative Decision 3/2011 is absolutely binding on all Bulgarian courts and forms the basis of the modern understanding of prescription of bank loans.

Acceleration (predsrochna iziskuemost)

Most bank loan agreements grant the bank the right, upon the failure of the borrower to pay a certain number of instalments (typically 3 consecutive), to declare the loan “accelerated” (predsrochno iziskuem). This means that the entire remaining principal becomes immediately due without awaiting the expiration of the repayment plan.

Pursuant to Interpretative Decision No 8/2017 of the General Assembly, acceleration does not occur automatically upon the existence of overdue instalments but only at the moment when the bank’s express written declaration of will reaches the debtor. The mere inclusion of an acceleration clause in the contract is insufficient — the bank must actually exercise this potestative right.

From the moment the bank’s declaration reaches the debtor, a new 5-year period under Article 110 OCA starts to run with respect to the entire remaining principal. Interest — both accrued before and after acceleration — continues to be subject to the 3-year prescription.

This rule is of great practical importance: if the bank declared acceleration in, for example, 2018 and took no action to judicially collect the debt, the 5-year period expires in 2023 and the principal may be extinguished by prescription.

Absolute 10-year prescription (Article 112 OCA)

By an amendment to the OCA promulgated in State Gazette, issue 102/2020, and in force as of 2 June 2021, Bulgarian law introduced a new provision — Article 112 OCA — regulating an absolute 10-year prescription for claims against individuals. This is the most significant reform in the field of prescription in decades and has direct bearing on old bank debts.

Characteristics

• Period — 10 years from the moment the claim becomes due.
• Absolute character — this period cannot be suspended and cannot be interrupted, neither by the filing of a claim, nor by acknowledgement by the debtor, nor by enforcement proceedings. After its expiration the claim is extinguished definitively, regardless of any actions by the creditor.
• Only for individuals — applies solely to debts of natural persons who do not act in the course of a commercial or professional activity. It does not apply to merchants or to sole traders with respect to claims arising from their commercial activity.
• First extinctions — the earliest possible extinctions under the absolute prescription will occur on 3 June 2031, as the period begins to run from the entry into force of the law for older claims.

Exceptions (Article 112(2))

The absolute 10-year prescription does NOT apply to the following types of claims:

• Claims arising from the commercial activity of sole traders;
• Claims arising from tort (delict);
• Claims arising from unjust enrichment;
• Maintenance claims;
• Labour remuneration claims;
• Claims under privatisation transactions;
• Claims secured by mortgage or pledge — of key importance for bank loans;
• Public claims of the National Revenue Agency (a separate regime under the Tax-Insurance Procedure Code applies).

Application to bank loans

The distinction between secured and unsecured claims leads to the following practical conclusions:

• Unsecured consumer loans, fast loans, overdrafts, and credit cards — fall within the scope of the absolute 10-year prescription and are subject to definitive extinction upon its expiration.
• Mortgage loans — are NOT within the scope of Article 112 OCA, since they are secured by a mortgage. For them, only the general 5-year prescription for the principal and the 3-year prescription for interest apply, both of which can be suspended and interrupted.

Suspension of prescription (Article 115 OCA)

Suspension of prescription means that during certain periods the limitation period does not run. After the cause for suspension ceases, the period continues — it does not start over but is calculated by including the time already elapsed. Article 115 OCA sets out the following grounds for suspension:

• Between spouses;
• Between parents and children while the latter are under parental authority;
• Between a guardian or trustee and the person under guardianship or trusteeship, while such status lasts;
• When an action cannot be brought due to circumstances beyond the creditor’s control;
• While court proceedings concerning the claim are pending.

Importantly, these grounds for suspension do not apply to the absolute 10-year prescription under Article 112 OCA — it runs without interruption regardless of the circumstances.

Interruption of prescription (Article 116 OCA)

Interruption has a more radical effect than suspension: upon its occurrence, the time elapsed until that moment is completely lost, and a new limitation period begins to run from the day of interruption. The grounds for interruption under Article 116 OCA are:

• Letter “a” — acknowledgement of the claim by the debtor. Acknowledgement may be express (in writing) or implied (conclusive). An implied acknowledgement exists, for example, in the case of partial payment on the loan, signing a rescheduling agreement, or filing a request with the bank for a grace period.
• Letter “b” — filing of a claim or objection, as well as filing a claim in insolvency proceedings.
• Letter “c” — undertaking enforcement actions (enforcement measures by a bailiff).

Following interruption, a new period of the same kind as the interrupted one begins to run (Article 117(1) OCA). The exception is Article 117(2): if the claim has been established by a court judgment, the new limitation period is always 5 years — even when previously it was 3 years.

Pursuant to Interpretative Decision No 2/2013 of the General Assembly, in enforcement proceedings prescription does NOT automatically pause for the entire period; rather, it is interrupted by each individual enforcement action. If for a period of 2 years the bailiff takes no action, the case is terminated by operation of law (Article 433(1)(8) of the Code of Civil Procedure), and prescription during the period of inactivity was not interrupted.

As regards the absolute 10-year prescription — none of the grounds for interruption under Article 116 OCA applies. Even partial payment or a court claim will not restart the period.

Effect of prescription — natural obligation

With respect to the general 5-year and short 3-year prescription, Bulgarian legal theory and practice hold that their expiration does not extinguish the claim itself but only deprives the creditor of the possibility to enforce it judicially. The obligation is transformed into a so-called “natural obligation” (obligatio naturalis).

The practical consequences are governed by Article 118 OCA: if a debtor voluntarily pays a time-barred debt, they have no right to reclaim the amount paid, even if they were unaware that prescription had expired. This is one of the classic manifestations of natural obligation.

As regards the new absolute 10-year prescription under Article 112 OCA, the prevailing view in the legal doctrine and in the legislative history is that it has a stronger effect and extinguishes the claim itself, not merely the possibility of enforcement. Final clarification of this issue will come with judicial practice following the first cases of application of the provision, which are expected after 2031.

Procedural rule — Article 120 OCA

One of the most important procedural provisions is Article 120 OCA: “Prescription shall not be applied ex officio.” This means that the court cannot, on its own initiative, determine that prescription has expired — the debtor must expressly raise an objection of prescription. Without such an objection, the court will grant the creditor’s claim, even when it is evident that prescription expired years ago.

The objection of time-bar must be raised at the following moments depending on the type of proceedings:

• In contentious (claim) proceedings — up to the conclusion of the oral hearing before the first instance court; the most appropriate moment is in the written response to the statement of claim under Article 131 CCP.
• In order-for-payment proceedings — by filing an objection under Article 414 CCP within a two-week period from the service of the order for payment. If the debtor misses this deadline, the order enters into force and cannot be further challenged notwithstanding the expired prescription.
• In enforcement proceedings — by filing an appeal under Article 435 CCP against actions of the bailiff.

Therefore, when a debtor receives any document from a court or bailiff relating to an old debt, it is absolutely critical to consult a lawyer immediately — missing the deadlines for objection is the most common reason debtors lose cases in which they would otherwise have an obvious prescription defence.

Practice of debt collection companies

After a bank sells its claim to a debt collection company (assignment of receivables), the new creditor continues to seek payment even on debts that are already time-barred. The behaviour of debt collectors often includes aggressive phone calls, offers of “discounted” settlements, and quickly filing applications for orders for payment under Article 410 CCP. The risks for the debtor are significant:

• Signing a settlement or making a partial payment — constitutes acknowledgement of the claim and interrupts the general prescription under Article 116(a) OCA. A new 5-year period starts to run. Important: the absolute 10-year prescription is not interrupted by acknowledgement.
• Order for payment without objection — if the debtor does not file an objection under Article 414 CCP within the two-week period, the order enters into force and becomes an enforcement title. The prescription becomes 5 years under Article 117(2) OCA, and you lose the opportunity to defend yourself with a prescription objection in ordinary proceedings.

Practical recommendation: upon receiving a claim from a collector on an old debt, do not pay, do not sign any documents, and do not accept any “favourable” settlement offers. File a written objection of expired prescription and consult a lawyer.

Practical example

By way of illustration, consider the following typical scenario: an individual takes out an unsecured consumer loan, and the last instalment paid was in January 2020. No further actions were taken afterwards — neither by the debtor (payments, acknowledgement, request for rescheduling) nor by the bank (court claim, order-for-payment proceedings).

• Monthly instalments from January 2020 to January 2021 — extinguished by the 5-year prescription under Article 110 OCA between January 2025 and January 2026 (each instalment from its own maturity date).
• Interest for the same period — extinguished by the 3-year prescription under Article 111(c) even earlier, between January 2023 and January 2024.
• If the bank declared acceleration in February 2020, the entire remaining principal is extinguished by the 5-year prescription no later than February 2025.
• Absolute 10-year prescription (Article 112 OCA) — where the loan is unsecured and the debtor is an individual, the latest theoretical moment of extinction is around 2030.

It is important to emphasise that the actual position depends on many specific circumstances — partial payments, order-for-payment proceedings, enforcement actions, signed settlements. An accurate assessment requires analysis of the entire credit history.

Frequently asked questions