The collapse of the Lebanese lira and ongoing economic challenges have profoundly impacted debt recovery in Lebanon, particularly through auction procedures. The drastic exchange rate fluctuations and legal uncertainties around payment via bank checks have led to a suspension of auctions, complicating matters for creditors of all kinds—whether individuals, companies, or banks—as they seek to reclaim unpaid debts.
Creditors generally rely on the legal framework and judicial procedures outlined in the Code of Civil Procedure to enforce debt repayment. This process typically culminates in a public auction, where the creditor may recover the owed debt along with applicable interest. However, with the Lebanese lira’s value dropping sharply against the US dollar and many loans originally issued in USD, significant legal complications have arisen. The judiciary has increasingly found that bank checks, particularly those denominated in USD, no longer hold the same value as a payment method, given that they do not reflect the actual monetary worth expected by creditors.
Additionally, debtors face mounting obstacles. Most depositors can only access a small portion of their funds in cash, as stipulated by the Central Bank of Lebanon’s regulations, making it difficult for many debtors to settle their obligations. In response, some debtors have attempted to settle loans using Lebanese pounds at an artificially low exchange rate or by offering bank checks in USD, which further strains the repayment process and leads to legal disputes between creditors and debtors.
To address these complexities, the judiciary has postponed auction proceedings. These delays are intended to allow time for both sides to reach a fair resolution, protecting creditors’ rights without imposing undue harm on debtors. Ensuring realistic valuation of assets in auctions is essential to achieving this balance, as creditors face significant losses if the debt payments are received through devalued checks or at below-market exchange rates.
In this uncertain environment, finding mutual ground remains the most viable path forward, ensuring that neither side is disproportionately affected. Alternatively, creditors may need to await a judicial or monetary resolution before auctions can proceed effectively, allowing them to reclaim their rights and assets at a fair market value.