IMPUTATION OF PAYMENT OF DEBTS

ECOVIS Miškinis, Kvainauskas ir partneriai advokatų kontora
According to the Civil Code of the Republic of Lithuania (hereafter - Civil Code), the creditors and debtors may set terms and conditions of payment of debts. If the parties don’t discuss the procedure of payment of debts, this procedure is determined by the Civil Code. 

Under the construction of Article 6.54 of the Civil Code, unless otherwise agreed by the parties, payments received by the creditor in result of performance of an obligation shall be imputed as follows:
1.    to the creditor’s expenses related with the tender;
2.    to interests in accordance with the sequence of their maturity;
3.    to a penalty;
4.    to the performance of the principal obligation.

A creditor shall have the right to reject an offer to pay if the debtor indicates a different order of imputation than that established in the Civil Code. A creditor also has the right to reject full repayment of the principle obligation if the current interest at maturity is not paid at the same time.

The Civil Code also determines imputation of payments in the event of several debts. According to the Civil Code, a debtor who owes several debts of the same kind to the same creditor may declare at the time of payment which debt he intends to satisfy. If the debtor pays less than the total sum of the debts and there is no different agreement between the parties, it shall be considered that the payment is imputed first to the debt at maturity. In the event of several debts at maturity, where none of them is secured, it shall be considered that the payment shall be imputed to the debt that was the first to reach maturity.

Where several debts are due, it shall be considered that the payment is imputed to the one having the security. Among several secured debts, the payment shall be imputed first to the debt which is most burdensome to the debtor, and in the event of all the debts being equally burdensome, to the one that was the first to reach maturity. In the instances where none of these criteria may be applied, imputation shall be made in proportion to all the debts.

Thereby, the Civil Code determines basic principles of payment of debts, but the parties may set different rules of imputation of payment.