Debt Collection Germany
Entrepreneurial risk is part of doing business outside your home country. It is possible, for example that your German customer won’t pay. What can you do when your customer in Germany fails to meet his obligations?
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More than 25% of debtors do not pay within the term for payment. When this happens to you, you can send a demand for payment. The demand for payment clearly states the deadline for payment, a breakout of the claim, the fact that should payment not be made on time the claim will be assigned, and that all costs will be recovered from the addressee.
Should your German customer not pay, you can upload your claim to Collections in Europe. We will then recommend some course of action. This is often serving a summons on the debtor or preparing a case file. It will also take account of the case’s chances of success, litigation risk, and the costs and benefits for you as the creditor.
A. Extrajudicial collections
Once your claim is transferred, Collections in Europe will contact your debtor to demand payment, in writing and by telephone. Should the debtor still not pay legal action will be brought in consultation with you. Since Collections in Europe will have handled the case from the start, filing will go quickly.
B. Court-ordered collections
Germany has two possible forms of proceeding: the quick Order for payment procedure and the comprehensive action on the merits.
Order for payment procedure
The ‘Mahnverfahren’, or, order for payment procedure, is an accelerated procedure for undisputed claims. It is quick, simple, and generally with low expenses. It is possible to obtain entitlement to enforcement against the debtor with the ‘Mahnverfahren’ and this title is a condition for attachment. A process server or bailiff will make the attachment, which will be followed by a sale of the debtor’s assets. This could involve a public sale. You will obtain the enforceable order (or ‘Vollstreckungsbescheid’) within two weeks. Enforcement measures can be carried out when the debtor still does not pay. If the debtor raises a defense, this will become a normal action on the merits.
Action on the merits
An action on the merits follows the extrajudicial dispute. The claim will be substantiated with evidence, which can be documents or records, but also witnesses. The debtor has two weeks after being summoned before the court to raise a defense. When the debtor does not respond, the court will award the claim in default of appearance. The debtor will usually be given two weeks to submit a substantiated defense. The court will determine the number of sessions for the defense. Witnesses can be called and experts appointed. The proceedings will end with a final judgment (entitlement to enforcement). This can also take the form of a settlement approved by the court. A settlement approved by the court, an order compelling payment, and a judgment are subject to a period of limitation of 30 years.
When a debtor does not pay, Collections in Europe can take the right legal measures.
If the debtor still does not pay, a judgment can be executed. Such a judgment could take the form of an attachment on claims, and/or on moveable and/or real property.
One important measure here is the ‘Eidesstattliche Versicherung’, or affidavit or affirmation in lieu. This is a declaration of assets by which the debtor makes a sworn state of his/its assets, if any. If there are assets, these can be attached. An important difference is that in Germany the process servers or bailiffs are officers of the court. This means that you are not free in your choice of bailiff.
Petition for bankruptcy
Filing a winding-up petition is only possible after a judgment against the debtor has been obtained. These are costly proceedings.
Would you like more information about collections or bringing legal action in Germany? Fill out the contact form or call us: +44 (0)20 3808 5878.
Click here to upload your claim to us.