Debt Collection Germany
See the claims process in a picture: claim process
The Debt Scenario
Your customer, buyer or partner tries to delay payments. They make promises, false claims about their bad financial situation; there are excuses and far-fetched legal objections such as defective goods etc. Your attempts to force them to pay have failed.
You need help with any of the following:
-disputes concerning the purchase price
-claims based on contract law, commercial law, damages and indemnification
-claims from private and business loans
-or issues with an enforcement of titles obtained in your country.
You have Consumer or Commercial debts.
Best practice “advaro Services”
advaro will assist you in all legal and court matters anywhere in Germany, Austria, Switzerland, Liechtenstein or Luxembourg. Our specialty in particular is with debt collection and commercial law but also across all other areas of civil and procedural law.
Our law firm and debt recovery agency primarily deals in collecting outstanding debts (bad debts) outside court followed by legal action in court. All proceedings, out of court, court proceedings and execution (enforcement) proceedings are all dealt with in-house.
We do everything from the initial request for payment (dunning letter, reminder) up to and until payment is enforced (execution proceedings, levy of execution). We can take care of out-of-court-activities which routinely involve investigation of the actual address and financial standing of the debtor, sending a dunning letter with a deadline for payment (approx. 14 days), correspondence with the debtor written and by telephone, negotiations concerning an instalment agreement (if recommended). Further down the line we check for information at different sources such as trade registers, internet databases, commercial agencies and resident’s address registry office (in Germany it is required by law to be officially registered).
We have an outstanding track record and have been for the last 7 years working for foreign companies in the field of liability management and managing debt collection for US, Swiss and English companies. Our Lawyers therefore are familiar with the requirements and handling of all bad debt collection proceedings for all foreign industrial, commercial and service-providing companies.
In court proceedings we can offer favorable, competitive terms and reasonable fixed-rates for our services. The debtor has to take over all our fees and court fees in the case of a judgment in your favor.
The legal advice itself is usually included in our fees as well as additional background information in each stage of proceedings and business information about your debtor. In addition to this we can carry out background checks on any future business partners (Consulting).
In the case of successful court proceedings we recover our fees via the debtor. It is in our own interest to give you a well-founded assessment on the legal position to be able to estimate how successful court proceedings will be. Your success is our success.
How much are lawyers fees when taking legal action against a debtor?
Law firms are subject to the German Federal Law regarding their fees called Rechtsanwaltsvergütungsgesetz (“RVG”). Success fees are not legal in Germany and law firms are legally bound to charge at the RVG. This scale of fees is binding by law.
It is possible to work without a retainer, by invoicing the client on an hourly rate or reaching an individual agreement of a fixed rate with the client.
The Key to Success
The success of a debt collection depends on having as much information as possible on the debtor. This includes full postal address, full name, DOB, all legal forms (whether a corporate company or an individual), telephone and fax numbers, bank details of the debtor and all documentation between client and debtor. In Germany documents and paperwork are generally much more important in court proceedings than witness statements.
What do we need?
For the collection of the debt we only need copies of all the documents concerning the contract; invoice(s), dunning letter / reminder(s), creditnotes, delivery notes, relevant pieces of correspondence with the debtor. In straightforward cases the invoice and statement of account is sufficient. We would normally need a POA (power of attorney) from the client/creditor as we regularly have to present a POA to the debtor in cases where we have to demand special rights on behalf of you the client, for instance rescission or cancellation of the contract etc. If it comes to court proceedings all documents have to be translated into german by a court authorized translator.
You can send us the documents and information via email or Fax. We will contact you immediately. Please inform us if you not received a confirmation of receipt within 3 working days.
– All contact details of the debtor
– All contact details and information of your company (legal forms, full name of the legal representative, your VAT-ID-No, Bank details (IBAN, BIC). The client should inform us about any fees for bank transactions so that we can add these costs to the statement of claim.
– contract, all invoices (copies)
– reminder, demand letter(s)
– original order, confirmation of order, delivery notes
– receivables account, statement of account (if significant)
– placement form/short statement of the matter (if significant)
Debt collection procedure
In debt collection proceedings we stay in permanent contact with the debtor by telephone or in writing in order to either force them to pay or ascertain the reasons of non-payment (i.e. insolvency, cash-strapped, serious legal objections). If the debtor does not pay the debt immediately, we try to find out all information on the financial standing and solvency of the debtor by different database services.
In debt collection cases we usually share the profit if we can resolve the debt out of court. In successful cases we charge a percentage of between 10% and 50%. (Special rates can be negotiated on request). There are no fees in Out-Of-court proceedings for our clients if we are not successful. The advantage of our services is that all proceedings, out of court, court proceedings and execution (enforcement) proceedings are in hand. (Except expenses 1:1 =except for basic admin expenses)
In most debt collection cases it is not necessary to initiate court proceedings as we have a very high out of court success rate.
You will be kept informed at all times about the case via your own personal login in the online-file.
2. Court proceedings
If the debtor does not respond or is objecting to the claim and we feel all measures have been taken to force them to pay have failed, it will be necessary to innitiate court proceedings.
a. Court fees
In all court cases the court requires an advance payment of court fees. Otherwise you simply can’t go to court. The court fees are related to a legal table. This scale of fees is binding by law. The fees are in relation to the amount depends on the amount disputed.
b. Lawyers fees
Our clients don’t have to pay fees for our services in pre-legal debt collection proceedings. In small cases we will arrange a percentage of the claim or a closed budget as a retainer fee. You will receive our table of fees immediately on request. Through these arrangements all activities are covered for the court proceedings.
In successful court proceedings and the collection of the debt we will refund the full retainer incl. the court fees.
In addition we can arrange working on a moderate hourly rate or charge a lump sum (flat rate scheme) fee for working on the file. “Success fees” are not legal in Germany and law firms are legally bound to charge at the RVG rate. It is common to ask for a retainer. As a matter of course it is possible to negotiate a flat fee, particularly in cases of multiple debts or where we take over your claim management.
If the debtor has claimed insolvency, we will file your claim at the bankruptcy court in order to preserve your rights (over the next 30 years).
3. Enforcement proceedings
The enforcement of the judgement could have to be the next step in debt collection. It is not the obligation of the court or authorities to enforce the judgment – enforcement and execution is the task of the creditor themselves or their lawyer’s. There are a considerable number of measures which are possible to levy execution (blocking bank accounts, access to salary, seizure of property).
For recovery by legal means we need firstly the court order to pay (the judgement/title itself).
– block a bank account to access funds of the debtor here in Germany
– an entitlement to wages
– instruct a bailiff to take away assets of the debtor
– bring the manager to an affidavit of means (in relation to company debt)
– seizure of debtor’s claims
– seizure of property, real estate
– file for bankruptcy
You need to inform us on the spot if you receive any payment from the debtor, mentioning the exact amount and the date of the credit to your bank account.
4. Limitations of a claim
All purchase based claims expire after 3 years starting from the end of the year in which the contract (order, confirmation of order) is made. It is no longer possible to sue the debtor in court after 3 years . If your claim is for a different reason (i.e. a loan) please contact us.
The limitation period starts at the end of the year in which the claim legally comes into existence for example concluding a contract, and not the date of delivery.
For example: If your invoice is dated 25.05.2016, the limitation period starts at the end of that year on the 31.12.2016 and ends 3 years later on the 31.12.2019.
This limitation period can be suspended in cases of negotiations between the parties about the claim or if there is an installment plan. The limitation period can then be extended by this extra time. We can only access this once we have the relevant information.
(Please note: the regular limitation period for all claims of the buyer/purchaser for defects liability/implied warranty is only 2 years).
- To avoid, stop or to suspend the statute of limitations it is necessary to initiate court proceedings in time!
The application or plea must definitely be received by the court before that day, otherwise your debtor can plead the statute of limitations and it will no longer be possible to force the debtor to make the payment.
We have to claim for interest according to German law. The rate of interest is 9% (b2b cases) or 5% (b2c cases) above the official base-rate of interest as stipulated by the German Federal Bank (Basiszinssatz). Therefore the interest rate will be 9 or 5 percentage points above the base rate. The legal base-rate of interest can vary.
We have to convert all other currencies into Euros according to the market exchange rate on the day we send a dunning-letter to the debtor.
At a glance
Success of debt collection is not a question of the legal position or applicable law.
Success in debt collection is depending more on the information about the debtor such as complete and valid postal address, full name, DOB, legal entity (corporate company or individual), contact details (email, telephone and fax number, bank details of the debtor and the documentation we get from the client.
Regularly we do not know if the debtor is solvent (anymore). Advaro gather all information about the debtor in each case using our databases and research proceedings. Advaro checks the risk level before starting court proceedings and advaro can, very quickly, establish if the debtor has filed for bankruptcy. But on the other hand you as the client made the initial contract, so you are much more informed than a debt collector/law firm about the former business partner. Thats why all the information you can give us about the real financial standing of the debtor is very important.
The main advantage of a debt collector is, that they have all possibilities to enforce the claim with Out-of-Court proceedings. If in the long run court proceedings become necessary our Lawyers take over.
See the claims process in a picture: claim process