Voluntary debt collection and transition to legal collection (consumer receivables)
If the debt is not paid during the voluntary collection, the case may be transferred to legal collection. Legal collection requires sending an application for summons to the district court and requesting a decision from the district court, which increases the amount of the debt with legal costs. The district court informs the customer about the matter in the form of service of a summons.
Legal collection usually involves two phases: application for a summons and enforcement.
In case the debt has not been paid or the payment has not been voluntarily agreed upon, and the creditor demands collection of the debt because of that, legal collection may have to start. Legal collection begins with an application for a summons being sent to the district court. When a court decision, i.e. usually a default judgment, has been obtained regarding the obligation to pay, collection is continued through enforcement.
In the enforcement proceedings, if garnishable income or distrainable assets are found, they will be garnished or distrained – all payment takes place at this stage through the enforcement. Legal collection is often expensive, as the costs are increased by authority and legal costs.
Some of the receivables are directly eligible for enforcement. Those can be collected via the enforcement without a court decision. These are, among other things, taxes and public payments.
The customer’s debt payment period in connection with legal collection
After receiving the summons, the customer can pay the debt before the deadline of written response. If the debt is not paid or there is no response within the deadline, the district court will decide the case with default judgment. As a result of the default judgment, a payment default entry is entered in the credit information, which can make it difficult to get, for example, a rental apartment, a loan or a job. In addition, a possible procedure for enforcement may follow.
Grounds for the legal collection
Legal debt collection refers to actions used when a creditor tries to get the customer to pay their debt when voluntary collection has not yielded results. The creditor must present the grounds for the existence of the debt and request the right to collect the debt.
If the debt is not paid despite the legal process by the deadlines specified by the district court, the district court issues a default judgment. This results in a payment default entry for the customer.
After a judgment, the collection of the debt can move to the enforcement process. It starts with an application for enforcement, which is accompanied by the district court’s judgment.
Debt collection methods in connection with the legal collection
The most common way to collect a debt through legal collection is a distraint, where the customer’s property is used to pay the debt. Unpaid debt can be garnished, for example, from the customer’s salary.
Another means of collection is asset distraining, where the creditor can request the right to seize the customer’s assets and sell them to pay off the debt.
If the customer disputes the basis or amount of the invoice, the voluntary collection must be stopped immediately. When collecting consumer receivables, the end customer also has the right to request suspension of the collection and transfer of the matter to the legal collection.
Legal collection from the corporation
If the debt is not paid during the voluntary collection, the matter may be transferred to court for collection. Legal collection requires sending an application to the district court and requesting a decision from the district court, which increases the amount of the debt with legal costs. The district court informs the corporation about the matter in the form of service of a summons.
Bankruptcy debt collection can also be used in some cases as a means of legal debt collection in corporate debt collection.
Legal collection costs
Legal collection can be a time-consuming and expensive process, so the creditor must carefully consider whether it is worth it. Costs are increased by legal and authority costs. In addition, if the claim is disputed in legal collection, the cost risk is considerable compared to an undisputed process.
It is also good to be noted that the legal collection can cause financial problems for the customer or even lead to bankruptcy.
Duration of the legal collection
Getting the actual judgment in the legal collection case can take from several months to even a year, depending on the processing times of the district court.
While we do our best to speed up and smoothen the process, it is still good to be prepared for long waiting and processing times.
Let Kredinor help in all phases of debt collection
We are your partner in all matters related to open receivables, up to legal actions if necessary. We handle the debt collection efficiently, reliably and in such a way that the customer relationship can still continue in the future – no matter whether your client is a consumer or business.
We offer at your service a modern and customer-friendly service that also includes active telephone collection. You can easily follow all actions taken and the status of assignments in real time. The reports you need, you will have easily and quickly.
Transparent operation, automated processes and modern systems make us a reliable and efficient partner that can produce a high-quality service even for large billing volumes.
We can flexibly agree on which part of the collection process you want to outsource. If necessary, we can also help with disputes, bankruptcy supervision and other special collection procedures. You can also use our international debt collection service in case the open receivables arise abroad.