Debt recovery
We can help you with your debt collection issues.
Different situations in practice
There are several different types of unsettled claims; each of these has different consequences,
Many cases are uncomplicated, since the non-payment is simply caused by though- tlessness. In these cases usually a lawyer’s letter is all that is needed. If the debtor then pays, he is obliged to take over the lawyer's fees therefore negating any costs to you our client. Legally speaking, though, since you have mandated us you are liable to pay our fees. This becomes an issue in those cases where the debtor is reasonable and acknowledges the debt but is insolvent. In such cases, which have, unfortunately, in the past few years have increased, you will not only be unable to recover your debt but that you will also be liable for the lawyer's fees.
Therefore in practice the first step, once we have been mandated, is to examine if the debtor is solvent. We do this by contacting a commercial inquiry office or having a look into the register of companies. If, at an early stage, it becomes obvious that the debtor may not be able to pay, we will talk with you about further steps that lie in your best interest. In this instance it is up to you to decide if you write off the irrecoverable debt or if minimal activities shall be taken to secure your position. If insolvency proceedings are opened, it is advisable to lodge a proof of debt. In most cases the creditor will only receive a small percentage of the actual debt (below 10 %) and that only after several years, but if the debt is high the amount recovered later may justify the expense.
A third group, the collection of litigious claims, does not actually fall under the term "debt collection" since it is actually a legal dispute. If the debtor raises an objection against the claim (for example bad quality of goods delivered by the creditor, late delivery, setting off of a claim), we need to discuss further steps with you and develop a strategy. In most cases a thorough analysis of the contractual relationship and the existing documents as well as talks with the debtor will have to be carried out.
Timescale
The time needed to collect your claim is hard to estimate. If the debt is not disputed and the debtor pays after having received the first lawyer’s letter, the matter will be settled within two or three weeks. If the debtor is financially weak but nevertheless willing and able to pay off his debts, it is advisable to agree on a payment by instalments. It naturally depends upon the concrete circumstances which exact instalments shall be paid within which period of time.
Not calculable are those cases where the claim is disputed. The review of the facts can be carried through within two to four weeks. The review includes the first step of contact with the opposing party to clarify the facts of the dispute. In the second step we attempt to reach an amicable agreement. If this is likely to be accomplished, then, according to our experience the matter can be solved within two to three months.
If an amicable settlement is not possible then legal proceedings have to be commenced. In this case predictions regarding the length of time are difficult. In general German courts are very efficient; an average duration of six months for each court case is likely. Depending on the value of the claim there can be up to three court cases, but in practice it is very unlikely that more than two court cases are needed.
The timescale of six months can easily be exceeded if the court has to take evidence, which is quite likely in disputed cases. If experts have to be heard, their - very often tight - time schedule can easily cause the court case to take six months longer.
Costs
Our activities regarding the collection of undisputed debts will be charged on the basis of the RVG (Rechtsanwaltsvergütungsgesetz), but we assume that the debtor is obliged to bear our fees. If the debtor is insolvent, you, as our client, must bear the costs.
In case of legal disputes we work on an hourly fee of EUR 300.00. If the costs that might arise are out of all proportion to the value of the claim, we can talk about a different form of remuneration like, for example, a lump sum fee.