Low costs; the prospect of fast, out-of-court dispute resolution; voluntary settlement – read on to learn more about efficient pre-trial collection.
Pre-court debt collection plays a key role in increasing the likelihood of voluntary settlement of debt by the debtor and minimizing the costs of court proceedings; it often achieves a quick out-of-court settlement of the dispute. In the following, we take a detailed look at all the key steps in pre-trial recovery.
Analysis of the situation and compilation of the necessary documents
In the initial phase, it is very important that the creditor provide their legal advisor with all relevant documents and information on the outstanding claim. This includes, in particular:
Contracts and agreements –written as well as verbal, with appropriate supporting documents such as e-mails or other messages (WhatsApp or similar).
Evidence that the creditor has fulfilled their contractual obligations – delivery bills, handover protocols, receipts for services rendered, invoices.
Reminder letters – copies of previous correspondence with the debtor.
Reactions of the debtor – this includes, for example, partial payments, proposals for payment in installments, but also notices whereby the debtor is disputing the debt.
Checking the debtor’s creditworthiness
An important step in pre-trial debt recovery is the analysis of the debtor’s ability to pay. This includes, among other things:
– Verification of information in the commercial register, land register and other public registers.
– Appraisal of the available assets that could be used for enforcement (e.g. by way of foreclosure).
– Analysis of the debtor’s historical payment behavior.
Pre-trial letter
The most important step in the pre-litigation stage is a formal final reminder before legal action. Pursuant to Section 142a of the Code of Civil Procedure, the creditor is obliged to send such a pre-trial reminder to the debtor if they wish to successfully claim reimbursement of the legal costs in the court proceedings. This letter should include the following:
– Identification of creditor and debtor.
– Clear specification of the claim – its legal basis, amount, and due date.
– Demand for performance – principal, default interest, lump-sum compensation of costs, and reimbursement of the costs of legal representation.
– Request for payment within a specific period (of at least 7 days).
– Reference to further legal steps (e.g. filing a lawsuit) in the event of non-compliance.
The last reminder before legal action can be sent by data box, registered letter or e-mail, or by any other means as long as it is ensured that the letter reaches the debtor.
Negotiations and search for consensus
The delivery of the pre-trial letter is often followed by a negotiation stage. The debtor may take e.g. the following steps:
– Proposal for an installment calendar.
– Recognition of the debt and request for a deferred due date.
– Partial settlement of the debt as a sign of goodwill on the part of the debtor.
At this stage, the legal advisor will assess whether the proposed solutions are advantageous for the creditor and whether they adequately reflect the legal reality of the situation. The negotiations also open up opportunities for the creditor to settle the claim out of court.
Preparation for the judicial phase
If the debtor does not respond to the pre-trial letter or refuses to meet their obligations, the creditor and their lawyer will consider other options, which include the following:
– Filing an application for a payment summons – a quick solution for obtaining an enforceable title, especially in cases where the factual evidence is clear.
– Preparation of the statement of claim (i.e., the lawsuit) – in the case of disputed claims or if the situation is complex or unclear.
Even in this stage, it remains important that all previous steps have been carried out correctly in order to maximize the chances of success in court.
Importance of the pre-litigation stage of debt recovery
Pre-judicial debt recovery opens up opportunities for a quick and cost-effective result. A correct approach at this stage reduces the risk of legal disputes, gives the creditor a better negotiating position and minimizes the costs of recovery.