How to collect a debt and recover the money

The invoice due date has passed, the promised payment has not arrived, and the debtor no longer answers calls. In such a situation, a legitimate question arises: how to collect a debt in a way that prevents costs and time expenditure from exceeding the value of the claim itself. Acting swiftly, calmly, and on the basis of evidence generally yields better results than repeated emotional reminders.

Debt collection does not always mean going to court. Many claims are resolved following a clear letter of demand or the agreement of a realistic payment schedule. If no agreement is reached, however, one must be prepared to use more formal options. The right course of action depends on whether the debt is disputed, the size of the claim, what documents are available, and whether the debtor may have assets or a regular income.

Start by ensuring the claim is clear and provable

Before demanding repayment, establish what the debt relates to and when it arose. Review the contract, order, invoice, deed of delivery, correspondence, bank statement, and any other documents showing the agreement and the fulfilment of the obligation. An oral agreement may also be valid, but proving it is usually more difficult.

In the case of a company, it is worth verifying that the invoice was issued to the correct legal entity and that the person who entered into the contract had the authority to do so. In the case of a private individual, ensure you have the debtor's correct name and contact details. If a claim is directed against the wrong party from the outset, subsequent proceedings may waste valuable time.

Calculate the principal claim, any applicable contractual penalty interest, and justified costs. Penalty interest can generally be claimed where there has been a delay in fulfilling a monetary obligation, but the amount and basis depend on the contract and applicable law. If an unreasonably high rate of penalty interest has been agreed in the contract, this may give rise to a dispute. It is therefore prudent to present the claim transparently: show the principal sum, the calculation period, and the penalty interest amount as separate figures.

Do not leave a claim outstanding for too long. Claims become time-barred, and the limitation period depends on the type of claim and the circumstances. For many contractual claims, the general limitation period is three years, though exceptions exist. The question of limitation deserves particular attention when the debt is old, when the debtor has acknowledged it in the interim, or when the parties have amended a payment schedule.

How to collect a debt using a letter of demand

A letter of demand is often the first substantive step. It need not be threatening, but it must be specific. The debtor must be able to understand unequivocally what is being demanded of them, on what basis, and by what deadline.

In the letter of demand, include the details of the creditor and the debtor, the basis on which the claim arose, the outstanding sum, a claim for penalty interest if you are seeking it, and a reasonable payment deadline. Add the account number and state what will happen if payment or a reasoned response is not received. For example, you may notify the debtor of your intention to initiate expedited payment order proceedings or to bring court proceedings and to seek recovery of procedural costs to the extent provided by law.

As a general rule, allowing 7 to 14 days for a response or payment is appropriate. A very short deadline may appear unreasonable, particularly if the debtor has not previously received the invoice. At the same time, there is no point in granting endless new deadlines to a person or company that has made repeated promises but failed to keep them.

Send the letter of demand in a manner that can later be evidenced. An email is practical if previous communication has taken place at the same address. For a more significant or larger claim, it is also worth using a registered letter or another reliable means of delivery. Retain the letter as sent, any attachments, and a record of when it was received by the debtor.

Listen to any explanation, but do not allow yourself to be delayed

The debtor may claim that the work was deficient, that goods were not delivered, that the invoice is incorrect, or that they currently lack the means to pay. Not all responses are merely attempts to gain time. If the other party raises a substantive objection, it must be assessed. In the case of a disputed claim, expedited payment order proceedings may not be appropriate, and pressure alone is unlikely to produce a swift resolution.

If the problem is a temporary inability to pay, a practical solution may be a written payment schedule. This should set out the instalments, dates, the manner in which penalty interest is calculated, and the consequences if any single payment is missed. A clear written acknowledgement by the debtor that they recognise the debt may later prove to be of considerable importance.

A payment schedule is not a good solution when the debtor avoids signing documents, offers unrealistic amounts, or has previously failed to comply with agreed schedules. In such cases, further delay may reduce the likelihood of actually recovering the money. Particularly in the case of company debts, it must be borne in mind that the financial situation can change rapidly.

Payment order or action: when to go to court?

Where a monetary claim is clear, for a specific sum, and the debtor does not substantively contest it, expedited payment order proceedings may be suitable. This is a simplified form of court procedure for resolving monetary claims. The debtor is given an opportunity to object to the claim. If no objection is filed and the court issues a payment order, this may subsequently serve as the basis for applying to a bailiff.

If the debtor files an objection, this does not mean the claim is lost. It means that, if necessary, the matter must be pursued further through ordinary court proceedings, in which the parties submit their evidence and arguments. Bringing an action may also be the appropriate option from the outset if the dispute concerns, for example, the quality of work performed, the interpretation of a contract, set-off, or a damages claim.

When going to court, one must account for the state fee, possible legal costs, and the time involved. That said, fear of costs should not compel a party to abandon a well-founded claim. If the claim is upheld, the court may generally order the losing party to bear the procedural costs, though the precise outcome depends on the circumstances and the extent to which the claim is granted.

A court judgment does not automatically discharge the debt

An enforcement instrument — such as a court judgment that has entered into force or a payment order — confers the right to initiate enforcement proceedings. For this purpose, an application must be made to a bailiff. The bailiff may, in accordance with the procedure prescribed by law, search for the debtor's assets and sources of income and take measures to enforce the claim.

An important practical distinction must be drawn here: a legally well-founded claim and actual recovery are not always the same thing. If the debtor has no assets, no official income, or is insolvent, obtaining the money may take a long time. In the case of a company, it may also be necessary to consider the possibility of bankruptcy proceedings or other procedures. Such a step should not be taken merely as a means of applying pressure — the facts must first be verified and a solution appropriate to the situation must be chosen.

When is it worth engaging a lawyer?

It is sensible to seek legal advice before a claim turns into a protracted exchange of correspondence or court litigation. This is particularly true when the sum is significant, the contract is unclear, the debtor is disputing the claim, the claim may become time-barred, or the other party already has legal representation. A professionally drafted letter of demand often helps to distinguish a situation where payment is simply being delayed from one where the dispute requires more thorough preparation.

Eurocity Law Office will listen to your situation, help you review the documents, and explain in plain terms whether it is expedient to send a letter of demand, enter into a payment schedule, initiate expedited payment order proceedings, or bring an action. Before work commences, the scope and cost of the work can be agreed so that the next step is clear.

In debt collection, the best results come not from making the loudest demands, but from taking a well-reasoned step at the right time. When your documents are in order and your communications have been managed carefully, you are in a better position to recover the money and to have clarity about what to do next.