Court Order for Payment, Enforcement Order and Debt Enforcement
If your pre-legal collection efforts have been unsuccessful, the only way left to collect on unpaid past-due invoices is to take legal action against your debtor. While pre-legal collections are not subject to legal regulations, the legal collection procedure is governed by specific formal and legal requirements and deadlines, and failure to comply with these can hamper the success of your collection effort.
Application for Issuing a Court Order for Payment
The first step in the legal collection process is applying for a court order for the debtor to pay what they owe. The court will issue an order that the debtor will be served with. This order suspends the limitation period of your claim and is a prerequisite for any future enforcement order against the debtor. At the same time, the creditor receives an invoice for the court fees of the collection proceedings.
Application Returned Due to Incomplete or Incorrect Information
The competent local court reviews the application for shortcomings and inconsistencies. The court will return the application if it finds any flaws. Common findings pointed out by courts are errors or omissions in the names of claimant or defendant, incomplete details on claims or incorrect legal forms. The defendant has the opportunity to reply to the court’s response. In many cases, however, the findings and explanations given by courts are difficult to understand, which is why service hotlines have been made available that offer quick help for defendants.
Court Order for Payment
Once the order for payment has been issued by the court, the defendant will be served with it. The court order lists the addresses of claimant, defendant and attorney of record as well as the claim, i.e. the original amount owed by the debtor, plus interest and secondary claims. It also includes court and attorney fees even if they have not been specified in the application for the court order; these fees are calculated by the court.
Unless exceptional factors (such as interest scales) indicate otherwise, interest is calculated automatically for the entire period up to the date the court order was issued. All amounts and the interest incurred are added up to a total amount payable, which is printed on the court order for the defendant to see at a glance what they owe. The claimant will not receive a copy of the court order but will be notified once the defendant has been served with the court order. Along with the notification will come an invoice for the court fees.
If the court order cannot be delivered to the defendant at the address specified in the application, the court will send a non-delivery notification to the claimant, stating the reason why it was not possible to serve the defendant. An application for new delivery will be attached to this notification for the claimant to re-attempt delivery of the court order to the same or a different address. If the defendant has moved to a different address or cannot be located, the claimant might start an address investigation. Any costs incurred for investigating the defendant’s new address can be claimed against the defendant. Another reason a court order cannot be delivered may be that the defendant’s name was incomplete or was misspelled.
The enforcement order is an enforceable judgment that can be collected by seizing the debtor’s assets. Once the enforcement order is issued, the proceedings at the local court are closed. All proceedings for enforcing the collection are handled by another court that is responsible debt enforcements. With a few exceptions (such as foreclosures), the competent enforcement court is the local court at the debtor’s residence or registered office.
For all activities related to collecting the judgment, the court needs the enforceable document of the enforcement order, that is, the original document sent by the court that issued the order, a copy is not sufficient. There are a variety of methods for collecting a judgment. In most cases, collection is entrusted to a court officer.
Accounts receivable and collection specialists need to organize and monitor this entire process.
Complex Processes – Time-Consuming and Cost-Intensive
Having a successful legal collection process in place requires know-how and employee resources, which makes it a cost driver to be reckoned with. This presents accounts receivable and collection specialists with specific challenges. To streamline the legal collection process, companies can use an electronic data interchange procedure to submit applications (court order for payment, enforcement order, re-delivery, etc.) to courts.
Applications sent through electronic data interchange are usually processed within a business day of filing the application, which speeds up processing time and reduces the number of returned applications due to incorrect or incomplete information.
To qualify for participation in the electronic data interchange procedure, companies need to obtain a special ID and a software solution that is able to create applications for court orders that meet the specified requirements and that is able to create the EDI files, i.e. the electronic data records. For example, the EGVP (German Electronic Court and Administration Inbox) application encrypts these data records, equips them with a qualified signature and sends them off to the competent court.
Having adequate system support facilitates also all the other activities and follow-up processes within the legal collection procedure. The employees involved can process all their tasks smoothly and efficiently in the system that they are using – which is usually an SAP system.
Serrala has developed a software solution that allows you to manage the entire legal collection process, while optimizing your accounts receivable management and maximizing your collection success rate.