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Cross-border debt collection and creditor representation in insolvency proceedings

Results-oriented debt collection

We support our clients in a results-oriented manner in the collection of their outstanding debts at home and abroad and, if desired, offer comprehensive receivables management. In addition to a careful risk analysis, this includes a multi-stage recovery system which is geared to the respective needs of our clients and allows for a transparent cost calculation.

Creditor representation in insolvency proceedings

The insolvency of a trading partner involves risks of damage, both in a national context and - even more so - in an international context. We offer our clients comprehensive advice with the aim of anticipating such risks or containing them as far as possible.

We answer all your questions in this area, such as:

  • Do I still have to deliver open orders to the insolvent buyer?
  • Can I realise my open claims and in what amount?
  • How do I enforce my retention of title?
  • Do I have to return a payment made by my customer to the administrator before the insolvency?

We represent our clients' interests in all phases of insolvency proceedings, in questions of contract implementation in preliminary proceedings, for the enforcement of your retention of title or other security interests, in the filing of claims or in the (extra-judicial and judicial) defense against insolvency challenges by the insolvency administrator.

Specialized in international matters

The firm's lawyers have completed their training in Italy and Germany and are admitted to the bar in both countries. Thanks to our knowledge of both legal systems and many years of experience in cross-border and international practice, we are able to examine the various concerns of our clients from the outset from an international perspective, taking into account both the legal differences between Italy and Germany and specific regulations for cross-border situations. This enables us to determine the most suitable strategy for safeguarding the client's interests in each case and to propose targeted solutions that best meet the client's individual needs.

Our services for cross-border debt collection in detail

In receivables management, the cost and time factor is decisive. For the recovery of your claims against clients at home and abroad, we therefore pursue a result-oriented approach: We therefore first recommend to our clients a risk analysis with regard to the concrete realization of the claim. On the one hand, this ensures that the claim (in Germany or abroad) is legally enforceable and how; on the other hand, obtaining a credit report on the debtor enables us to assess the concrete prospects of realization of the individual claims.

A quick and cost-effective settlement of the debt collection can usually be achieved out of court; in the event of liquidity bottlenecks on the part of the debtor, we draw up an individualized instalment payment agreement, which in some cases can also be designed to be enforceable, and monitor its regular fulfilment.

If the debtor does not pay "voluntarily", we represent you in asserting the claim in court before German and Italian courts. Depending on the individual situation, we advise our clients to use simplified procedures which help to obtain an enforceable title relatively quickly and inexpensively in order to be able to enforce against the debtor, e.g. the order for payment procedure or the procedures possible at European level (European Small Claims Procedure, European Order for Payment Procedure).

For the recovery of claims before the courts of other countries, we are at your side with our worldwide network of partner law firms World Link for Law (represented in 47 countries worldwide with a total of 70 law firms guaranteeing high quality standards) and we will arrange for partners of our confidence on site.

If you wish, we can also provide you with a single point of contact for all your international debt collection needs in German, Italian, French or English.

Within the framework of compulsory enforcement, we take all appropriate measures tailored to the individual case to recover our clients' titled claims, such as the attachment of bank balances, wages, shares in a company or other assets. In addition to the principal claim, legal costs and interest on arrears are also enforced. Under certain circumstances, it may be advisable to conclude enforcement settlements.

In urgent cases and if the debtor's financial situation so requires, we secure the titled claim in advance by means of provisional security measures such as (European) account seizures, provisional payment bans or attachment and interim injunction proceedings.

Read more about the enforcement from foreign enforcement orders.
Read more about the enforcement of German enforcement orders in Italy.

In the event of the debtor's insolvency, in addition to filing claims, we represent our clients during the entire (preliminary and opened) insolvency proceedings, in insolvency proceedings in self-administration as well as in supplier pools and support them in enforcing their claims, e.g. in the event of the insolvency administrator's objection to the filed claims, as well as in asserting retention of title and other security interests.

We also support our clients in defending actions for avoidance brought by the insolvency administrator.

The contestability of payments made by the insolvency debtor prior to the opening of insolvency proceedings is relatively extensive in Germany: under certain circumstances, payments made up to three months prior to the filing of the insolvency petition must be repaid to the insolvency administrator. Payments made up to 4 years, and in certain cases even up to 10 years, prior to the filing of the insolvency petition may then also be claimed by the insolvency administrator if he can prove that a creditor knew at the time of receipt of the payment that the debtor's insolvency was imminent and that the payment disadvantaged the other creditors. Since German case law facilitates such proof for the insolvency administrator through a variety of presumptions, the risk of a challenge of intent should not be underestimated.

Special features of cross-border debt collection in Italy

Dunning proceedings in Italy

In contrast to the dunning procedure in Germany, the Italian dunning procedure requires the submission of all documentary evidence on which the claim is based, i.e. usually orders, delivery notes, invoices. The procedure is neither automated nor centralized, i.e. the application for the order for payment is made by a lawyer's brief to the competent trial court.

Another special feature of the Italian order for payment procedure is the possibility to apply for immediate provisional enforceability of the order for payment if certain conditions are met. In this case, the court issues a provisionally enforceable title, if necessary, without prior hearing of the debtor, on the basis of which enforcement measures can be taken immediately. In order to defend himself against this, the debtor must take active steps with appropriate measures both before the Italian trial court and the German enforcement court.

Unlike in Germany, in Italian order for payment proceedings the debtor must substantiate any objection to the order for payment. The objection must be filed in writing by a lawyer admitted in Italy and must contain the reasons for the objection. The objection automatically opens the way to the ordinary procedure.

If commercial invoices or other debts remain unpaid, a request for final determination of this debt can be filed before the competent court.

The order for payment procedure starts with the following judicial acts:

  • Service of a reminder letter on the debtor requesting him to pay the outstanding debt within a certain period of time;
  • If the debtor does not pay within the time limit after receipt of the reminder letter, an application for an order for payment (decreto ingiuntivo) is filed before the court with subject-matter and local jurisdiction; under certain conditions this order may be provisionally enforceable.
  • The order for payment is issued by the court with subject-matter jurisdiction after a careful examination of both the origin and the existence of the claim. One of the prerequisites for the issuance of the order for payment is that the creditor can present written proof of the claim.
  • The order for payment can be directed both at the payment of a monetary claim and - unlike in Germany - at the surrender of an object.
  • An order for payment is also admissible if the claim is linked to a condition or consideration: In this case, the creditor must provide proof that the condition has occurred or that the consideration has actually been paid.
  • In certain cases, the provisional enforceability of the order for payment can be pronounced: if the claim is based on a bill of exchange, a bank cheque, a bank draft or a stock exchange settlement certificate; or if the claim results from a notarial or other official deed; furthermore, if there is a risk of serious damage in case of default of payment or finally, if the creditor can present an acknowledgement of debt signed by the debtor.
    The provisional enforceability of the order for payment means that the creditor can immediately - but not before the expiry of 10 days after service of a formal summary of the total claim including interest and costs of proceedings ("precetto") - initiate enforcement against the debtor.
  • If, on the other hand, the order for payment has not been declared provisionally enforceable, the creditor is responsible for serving the order for payment. This can also be done electronically, provided the debtor has a certified e-mail box (so-called "PEC"). After the order for payment has been served, the debtor can lodge an objection within 40 days.
  • Unlike in Germany, the objection must be substantiated and supported by the relevant evidence.
  • If the debtor lodges an objection, the proceedings turn into ordinary proceedings according to the rules of the Italian Code of Civil Procedure.
  • If no objection is lodged 40 days after service, the order for payment becomes final and is accompanied by the enforcement clause.
  • The creditor must now serve the debtor with a formal statement of the total claim including interest and procedural costs ("precetto"), setting the debtor a further deadline of 10 days to pay the amount due.
  • If this deadline also expires without payment, enforcement measures will be initiated.

Compulsory enforcement in Italy

Enforcement proceedings may be initiated in respect of an outstanding debt if the creditor is in possession of an enforceable title, e.g. a judgment, an enforceable order for payment or an arbitral award.

The attachment may be made on movable property, at the creditor's domicile or residence or at a third party, or on immovable property, depending on the nature of the assets attached (raw materials, receivables, movable property, real estate of the debtor, etc.).

The judicial costs of execution are low as far as seizures of real property or claims are concerned. On the other hand, high costs may be incurred for measures of compulsory real estate enforcement because, among other things, notarial certificates have to be submitted.

Insolvency of the debtor in Italy

Italian law provides for a variety of different bankruptcy and composition procedures tailored to the particular situation of the company in crisis.

In each case, the bankruptcy procedure provided for by law and assessed on a case-by-case basis aims to regulate the relationship between the company as a whole and its creditors. In addition to insolvency, the bankruptcy law provides for other conditions before a company can be subject to bankruptcy proceedings.

The Italian legal system distinguishes the following bankruptcy procedures:

  • Insolvency (fallimento)
  • Bankruptcy averting composition proceedings (concordato preventivo)
  • Compulsory liquidation (liquidazione coatta amministrativa)
  • Special administration of large insolvent companies (amministrazione straordinaria delle grandi imprese in stato d'insolvenza)
  • special extraordinary administration (amministrazione straordinaria speciale).

Each of these procedures aims to significantly limit the entrepreneur's power of disposal and decision-making by entrusting the entrepreneur's assets and, in some cases, even the company itself to the supervision and administration of an impartial third party with the aim of resolving the state of crisis and satisfying the creditors.

Besides, since 2012, Italian law has known several additional procedures that can be used in case of economic difficulties of consumers and smaller entrepreneurial activities such as freelancers, self-employed persons, artists, start-up companies, associations and similar private, non-merchant associations, agricultural entrepreneurs and other small entrepreneurs outside the scope of the Bankruptcy Act, such as the over-indebtedness procedure (procedura di sovraindebitamento), the procedure for the realisation of the debtor's assets (procedura di liquidazione del patrimonio del debitore), the debtor's settlement (accordo del debitore) and the consumer plan (piano del consumatore).

The best known and most common bankruptcy procedure is the debtor's insolvency (insolvenza), which concerns the commercial entrepreneur, his assets and all his creditors.

The judgment opening the insolvency proceedings has the effect of depriving the entrepreneur of the management of the business and the power of disposal over the entrepreneurial assets. As a result, all legal acts undertaken by the entrepreneur after the opening of insolvency proceedings are invalid.

In insolvency proceedings, the insolvency of the debtor company is established, and the claims filed by the insolvency creditors are examined. In principle, the principle of equal treatment of creditors applies in insolvency proceedings, but there are numerous privileges for certain creditors and for certain types of claims that are given privileged consideration in the distribution of the insolvency estate, to name a few examples:

  • claims secured by distraints or mortgages;
  • claims of the judicial treasury;
  • Claims arising from the employment relationship, for severance pay and unpaid wages;
  • claims from pension and retirement funds;
  • claims of freelancers (such as lawyers, tax consultants, architects, ...);
  • certain compulsory insurance contributions such as social security;
  • tax receivables;
  • Receivables from a commercial tenancy;
  • claims arising from a registered preliminary real estate purchase contract;
  • etc.

The filing of a claim, which must be submitted no later than 30 days prior to the holding of the court verification hearing, can only be made via the insolvency administrator's special "certified" e-mail box ("PEC"). The creditor shall prove any preferential status of its claim with appropriate supporting documents. Unless the creditor has been informed by the insolvency administrator of the date of the verification meeting, a subsequent filing of a claim is possible up to 12 months after the verification meeting has been held.

Particular caution is required in complying with all formalities of filing a claim: if something is forgotten or done incorrectly, this can lead to the invalidity of the insolvency filing with the consequence that the claim will not be taken into account at all later in the distribution of the insolvency estate.

The assertion of a general or special privilege of the filed claim and the submission of the corresponding evidence should also be done with particular care, because the recognition of a privileged claim by the insolvency court can ultimately make a big difference to the amount of the quota to be distributed.

In order to avoid mistakes when filing a claim and to still realize the highest possible quota on the claim despite the debtor's insolvency, it is advisable to seek professional assistance, especially if the documents to be attached are complex.

We advise and represent our clients in all phases of the insolvency proceedings: we check their claim for possible privileges, file the claim application in due form and time and take care of all other tasks in the insolvency proceedings, e.g. if the claim or its privilege is disputed.

In addition, we also represent our clients in defending themselves against actions brought by the insolvency administrator to contest the claim. Under Italian law, payments for the delivery of goods can be contested up to six months before the opening of insolvency proceedings, whereby the insolvency administrator has to prove the creditor's knowledge of the insolvency debtor's inability to pay. Italian case law has elaborated numerous criteria on the circumstances suggesting such knowledge, which may facilitate the insolvency administrator's proof. Creditors facing an insolvency avoidance action are strongly advised to seek legal advice in order to defend the avoidance claim.

Special features of cross-border debt collection in Germany

Dunning procedure in Germany

The dunning procedure in Germany is automated and does not require the submission of invoices or other evidence. As a rule, the order for payment is issued within a few days. If the debtor does not lodge an objection 14 days after the order for payment has been served, the order for payment court issues an enforcement order at the creditor's request. This then enables enforcement against the debtor, e.g. seizure of bank balances, wages, shares in a company or other assets.

If the debtor files an objection, the legal dispute is continued in ordinary proceedings at the creditor's request. From this point on, at the latest, the debtor must be represented by a lawyer if the amount in dispute is €5,000 or more.

Compulsory enforcement in Germany

Enforcement is based on enforceable titles such as judgments, enforcement orders, court settlements, arbitration awards and enforceable notarial deeds. (Out-of-court) lawyer settlements also constitute an enforceable title if one or both parties have submitted to immediate enforcement in the settlement.

  • Movable property enforcement: here the bailiff is instructed to seize movable property belonging to the debtor;
  • Real estate enforcement: here, for example, compulsory mortgages can be registered on a plot of land belonging to the debtor;
  • The attachment of claims: this allows access to the debtor's claims against third-party debtors such as banks and insurance companies, employers, pension insurance institutions, etc.
  • The procedure for making a statement of assets: at the creditor's request, the bailiff gives the debtor one last opportunity to pay the debt within a period of two weeks before the statement of assets is taken. If the debtor does not pay, he is summoned to provide comprehensive information on his financial circumstances under threat of compulsory detention. The debtor must affirm the correctness and completeness of the information in lieu of an oath. The creditor may then execute the assets listed in the list of assets. An omitted, false or incomplete statement of assets and liabilities may result in an entry in the debtor's register as well as other consequences under criminal law that are detrimental to the debtor.
  • Obtaining information from third parties: the bailiff may be instructed by the creditor to obtain information about the debtor's assets from third parties, namely the Federal Motor Transport Authority, the pension funds, the tax office. On the basis of the information obtained, the creditor can initiate enforcement against the respective assets (e.g. motor vehicles, pension payments, bank balances).

When carrying out enforcement measures, the legislator stipulates that the debtor must be left with a certain subsistence level, which may not be taken away from him by his creditors. Therefore, there are certain garnishment limits below which a compulsory enforcement measure cannot intervene.

Insolvency of the debtor in Germany

If the debtor files for insolvency, the creditors' claims can only be enforced within the framework of a quota distribution. An exception is made for creditors who have secured their claims by special security interests, such as by agreeing a reservation of title. With the help of the security interest, the so-called "separate satisfaction" of the claim can be asserted, which under certain circumstances enables a full recovery of the claim.

In some cases, supplier pools are formed for the secured creditors, which use the sales channels of the insolvent company for an optimized realization of the reserved goods and carry out an internal quota distribution of the collected funds. Participation in these supplier pools is voluntary; the opportunity to at least partially resell otherwise possibly unsaleable reserved goods, to minimize one's own realization risk and to obtain a strong representation of interests vis-à-vis the insolvency administrator should at least be seized if the individualization or individual realization of one's own reserved goods cannot be foreseen without any problems.

The German standard insolvency procedure is divided into two parts. At the beginning there are the preliminary insolvency proceedings, which begin immediately after the filing for insolvency and in the course of which the insolvency administrator checks whether the conditions for opening the proceedings are met. In this phase, it is also examined whether a reorganization of the company is possible. This presupposes that the suppliers do not cease their services to the debtor, so that the insolvency administrator guarantees payment to the suppliers for all orders approved by him. If reorganization cannot be achieved, (ordinary) insolvency proceedings are opened. Within this framework, the debtor's assets are realized, usually an investor is sought who buys up the assets of the insolvent company; the insolvency estate enriched with the purchase price is then distributed to the insolvency creditors.

Because most creditors in Germany secure their contractual claims for performance by means of insolvency-proof collateral (such as assignments by way of security and retention of title clauses) when the contract is concluded, often only a small quota of around 10% remains for the unsecured creditors at the end of the proceedings.

In addition to the standard insolvency proceedings, there is also the possibility in Germany for a company in difficulty to apply for insolvency proceedings in self-administration. If the conditions for this are met (including a good restructuring prognosis), the power of disposal remains with the company, which continues to be administered by its own management; the administrator appointed by the insolvency court only has monitoring, advisory and control functions. Insolvency proceedings in self-administration have a higher restructuring rate due to the use of existing entrepreneurial know-how.

Frequently asked questions by our clients

The European order for payment procedure is recommended for cross-border proceedings in the European area, especially if it is known from the outset that the debtor has assets in several member states. This is because on the basis of a European order for payment enforcement measures can be initiated in all member states without any difficulties. However, this presupposes that the order for payment remains unchallenged.

However, enforcement orders obtained in German or Italian order for payment proceedings can also be enforced quickly and easily in all Member States throughout Europe on the basis of a certificate as a European enforcement order. You can find more information on this at [LINK TO RECOGNITION AND ENFORCEMENT].

In general, the order for payment procedure in Italy allows quick access to an enforcement order because, unlike in Germany, a single-stage procedure is followed (see above LINK TO Order for Payment Procedure in Italy).

The actual duration of the order for payment procedure varies depending on the workload of the court seized but has been considerably reduced since the introduction of electronic service of pleadings and court documents. Some judicial districts (e.g. Modena) even provide for the possibility of electronically issued enforcement clauses - currently still in test operation.

The order for payment is usually issued within two weeks. If it is possible to manage all deliveries electronically, the claim can be collected within 4-5 months in the case of a provisionally enforceable order for payment. If the order for payment is not provisionally enforceable, the claim can be collected after 6-7 months - provided the debtor is solvent.

The costs of the order for payment procedure are 50% lower than the costs of ordinary proceedings. The lawyer's fees are calculated by the judge on the basis of the relevant legal provisions and imposed directly on the debtor in the order for payment.

Unlike German law, the standard limitation period in Italy is 10 years. Depending on the legal relationship on which the claim is based, it is therefore quite possible that the limitation period has not expired before 10 years have elapsed since the claim arose. Furthermore, according to Italian law, even a formal reminder suspends the statute of limitations, so that, unlike in Germany, the statute of limitations can be considerably extended by certain action on the part of the creditor, even without recourse to the courts.

No. Both the claim and the retention of title must be explicitly asserted, namely by filing a claim in due form and time. The agreement of the retention of title must be proven to the insolvency administrator so that the claim can be determined by the insolvency court as privileged in this respect.

To avoid disadvantages, it is advisable to seek legal advice. 

It usually only takes 1-2 working days for the order to be issued and the debtor is usually served after one week. If the debtor does not lodge an objection, another 1-2 weeks must be allowed for before the enforcement order is issued. Enforcement can therefore usually begin after 4-6 weeks.

If the debtor lodges an objection against the order for payment, the creditor must initiate the ordinary proceedings. On average, the duration of first-instance civil proceedings before the regional court (i.e. with an amount in dispute of more than €5,000), which is terminated by judgment, is 13.4 months in Germany (source: Federal Statistical Office, values of 2019).

Ideally: none! If the debtor is in default of payment, he has to pay the lawyer's fees together with the claim.

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