1. Collection out of court
Extra-judicial collection
Extra-judicial collection is the process of claiming your debt without court-proceedings. In practice this would typically include contacting the debtor and issuing reminders regarding the default. With these written notices a fee of DKK 100 can be imposed up until three times, however, once this option is exhausted and the claim remains unfulfilled the next natural step is to place the debt for collection
thus initiating the legal collection proceedings described below.
It is of utmost importance (a prerequisite) that before initiating judicial collection proceedings a notice of debt collection is sent to the debtor stating that continued non-payment means the proceedings will be initiated and that further costs associated with this procedure may be added to the claim. This ‘warning’ is usually sent with the 3rd reminder.
This is typically done by consulting a lawyer or a law firm to help ensure that everything is handled in accordance with the debt collection law when sending a summation demanding the debtor to pay up.
This article does not include a detailed review of the requirements of such summation which should, however, consist of the following:
- The specific claim is involved;
- Information on the debtor and collector (name, address, CVR / CPR, etc);
- How much (if any) of the claim has already been paid;
- What amount of statutory interest and extrajudicial (collection) costs are charged;
- And within which reasonable period of time the outstanding amount must still be paid.
Finally, there are rules regarding the extra fee added with this notice. The size of this fee depends on the principal of the claim as well as whether you have managed the process yourself or instead have hired a lawyer or debt collection agency. The current rates can be found by following this link:
– https://www.retsinformation.dk/eli/lta/2016/476
2. Collection through the civil procedure
Civil procedure:
If, in spite of the above-mentioned, the debtor does not pay you can take your claim to court. An “order of payment / summons” can be made and sent to the bailiff’s court in the district of the debtor’s domicile or head office to initiate legal proceedings. (In Denmark we have a standard form for this purpose – if the amount does not exceed DKK 100.000 – specifically which helps ensure that all details needed to expedite the procedure are included).
This includes:
- Notice of the debtor
- Your requirements (payment of the claim)
- The substantiation of this requirement
- Any evidence you might have to support your claim (agreements, invoices etc.)
If the court proceeds and “accept” your claim as presented and you have thus obtained an outlay basis (demand for payment) which allows enforcement to take place through the bailiff’s court. Furthermore, this entails that the debtor will have to pay legal costs of some sort depending on the principal of the claim (see link above).
European Payment Order Procedure.
Since 2008, it has been possible within the European Union to have an undisputed monetary claim on a foreign debtor established by a judge in the form of a European Payment Order. The possibility hereof applies between all Member States of the European Union with the exception of Denmark. Questions regarding procedures of a claim in another Member of the European Union follows the procedure referred to as “Civil procedure”
3. Execution of your claim
When the enforcement court endorses a demand for payment, the claim will form the basis of execution. When such basis is available, a bailiff can start the legal proceedings by sending the basis of execution as well as a requisition to the bailiff’s court. The requisition is a request to summon the debtor in court to make the debtor pay the entire claim. Once the bailiff’s court has received the bailiff’s requisition, a bailiff’s court hearing is scheduled. The time of the hearing is then served to the debtor.
The bailiff’s meeting is conducted with the purpose of either obtaining full payment, agreeing on an instalment plan with the debtor or levying execution against the debtor’s property. If the debtor owns no property or assets of significant value, the debtor will be able to declare its insolvency. The declaration of insolvency protects the debtor from prosecution for a period of 6 months. If the debtor does not attend the hearing after being duly notified, the police will bring the debtor
before the court.
4. Collection through bankruptcy
If a claim is both undisputed and due it is possible to file a bankruptcy petition. In Denmark both a person or a Company can undergo bankruptcy procedure. It is a precondition for bankruptcy that the debtor is insolvent in accordance with the Bankruptcy Act, section 17, subsection. 2, and that you as a creditor have a legitimate interest in filing a petition for the debtor’s bankruptcy.
A debtor is considered insolvent when unable to meet its obligations as and when they fall due – unless said inability to pay can be regarded as merely temporary. When the bankruptcy conditions are met, the bankruptcy procedure is initiated by filing the abovementioned bankruptcy petition before the probate court in the district where the debtor is domiciled or has its headquarters.
me formal requirements are set for the bankruptcy petition, and it is thus required that the bankruptcy petition:
- is written
- appears in Danish
- contains information on the debtor (name, address etc.)
- is handed to the court in two copies
Regarding the claim involved this must further contain the following:
- the circumstances of the claim
- the cause of debt,
- the due date(s),
- information of securities (if any) for the claim.
– The issuing of a bankruptcy order is subject to the party having filed the petition providing security for the costs incidental to administering the estate. The security usually constitutes an amount of DKK 30,000 but this amount is merely a benchmark and is not necessarily limited
thereto.
– The creditor must additionally pay a fee of DKK 750 for the administration of the petition.
The probate court will convene a meeting to be held no later than three days after receipt of the bankruptcy petition. At said probate court meeting the debtor has the opportunity to raise any potential objections to the claim(s) involved. If the bankruptcy petition is granted the probate court issues a bankruptcy order and immediately thereafter appoints a trustee to handle the bankruptcy estate.
When the bankruptcy order is issued the debtor will lose the right to:
- transfer or abandon property,
- accept payments and other services,
- accept terminations, complaints and similar declarations from employees,
- make commitments or otherwise dispose of property with impact on the estate
The bankruptcy procedure includes all the debtor’s property at the time the bankruptcy is issued as well as any other property accruing to the debtor during the bankruptcy up until affirmation. When administrating the estate, the trustee is responsible for keeping account of all claims and debts notified by creditors. When the estate’s assets are settled the trustee ascertains that dividends (if possible) are distributed to the creditors from the available assets. The dividend must be paid in equal shares within the order of priority. The order is briefly stipulated as listed below:
- Expenses regarding the administration of the estate (article 93)
- Reasonable costs incidental to attempting to procure a total solution by means of restructuring the debtor. (article 94)
- Claims for wages and other remuneration for work performed in the debtor’s service. (article
95) - Suppliers’ claims for duty on products that are liable to duty (article 96)
- All other claims except claims mentioned in article 98. (article 97)
- Claims for interest post the bankruptcy order, claims for fines, claims under a lease agreement and claims according to gratuitous promises. (article 98)
A claim will often fall subject to article 97 and is thus to be covered in proportion to the size of the claim (percentage-wise) and any other article 97 claims raised against the estate as mentioned above
- provided there are any remaining funds in the bankruptcy estate after all claims subject to article
93-95 have been covered.
For further information regarding bankruptcy in Denmark: https://www.ten-law.org/knowledge/bankruptcy-in-denmark/
By Mads Kjeldgaard Leth and Thomas Bjerregaard
Virtus Advokater ApS