The most important part of a
German lawyer's task
is the collection of debts and liabilities in the relationship with
debtors in Germany or with the customer's outstanding demands, if the German lawyer works for a private
corporation. The creditor to debtor relationship often starts with an intake agreement where the German lawyer
gets to know the problems of his client, develops the facts of the debt collection, investigates where the
debtor lives, increases the client's expectations, begins to develop strategies for claims and explains the
methods to the client.
In Germany, only solicitors were in direct contact with the debtor. The creditor did not retain a lawyer if
this was necessary and he acts as a solicitor between the customer and the client. In most cases the debtor
would be obliged, under the German law, to accept payments for a certain case in a country in which he helds
himselve out as escaping, at any German city at which he normally remains or resides for effectuating the
collection of debts by lawyers in Hamburg.
The term "debt collection in Germany"
is usually applied to lawyers, called such because they were a party to the original contract. The creditor
assigns his accounts directly to a German lawyer on a fee-free basis, which usually costs nothing to the
creditor, except for the court costs. This however is independent on the individual service agreement that
exists between the creditor, the debtor in Germany and the collection agency.
German law firm
for debt collection
is not allowed to take a percentage of debts successfully collected; this equals a Pot Fee or potential fee
upon a successful collection of zero. This does necessarily have to be upon the collection of a full balance;
very often the fee must be paid by the debtor if he reaches collection efforts when the debt is collected. The
collection agency earns money only if the debt is collected from the debtor.
Depending on the type of account, the age of the debt and how many attempts have been made to collect on it,
the fee will always be zero.
Not only debt purchasers who purchase sizable portfolios will utilize a lawyer to assist in managing their
outstanding demands across multiple collection methods. Given the time-sensitive nature of the assets, many in
the debt collections industry think there is a competitive advantage in utilizing the immediat collection
technique as it gives the creditor more control and flexibility to maximize the collections. Lawyers in Germany
offer a flat fee collection service. This service sends a series of written reminders, usually fourteen days
apart, instructing debtors to pay the amount immediatly and directly to the creditor's lawyer
or risk a collection action and later on a court procedure. Depending on the terms of the contract, the
accounts may revert to a kind of hard collection status at the lawyer's regular rates if the debtor does not
react or respond.
The usual form of a scheme of arrangement is an assignment by the debtor of his property in Europe to a trustee
for distribution of the proceeds of sale among the creditors, rateably or in agreed proportions.
The first step for a debtor who wishes to make a composition or scheme of arrangement of his affairs is to
apply to the court for an interim order. This order has the effect of preventing a bankruptcy petition from
being presented. In his application the debtor must state that he proposes to make a voluntary arrangement and
he must name a nominee (an insolvency practitioner) and he has to present all open and unpaid
Within 14 days the latter must submit a report to the court stating whether a meeting of the debtor‘s creditors
should be called to consider the proposal.
Most debt collectors in Germany declare upon receipt of this report, and if satisfied that such a meeting
should be held, the court will direct that the interim order be extended for a specified period of billing.
Thereafter the nominee must summon the meeting.
The chairman of the meeting must report its deliberations to the German court and, assuming that the court
approves the proposal, every creditor who had notice of the meeting and was entitled to vote is bound by the
arrangement whether or not he attended the meeting or voted in favour of the proposal. After the report to the
court the order continues in being for a further 28 days. This is to allow the arrangement to be challenged by
any creditor entitled to vote, the counsel, or (where the debtor is a bankrupt) the trustee of his
state or the official receiver of goods.
After the 28 days no challenge is allowed. If the challenge is
successful the period of the collection order will be extended. If there is no challenge, or the cashing is
unsuccessful, after the 28 days the arrangement becomes binding and it is then for the client in Germany
(thereafter known as a ‘German debtor‘) to assume responsibility for the implementation of the arrangement.
All voluntary arrangements have to be registered in a register of individual voluntary agreements maintained
by the lawyer's office.