Recovery of claims and compensation for damage

Introduction

We don’t say “good accounting makes good friends” or “lend your money and lose your friend”. Anyone can find themselves in a situation in which one of the parties (the debtor) “owes” something to the other (the creditor), which corresponds to the other party’s right to payment of the debt (claim). This could be a friend who has not returned the money they borrowed on the agreed date, an invoice for goods that is overdue, a liability for damages caused by a car accident, or just funds that were mistakenly sent to a wrong bank account. In all of the situations outlined above, there may come a point where it is no longer possible to wait to see if the debtor will agree to settle its debt on its own, but the creditor will be forced to start the debt recovery process.

The whole process can be very demanding, both psychologically and financially, very lengthy and ultimately without the expected result. Unprofessional recovery of claims can sometimes result in a loss of the claim and an obligation to reimburse the other party for the costs of the court proceedings. Therefore, it is always advisable to contact experts who will be able to effectively protect your rights throughout the process.

Pre-trail stage of recovery of claims

Of course, the recovery of a claim begins at the stage when the action has not yet been filed. At the pre-trial stage of recovery, it is first necessary to assess whether the claim is justified at all and whether it can be assumed that it can be successfully asserted in court. In this respect, the main focus should be on:

• The debtor (to whom the funds were lent, who actually caused the damage, who used the item without legal justification, etc.).
• The exercise of the claim in court (e.g. some betting, gaming and lottery claims cannot be enforced).
• The maturity of the claim (whether the agreed time limit for repayment of the money lent has already passed or whether the wrongdoer has already been asked to pay compensation, etc.).
• The defences available to the opposing party (e.g. statute of limitations or abuse of rights).
• The enforceability of the claim (the debtor’s financial situation must also be considered so that the creditor does not see the possible court decision as a mere “piece of paper” but that it is actually realistic that the claim will be satisfied).

If the creditor concludes that the claim needs to be asserted in court, the first step should be to file a “letter before action”. A letter before action can have a major psychological effect, i.e. the debtor gets scared and pays the claim before the court proceedings are initiated. This can prevent lengthy court battles. At the same time, however, the sending of the letter before action to the debtor is a condition for the award of costs to the claimant.

Asserting a claim in court

If the letter before action does not have the desired effect, i.e. the debt is not fulfilled, the creditor often has no choice but to file an appropriate legal action, i.e. usually a lawsuit. In some cases, however, it is not directly a lawsuit but, for example, an application for an electronic payment order, an application for a European order for payment procedure or, in the case of the enforcement of bills, an application for a bill (cheque) payment order (e.g. if the receivables are secured by issuing bills).

In connection with the commencement of court proceedings, it is necessary to realise that this entails the necessity to pay a court fee, which is usually based on the amount of the claim. It is also important to note that each party pays its own legal costs (especially attorneys’ fees) during the proceedings. In the final decision in the proceedings, the court also decides on the obligation to compensate the other party for its costs, usually according to the proportion of success in the case.

Court or other proceedings (e.g. before an arbitration body in the case of commencement of arbitration proceedings) entail a large number of twists and turns, as the claimant is obliged to prove its claims sufficiently and present the claim so that there is no doubt in the eyes of the judge (arbitrator) that it is justified and should be upheld.

Enforcement of decisions (execution)

The end of court proceedings does not mean the claim recovery has ended as well. If the claimant is successful in the court, the court will issue a decision authoritatively ordering the defendant to pay the claimant the amount claimed (including, for example, default interest) and to pay the costs of the court proceedings. The defendant then has a court-specified period of time (usually three days after the decision becomes final) to voluntarily comply with the obligation imposed. If the defendant fails to do so, the creditor (or the successful claimant) may refer to a bailiff (or the court itself) to ensure the compulsory enforcement of the claim. It is then the bailiff’s duty to execute the court’s decision and enforce the claim.

The bailiff tries to recover the relevant money in all possible ways that he or she is legally allowed to do, e.g. by direct deductions from the account (freezing of accounts), by deductions from wages or by selling movable or immovable property. However, it is often in execution that the need for a prior assessment of the enforceability of the claim becomes apparent, when the bailiff, despite all his powers, cannot find any assets from which the claim can be satisfied. In such a case, it will be an unsuccessful execution in which the creditor will not recover anything from his court-awarded claim and will even be obliged to pay the basic costs to the bailiff, as the latter cannot be held liable for unsuccessful executions under the law.

Debtor’s bankruptcy and insolvency proceedings

A situation may also arise where it is objectively impossible for the debtor to continue to pay his debts to a large number of creditors properly and in full. Using legal terminology, such debtors are bankrupt or declare personal bankruptcy. This is either a situation in which the debtor has more than one creditor to whom he has overdue debts (insolvency) or a situation in which, in simple terms, the debtor’s debts exceed his assets (over-indebtedness). If the debtor is in either of these two situations, he may (in some situations even must) file for insolvency (personal bankruptcy).

The filing of the insolvency petition then initiates the insolvency proceedings, the aim of which is to resolve the debtor’s situation collectively, i.e. between the debtor, all its creditors, the court and, as a rule, the trustee in bankruptcy, so as to achieve the maximum possible satisfaction of all creditors.

However, in the context of insolvency, it is important to note that all information about the fact that insolvency proceedings are being conducted against the debtor, as well as the entire course of such proceedings, is publicly available in the insolvency register. Filing an insolvency petition can – unintentionally – cause a great deal of inconvenience, such as the loss of business partners.

Conclusion

The claim recovery process carries a great deal of risk. Some risks are common to any claim recovery, some risks are different in the recovery of claims for damages and others in the recovery of claims for unjust enrichment. We can thus clearly recommend you to turn to professionals in any case who will provide you with professional and effective legal assistance and always recover your claim for you after assessing the specific circumstances of your case.

What issues do we typically handle for clients in relation to recovery of claims and compensation for damage?

• I need to assess the recoverability of a claim
• Dealing with creditors as a debtor
• How to recover claims
• How to file a letter before action
• I have been served a letter before action
• How to get rid of distraints
• Assistance in declaring personal bankruptcy
• Recovery of an unpaid invoice
• How to protect yourself from distraint
• My property was seized by distraint, how to get it back
• Removal from the register of debtors
• How to stop enforcement proceedings
• I have incurred damage – help with compensation
• Oppose the enforcement decision