Late Payment – How Creditors and Debtors Respond at Best

 

A late payment can occur quickly and unnoticed. The classic example is when you have ordered something and forget to pay the bill. Sometimes the payment can not be made because the money is missing. An unexpectedly high expenditure, unemployment or a longer illness leads to a decrease of the income. It will be difficult to settle all open items. A default with reminder is the result. In the case law, the default in payment is defined in the Civil Code under §§ 280 and 286 ff . In the legal sense, there is a default of payment if the invoice was not settled on the due date . The due dates are specified in the invoice.

Late payments – The introduction of the first steps

When is a late payment?

This question many debtors who hold an invoice in hand and pay the reminder fees. From a legal point of view, different reactions to a late payment are distinguished. If a service has been used or a good has been purchased, billing will usually take place within a period of two weeks. If the invoice is paid within this period, the due date is deemed to have been completed. The debtor has, according to the law, however, another two weeks to the

Settle the bill. A reminder for late payment can only be made after the expiration of four weeks. The default then occurs automatically.

Recurring payments

The situation is different with regular recurring payments. These are provided, among other things, for payments of incidental costs or ongoing mixing costs to energy suppliers . If the payment is not made on the due date, the delay in payment occurs immediately. The company can immediately send a reminder without waiting four weeks. For loans differing provisions apply. Call-off loans may be terminated immediately if an agreed installment has not been received. Installment credits may be demanded. Termination is only possible if at least two consecutive installments have not been paid and the arrears exceed an individual percentage. The percentage depends on the amount of the loan.

The dispatch of reminders

Voluntary dispatch of reminders

The assumption that the creditor must send three reminders before he can take further action is legally inconsistent. The despatches are sent on a voluntary basis . Many creditors send the first reminder free of charge. The second and third reminder will be charged a reminder fee. The creditor does not have to send reminders if he already points out in the invoice the legal consequences of non-payment. In this case, after four weeks have expired, he can initiate enforcement measures without having sent a reminder.

Reaction in case of late payment

How to respond to a warning?

If a reminder has been written and interest has been claimed for the late payment, the debtor should react immediately. With the transfer of the amount including reminder fees the claim is done. If the sum can not be settled in an amount due to financial difficulties, it is important to contact the creditor. Often it is possible to arrange a installment . These agreements may incur additional costs in some cases.

Legal consequences

What legal consequences does a late payment have?

If the delay in payment continues, the creditor can withdraw from the contract or claim damages . The procedure is presented in the terms and conditions. First, the creditor will try to get the money from the debtor. If reminders do not bring success, a judicial reminder procedure can be sought. Upon withdrawal from the contract, the creditor has the right to claim damages for the lost revenue. In addition, the debtor must bear the costs of the dunning procedure.

The court order

Conduct when issuing a court order

The granting of a judicial order for dunning takes place without the examination of a court , whether the costs were actually incurred. If the debtor receives such a dunning notice, he should first check whether he is really in default. If so, contradiction makes no sense. Usually the creditor will try a procedure. If the creditor is right, the debtor must bear the entire costs of the proceedings.

The enforcement order

If the debtor does not file an objection, the creditor applies for an enforcement order . The amount can then be recovered from the debtor over a period of 30 years. An objection may be filed against the writ of execution. This is useful if the decision was wrongly issued. In this case, there is a chance to win the lawsuit.

Cost of the dunning procedure

How expensive is a dunning procedure?

If the order for payment becomes final, the debtor must bear the costs of the order for payment procedure. This includes:

• Sum of the principal debts
• Interest rates (5 percent above the base rate, which is based on key interest rates)
• Costs for the reminder
• Costs for the work of a lawyer or collection agency
• Expenses proven by the creditor (postage, telephone calls, determination of address etc.)

 

The costs must be listed in such a way that they are traceable to the debtor. If it comes to a lawsuit, the debtor must pay additionally the court costs and the opposing lawyer . The total amount may amount to a multiple of the actual debt after such a procedure.

Late payment by creditors of different legal forms

A late payment can have different consequences. If an invoice is not paid, the debtor bears the financial consequences. Worse are the consequences if rent or health insurance is not paid. If the salary payment fails because the employer is unable to pay, this often has serious consequences for the employee.

Late payment at the landlord

The payment term of the rent payment is according to the legal regulations on the tenth of the respective calendar month. If the tenant has not made the payment on this date, there is a default in payment. The landlord charges the costs in the form of default interest . Only with the second missing payment is it possible for the landlord to terminate the living space. If this happens once and the tenant is looking for a conversation with his landlord, in most cases no notice is given. The termination can be averted by full payment of the rent for a period of time. An eviction notice is possible if the renter refuses to accept the termination.

Late payment in private health insurance

Members of private health insurance and private supplementary insurance actively pay their contributions to the insurer. If the payment is not made on time, this will initially lead to a suspension of the contract. This means that the insurance coverage expires. This occurs when the insured is in arrears with two consecutive bonuses.

Important to know:
If benefits are received in the sense of the German Social Code, it is not permissible to suspend the insurance contract. In this case, the state will pay for the contributions or a change to the statutory health insurance is considered.

Late payment by the employer

A late payment by the employer is often a serious cut in the employee’s personal budget. Important bills can not be paid and there is a delay in payment. The employee has a statutory right to the payment, which he can enforce in court. If this is unsuccessful because the employer is not solvent, the claims fall under the bankruptcy estate and are never serviced at worst. The employee can do nothing but bridge the time after the termination or the trial with savings, help from friends or family or with a loan.

Borrowing in case of late payment

The inclusion of a short-term loan can help to catch a temporary default. If the creditworthiness is sufficient, it is advisable to reschedule the outstanding amounts in a loan. The outstanding claims are bundled and can be paid in regular installments.