How to collect outstanding invoices

It's become easier to collect money from recalcitrant customers. You just have to know how. The foreclosure reform makes it possible.

This article is part of the special topic " Invoices: What matters"

Time and again, tradespeople complain that their private customers aren't paying their bills. Apparently, there's a growing number of bad apples brazenly refusing to pay and taking legal action.

What few people know: For the past year and a half, creditors have had much better opportunities to access their debtors' assets. Since the beginning of 2013, the "Law on the Reform of Factual Investigation in Enforcement Proceedings"The key innovation: Now a creditor can obtain important information about his debtor's assets – from the authorities. Provided he has an enforceable title, such as a judgment or writ of execution against him. So, if master metalworker Schulte has successfully prevailed against his client Schmitz in court regarding his outstanding invoice, he can now send the bailiff to obtain information from government agencies.

Query important information

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Previously, the debtor could lie in their affidavit – a criminal offense – and the creditor would be left empty-handed. If Mr. Schmitz remains silent for two weeks, the bailiff can now obtain information directly from authorities, namely from the statutory pension insurance providers (who is the employer? Are there wage and pension entitlements?), the Federal Motor Transport Authority (are there one or more valuable vehicles?), and the Federal Central Tax Office (are tax refunds expected?). With this information, the bailiff can then directly seize the tax, wage, or pension entitlements. In most cases, this is significantly more worthwhile than the previous method of seizing property from the debtor's home – which is still possible, however.

"You only need to know where the debtor's assets are located, then access to them is quite simple," explains Peter Marchlewski, Head of the Public Relations and Justice Communications Department at Ministry of Justice NRW"The work of bailiffs has fundamentally changed due to the new law: Previously, they had to do a lot more door-to-door work; now it's an office job."

Frank Neuhaus, state chairman of the German Bailiffs Association in North Rhine-Westphalia, sees the reform as positive: "Bailiffs have been equipped with more tools to make enforcement more effective. The improved information options are already benefiting creditors: The amount of money recovered has increased," he says, describing the advantages for creditors. The Federal Central Tax Office provides creditors with information about all accounts opened by the debtor in Germany. "Sometimes interesting things come to light," is his experience with the official information.

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According to Neuhaus, the newly created option for amicable settlement is also a step forward for all creditors. This wasn't possible before. Now, bailiffs can also agree on installment payments on behalf of the creditor. The increased number of installment payment agreements demonstrates this improvement.

The only drawback of the reform: official disclosure is only possible for debts exceeding €500. "This can be particularly detrimental for smaller tradespeople. The data protection officer has ensured that banks and large creditors are given preferential treatment. We are committed to lowering this limit even further," says expert Neuhaus, representing small and medium-sized businesses.

Seizing hidden income

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By the way, there's also a legal remedy for those who use their wives to skip out on the bill. At least, it's against those who transfer the company to their wife and work there for free or for a low wage – meaning they're no longer the boss only on paper. Even lawyers aren't always aware that a creditor can garnish an employee's fictitious salary, as so-called disguised income. So, if Mr. Schmitz were hired for "penny and pie," the company would still have to pay the creditor, Schulte, the money an employee in that position would normally receive, for example, the standard wage.

Another, lesser-known procedure that allows creditors to get their money faster is the deed-by-deed process. Anyone who can substantiate their claims with a written document isn't required to accept any objections not described in the document. So, if Schulte signed a written order and Schmitz wants to claim, for example, that the measurements were incorrect, he won't be able to get away with it in the deed-by-deed process, because there's nothing about this in the contract. Schulte immediately receives a payment order. "Once the money is paid, the dispute usually subsides quickly," says lawyer Marchlewski.