Maturity and default  

The creditor may claim damages from the debtor caused by default of payment, especially interest for default of payment. The following points must be considered:

[Image] Maturity
[Image] Default of payment
[Image] Damages caused by default
[Image] Default interest
[Image] Dunning costs for default of payment


Maturity is the date after which the creditor asks the debtor to pay his claim (i.e. invoice). Maturity may stem from a contract where, for instance, one party must pay the other for services rendered. It is also possible that a claim’s maturity arises based on an invoice. The invoice states that the amount to be paid must be paid immediately or maturity occurs after a specific date set out in the invoice.

Please note that the debtor is not automatically in default (in spite of maturity).

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Default of payment
A debtor has three different possibilities to enter the default stage involving demand of payment:

Default based on the creditor’s reminder: The debtor is in default of payment starting on the date of the creditor’s reminder asking for payment. In this case default begins upon the reminder’s delivery to the debtor. The creditor may have a problem proving that the reminder has been delivered. Here delivery by registered mail with a return receipt may help.

Default without reminder: A reminder is needed to prove default whenever payment has been stipulated to be paid by a certain due date (i.e. on a contract or bill). If the debtor exceeds the term, he or she is in default of payment starting from the day following this due date. If, for example, the deadline is August 28th, the debtor will be in default starting on August 29th onwards.

The new German law for default of payment stipulates that a debtor generally is in default 30 days following the due date, or receiving a new invoice or the equivalent thereof, unless a shorter due date was set by the creditor.

[Image] Information on the reorganization on default of payment 

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Damages caused by default
The creditor may claim expenses that arise due to the debtor’s default of payment starting at the time of default. This is generally the case after a second reminder is sent.

However, these expenses are only refundable if they are directly attributable to the debtor’s default. A company employee’s debt collection activities cannot be claimed as expenses caused by default of payment. However, retaining the services of an attorney to collect debt claims may be claimed as expenses.
Typical expenses for damages caused by default include:

  • Postage costs
  • Default interest
  • Expenses for retaining the services of an attorney  
  • Court fees for the court order
  • Expenses for issuing a reminder following default (a charge of €2.50 per reminder is legally accepted)

In addition, expenses for information (for instance to determine the debtor’s place of residence) and expenses for a bank-chargeback can be claimed from the debt in addition to the principal claim.

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Default interest
Legally the creditor is entitled to claim default interest the time of default onwards. This is in general 4% per year if the debtor is a private individual and it is 5% per year if both creditor and debtor are companies.

In the following cases it is possible to claim even higher default interest:

  • Contractual agreement: Higher default interest in case of default has been agreed.
  • Loss of interest for investments: The creditor can concretely prove that a loss of interest resulted because of default had the debt amount been invested.
  • Disbursement of credit interest: The creditor proves that a credit loan could not be amortized because of lack of debtor payment. In this case the credit interest charged to the creditor can be claimed.
  • For credit contracts according to consumer credit law, default interest is 5% above the Bundesbank’s bank rate.

The creditor generally cannot claim compound interest of default interest from the debtor.

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Dunning costs due to default

If the debtor is in default of payment – that is, the debtor did not make payment in time - then the debtor must pay for all expenses relating to the dunning procedure even if the debtor pays the claim before the court order has been delivered. 

It is the debtor’s responsibility to pay the creditor’s demand for payment on time. For this reason the debtor must pay all expenses that arise due to default of the debtor.

All information is presented to the best of our knowledge. We assume no responsibility for its correctness.

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