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:
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).
|Default of payment|
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.
|Damages caused by default|
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.
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.
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:
The creditor generally cannot claim compound interest of default interest from the debtor.
|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.