Debt recovery. How it works and when needed.

Given that the economy is undergoing continuous and rapid changes, having your financial resources blocked could mean pausing the activity of the whole company.

Of course, there are some preventive measures available, such as due diligence or background checks, but it happens far too often that we underestimate the situation and get stuck with a lot of unrecovered debt.

Find out why the debt recovery procedure is so necessary and what does the process entail. 

What are receivables? 

In a nutshell, receivables (or debts) are amounts of money that the company must cash in. In order to determine the number of receivables that have to be recovered it will be necessary to identify the financial obligations in the contracts and the loans you have granted. When the debt is not recovered in time, the creditor’s company might cash in additional sums. 

However, there exist truly unpleasant situations, when the debtor is unable to pay the due amounts or is bankrupt. The problem is the same, whether we refer to debt recovery from individuals or legal persons. 

There are several types of receivables, classified in accordance to their economic content, term of payment and degree of association. Thus, we may talk about: 

• Civil receivables, collected based on contracts between individuals;
• Banking receivables, following bank loans;
• Fiscal receivables, linked to tax payments and state budget fines;
• Salary receivables, linked to payment of employees;
• Commercial receivables, linked to commercial contracts between commercial companies or a commercial company and a contractor. Failure to abide by the contract’s conditions may lead to commercial litigation. Luckily, there are several effective ways to solve business disputes.

Experts advise that it’s best to keep the debt recovery process pretty friendly, firstly by contacting the debtor and by using several methods of debt recovery from late-paying customers. Additionally, a negotiation may ensure that relations are not strained and the partnership will continue to exist. Don’t forget that any trials will involve high costs and may stretch on for a long time. Find below the procedures you have access to if going to court is the final option. 

The common law procedure

When discussing the common law procedure it’s important to mention that the source and value of the receivable are irrelevant and you can use any valid legal means to demonstrate it. It’s true however that trials based on the common law procedure tend to last longer. Also worth mentioning is the fact that judicial fees will amount to roughly 3% of the receivable’s value, in the first instance. The advantages of this procedure lie in the fact that it may be used to recover debts no matter the source, value or nature of the proof. 

Recovery by payment ordinance 

A procedure that is faster than the one based on common law, receivables recovery based on a payment ordinance works only based on inscriptions and clarifications from the parties as evidence. So, by using the payment ordinance you can only recover liquid and demandable receivables. In order to use this procedure, the source of the receivables must be contractual relations based on a contract or other inscriptions agreed upon by both parties. In this matter the law accepts very few exceptions. 

Recovery by low value requests 

This solution may be used on condition that the receivables do not amount to more than 10.000 RON. Trial of this cause takes place mainly in writing and is very simplified. We’re also mentioning judicial fees for stamps, but these are rather small, from 50 to 200 RON. These requests will be proven mainly by inscriptions, but other proof will be admitted only if the court deems it necessary. Do not forget that, if the receivables are a consequence of bankruptcy, succession, renting or work relations, this method will be rendered unusable. 

Next time you’re thinking about signing a contract, remember that financial forensics may come in handy! 

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