Open invoices are not only annoying for companies, but also jeopardize liquidity and business success. If customers still do not pay despite a reminder, the question arises: What should I do next? There are two key routes in receivables management: out-of-court debt collection and the court-based dunning procedure. In this article, we explain the differences, advantages and disadvantages, and when each measure makes sense.

What is out-of-court debt collection?

 Out-of-court debt collection is the attempt to recover an outstanding receivable without involving a court. This is usually carried out by a specialized collection agency or an attorney, who contacts the debtor in writing or by phone.

Typical process for out-of-court debt collection:

1. Engagement of a collection service provider

2. Review of the receivable (plausibility & limitation period)

3. Sending reminder letters to the debtor

4. Contact by phone or email

5. Agreement on installment payments or settlements

Advantages of out-of-court debt collection:

• Faster and more cost-effective than court proceedings

• No court fees

• Preservation of the customer relationship through an out-of-court settlement

• Often successful, especially for smaller amounts

Disadvantages:

• If the debtor does not respond, the receivable remains outstanding

• No enforcement option without a court title

What is the court-based dunning procedure?

If out-of-court measures fail or the debtor does not cooperate, the court-based dunning procedure can be initiated. This procedure is used to obtain an enforceable title – an official document that can be used to collect the claim by force.

Process of the court-based dunning procedure:

1. Application for the dunning notice at the competent dunning court

2. Service of the dunning notice on the debtor

3. Opportunity for the debtor to file an objection (deadline: 2 weeks)

4. If no objection is filed: application for an enforcement order

5. With the enforcement order, a bailiff can be instructed or an application for account seizure can be filed

Advantages of the court-based dunning procedure:

• Obtaining an enforceable title (valid for 30 years)

• Possibility of enforcement

• High level of legal certainty

Disadvantages:

• Longer duration than out-of-court debt collection

• Court costs and administrative effort

• Risk that the debtor files an objection → then contentious proceedings follow

When is which measure appropriate?

The combined approach – the best of both worlds

Many companies today rely on a combined approach: first out-of-court debt collection, to save costs and time. If this is unsuccessful, the court-based dunning procedure follows to obtain an enforceable title.

Tip: everything from a single source with KELVERBILL

With KELVERBILL, you receive a complete solution for your receivables management – from invoice issuance and dunning through out-of-court debt collection, court-based dunning procedure and enforcement. International receivables are also covered. This saves you time, money and effort – with full legal certainty.

Both out-of-court debt collection and the court-based dunning procedure have their place. Which path is the right one depends on the debtor's behavior, the amount of the receivable and your company's strategy. The important thing is that you do not wait too long to enforce your claims – and that you document the process, so that you remain on the safe side legally during tax audits.