Debt Collections In Belgium, How it Works

Debt Recovery Services for Belgium

The staff of our Debt collection agency is trained to retrieve money from customers that are hard to deal with; we will contact the debtor using our strong but diplomatic techniques and make sure your unpaid accounts are quickly sent to your bank account.

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Here below you will find a detailed explanation on how we collect debts and both amicable and legal steps we are following.

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1.1 Amicable Phase

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1.1.1 General

Debt Collection Agency Service Belgium pursues a professional collection process with each client it represents, working to achieve an amicable resolution of all outstanding debts that focuses on client-debtor communication. Our Debt collection specialists are based in-house, and seek to contact debtors both via telephone and via postal mail. In the event of a dispute, we will analyze all relevant documentation in order to help create an agreeable resolution between both parties.

1.1.2 Local agent

Debt Collection Agency Service Belgium will work with field agents when our in-house process has not produced the client’s desired results. Each field agent represents a different part of the country, and will work to obtain financial and other information from the debtor during their visit to the debtor’s business or home address. Our agents are also permitted to obtain payment from the debtors they visit, and their acquisition of information helps us pursue the best possible path for full recovery of the debt.

1.1.3 Interests

Debt Collection Agency Service Belgium always adds interest to the outstanding balance owed by the debtor. By default, this rate is set at 12 percent. If the contract between the creditor and debtor stipulates a different interest rate, that is the rate that will be pursued by our in-house professionals. Belgian debtors consider interest rates a negotiation tool, however, and clients should be aware of the difficulty involved with collecting this cost.

1.1.4 Debt collection costs

Debt collection costs are charged in two ways by our team:

– Costs of collection that can be charged according to European Statute 2011/7/UE, stipulating a fixed amount of 40.00 EUR.

– A 15 percent penalty cause based on the outstanding balance. This cost is negotiable, in many cases, while the flat 40.00 EUR rate is not.

1.1.5 Prescription

Belgian law sets a statute of limitations that last 10 years from the date when a debt first become past due and owed in full to the creditor. Legal action may interrupt this period.

1.1.6 Accepted and most common payment methods

Most debt payments are made via bank transfer, though bank drafts are also permitted. Direct booking of bank accounts is not offered.

1.1.7 Types of companies

SA/NV:

This is a joint stock company requiring at least two employees.

SPRL/BVBA:

A limited liability company that also requires at least two employees.

SPRLU/EBVBA:

This limited liability company requires only one employee.

SCRI Cooperative Company:

This company has unlimited liability, and that liability may be borne by the founders of the company. Typically, those founders cannot be held personally liable for the company’s debts.

Managerial liability

Any managers of the company also cannot be held accountable for the company’s debts and liabilities. They can, however, be held liable for those costs if they were responsible for mistakes that led to the company’s weak financial position. This must be proven according to the Belgian Code of Companies and creditors must be able to prove the manager is at fault for the situation.

During bankruptcy, it should be noted that company managers can be held liable for the debts incurred by the business, either in full or in part. The creditor petitioning for the bankruptcy proceeding must prove misconduct, as in typical lawsuits.

1.1.8 Sources of information

Several sources of information are available to our in-house professionals:

– External Information Sources:

Our professionals have access to public databases that deal with things like corporate addresses, insolvency proceedings, bank account information, and delayed tax payments. Information about managers and shareholders can also be accessed. Our agents will also be able to provide similar information when engaged in a field visit.

– Bailiff’s Report:

Bailiffs can provide Debt Collection Agency Service Belgium with information about the company’s assets and potential seizures after legal action has been started against the company to recover a debt.

– Public Registers:

It is possible for Debt Collection Agency Service Belgium to contact public offices and obtain information about debtors’ real estate, mortgages, and other holdings.

– Registration of Address Office:

Private debtors who have no publicly known address can be traced by using this office’s records. In Belgium, it is a requirement of all citizens to provide this office with information pertaining to their current address. This address will then be used for contact with the debtor.

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1.2 Retention of Title

Retention of Title is permissible only in case of liquidation, bankruptcy, or restructuring of the debtor. The conditions for this include:

– A Retention of Title clause must be written into the delivery bill that corresponds with the goods to be seized.

– The buyer must accept the ROT clause, with the burden of proof on the supplier.

– The goods must be movable and still in the buyer’s possession.

These conditions are very strict, and they make it hard to achieve success when pursuing this process in court. It is not impossible, however, and we’ll advise our clients about their chances of success on a case-by-case basis.

1.3 Safeguarding measures

The goal of safeguarding measures is to ensure the debtor does not shed those assets that could be used to execute a judgment or reduce a debt. To that end, a bailiff is permitted to seize the bank accounts of a company who owes a commercial debt, as long as the bank agrees and grants permission. Debts can also be seized through third parties with proper paperwork. It’s worth noting that there is no way to determine the balance of a debtor’s bank account, making this costly procedure too much of a gamble for most clients.

If a creditor suspects that a debtor might shed their assets to avoid payment, they can request that a Judge of Seizures grant them permission to evaluate the debtor’s assets and property value. This will result in an attachment of those assets that will remain on record for three years.

If a sale is already in progress, the creditor can request that a bailiff delivers a special garnishment order to the notary executing the sale. This will require the value of the goods to be transferred to the creditor toward the payment of the outstanding balance, with any remaining funds being the property of the debtor.

Debtors can, if they wish, offer a form of security to safeguard to debt on their own. This would be agreed to between both parties, and legally enforceable in court.

1.4 Legal Procedures

1.4.1 General

Legal action against a debtor is governed by the Civil Code, the Commercial Code, and the Judicial Code, depending on the type and scale of the case being pursued. A special segment of the Commercial Code governs the insolvency process for companies who cannot pay their debts. Debt Collection Agency Service Belgium has an extensive network of lawyers to help ensure success during legal action.

1.4.2 Legal System

The court that takes any lawsuit against a debtor is based on the size of the claim being filed by our client. Claims less than 1,860.00 EUR will be handled by the Justice of the Peace. Claims above 1,860.00 EUR against merchant debtors will be taken by the Commercial Court. Claims above 1,860.00 EUR against private citizens will be handled by the Court of First Degree. All claims will be brought before a regional court nearest the debtor’s business or home address. Representation is not required of the debtor in any court except the Arbitration Court.

1.4.3 Required documents

Legal action can only begin when we receive the following documents:

– Copies of invoices
– Copies of the terms and conditions or contract
– Original Power of Attorney for each file, signed by the creditor’s legal representative

All documents should be drafted in the language of the legal procedure itself, typically either French, German, or Dutch. In case of dispute, the following additional documents will be required:

– Proof of orders or deliveries
– Written correspondence proving the claim’s existence
– Notes regarding debtor-creditor conversations

1.4.4 Legal dunning procedure

A summary procedure does exist in Belgium when working to obtain payment. Typically, it is not used in ROT procedures because of extensive documentation requirements, the relatively small size limitations of the claim itself, the requirement for legal representation, and the chances for a dispute.

1.4.5 Lawsuit

A lawsuit is initiated in the event of a dispute filed by the debtor, or if the amicable phase has failed to produce results. Lawyers representing the client will file all documents and paperwork with the court, and the court will do this research without the presence of the credit or debtor required. Once a decision is reached, a hearing will be called and a judgment will be delivered. This typically takes at least one month.

In the event of a dispute, the case file is transferred between both parties and this transfer is documented for the court. The judge overseeing the case will issue a new date for the case to be heard and will issue a judgment typically within a month.

1.4.6 Appeal

Appeals are not possible for debts less than 1,240.00 EUR. For larger debts, an appeal will be granted at the court of first instance. For debts no larger than 1,860.00 EUR, this appeal will remain at the court of first instance, while larger cases will go to Belgium’s Court of Appeal.

1.4.7 Costs

There are several major costs associated with legal action:

– Judicial costs:

This includes the cost of the summons and inscription in the court’s calendar, and is around 250.00 EUR.

– Indemnity costs:

The indemnity procedure carries its own costs, and is automatically charged back to the debtor unless the court rules that it should be paid by the creditor.

– Legal fees:

Attorney’s fees will be charged to the debtor unless the court rules otherwise.

– Execution costs:

The cost of enforcing a judgment by the bailiff will be charged directly to the debtor. Costs will vary based on the actions taken to enforce the debt. Estimations of these costs will be given on a case-by-case basis.

1.4.8 Expected timeframe

A judgment typically takes about four months to obtain. A dispute can draw this out to several years.

1.4.9 Interests and costs in the legal phase

Interest is charged during legal procedures according to the existing agreement between the creditor and debtor. The court is permitted to reduce or eliminate these costs, however, due to lack of written proof showing acceptance of the terms that led to charging the interest in the first place. The court may also allow for a lesser interest rate to be charged.

Collection costs can be claimed according to European Union laws and regulations, as stated in section 1.1.4.

1.5 Enforcement

1.5.1 Enforcement in debt

Enforcement begins as soon as the debtor refuses to follow the terms of the judgment and satisfy the outstanding balance. Without an appeal filed within 30 days from issuance, the judgment becomes definite. Bailiffs are then sent to handle execution and recover the debt. This is done in one of three ways:

– Enforcement via immovable goods
– Enforcement via movable goods
– Enforcement via seizure

1.5.2 Enforcement in movable goods

A bailiff will visit the debtor and obtain movable goods that can be liquidated and used to pay off some or all of the outstanding balance. Goods necessary for daily life cannot be seized. Debtors’ assets will be auctioned, though they often make payment arrangements or partial payments before this is necessary. Seizure and sales can be held later if the debtor does not follow payment arrangements.

1.5.3 Enforcement in immovable goods

Though expensive, it is possible to seize the debtor’s real estate in order to obtain payment of the debt. This process is also exceedingly complex, and may not result in the payment of the judgment at all.

1.5.4 Expected timeframe

Enforcement can take around 12 months on average, though enforcement via immovable goods can take far longer.

1.6 Insolvency Proceedings

1.6.1 General

Belgium has three distinct insolvency proceedings:

– Liquidation
– Bankruptcy
– Composition

Insolvency proceedings are approved by the court with the goal of either facilitate payment and company continuity, or enter a no-payment situation and force the liquidation of the entity. Enforcement proceedings are suspended when insolvency hearings begin.

1.6.2 Proceedings

– Bankruptcy:

Only merchant debtors can be declared bankrupt in Belgium. A trustee will be appointed by the Commercial Court nearest the debtor and will handle all claims lodged by creditors against the debtor. These claims are split into three categories:

– Unsecured creditors
– Preferential creditors
– Retention of Title cases

When verified by the appointed trustee, claims are accepted or rejected as part of the proceeding. Disputes will be handled by the Commercial Court. After analyzing the debtor’s assets, the trustee will notify clients about the possibility of a dividend.

Liquidation:

Another commercial proceeding, liquidation sells the company’s assets in order to recover the debts owed to creditors. Liquidation must be requested by the debtor and, unlike bankruptcy, cannot be requested or forced by a creditor. A court-appointed liquidator manages the process, accepts claims from creditors, and oversees the potential issuance of a dividend. Creditors are classified either as uninsured or preferential.

– Composition:

The goal of composition is to restructure the company and allow it to continue functioning while paying off its debts and regaining a strong financial position. This is typically done under the court’s authority, and the debtor must file a request for the procedure to begin. The moratorium period lasts between 3 and 6 months, allowing the debtor time to craft a plan to pay back at least some portion of debts owed. Extensions are granted in some cases.

The plan drafted by the debtor must be approved by a majority of their creditors. If the court itself approves the plan, it will be opposable to all current creditors.

1.6.3 Required documents

We require the following documents to lodge a claim:

– Original Power of Attorney
– Copies of conditions of sales, if relevant
– Copies of invoices
– Copies of contracts, or terms and conditions

1.6.4 Expected timeframe and outcome

Insolvency proceedings take several years, largely based on how complex the process is. It should be noted that, in 95 percent of cases in Belgium, no dividend is issued.

1.6.5 Rescission in case of bankruptcy

The period between filing for bankruptcy and receiving a court approval of the proceeding is known as the “hardening period.” If creditors believe that actions have been taken by the debtor to undermine their case during this period, they can submit documentation with the court and seek to have those actions declared void. Any payments made during this period must be refunded to the trustee overseeing the case.

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