Debt collection in Denmark
Robust debtor management is always preferable to having to collect a debt; a creditor should make the debtor understand that the agreed payment terms should be taken seriously. Consequently, when a debtor has not paid by the due date, the creditor should immediately send a payment reminder to the debtor requesting payment giving a short deadline.
If payment is not made by the end of the deadline, the creditor should as a minimum notify the debtor that if payment is not received, the matter will be escalated and legal proceedings may be issued.
2. Pre-action procedure
Once a lawyer has been instructed a pre-action letter will be sent to the debtor giving brief details of the debt owed and requesting payment within 10 days. In the event the debtor asks for further time to pay and/or to pay by instalments, it is not uncommon for the creditor to agree thereto subject to the debtor signing a “frivilligt forlig” (settlement agreement) by which the debtor acknowledges the debt and payment conditions. The advantage of a settlement agreement is that the creditor may use it to proceed straight to enforcement in case the debtor does not adhere to the payment schedule.
3. Court procedure
3.1 Small claims
Claims below DKK100,000 which are not expected to be disputed and are not based on a directly enforceable document are subject to a simplified procedure. Under this procedure a claim form setting out the demand for payment is lodged with the local bailiff’s office which, subject to a review of the claim form and subsequent approval, will proceed to serve the claim form on the debtor.
If the debtor does not dispute the claim within 14 days, the bailiff will endorse the claim form making it enforceable equivalent to a judgment.
The claimant may on the claim form indicate a preference for the matter to proceed before the ordinary court on the basis of the contents on the claim form the proceedings if the debtor contests the claim. In that event the proceedings will immediately transfer to the ordinary court under the normal process for claims upon the court’s receipt of the debtor’s basis for disputing the claim.
3.2 Cheques and bills of exchange
In case the claim is based on a cheque or a bill of exchange, the request for payment can be sent directly to the bailiff. If the debtor contests the claim and depending on the basis for the dispute, the bailiff may decide the case or, if it is considered too complicated, request the parties to go through the ordinary court procedure.
3.3 Ordinary court procedure
If a debtor fails to pay the sum due by the deadline stipulated in the letter before action or to sign a settlement agreement, the next step is usually to issue proceedings against the debtor in the district court where the debtor resides in order to obtain an enforceable judgment.
Proceedings are issued by filing a writ with particulars of claim and enclosing the documents you wish to rely on together with the appropriate court fee.
3.3.2 Court fees
The court fee is based on the amount claimed and is calculated as follows:
- DKK 500 to issue a claim of up to DKK50,000;
- DKK 150 plus 1.2% of the amount claimed is paid to issue claims of between DKK50,001 and DKK6,237,500; and
- a fixed amount of DKK75,000 to issue a claim of more than 6,237,500.
If the matter is scheduled for trial and a hearing date agreed a further court fee equivalent to the issue fee becomes due and payable.
The court arranges for the writ to be served on the debtor together with guidance notes and a deadline for filing a defence, typically two weeks from the date of service.
Following issue of proceedings many defendants fail to file a defence and against this background you may request the court to render a judgement in default of appearance.
The court manages the process and most court cases are now prepared in writing without pre-trial hearings.
Should the defendant dispute the claim, the court will direct the parties to exchange further documents and will often conduct a case management conference by telephone. The court may also encourage the parties to settle the matter at this stage.
When the court finds – wholly or partly – in your favour it will also make an order for costs which typically only covers part of the debt collection costs including court fees paid and some contribution towards legal fees.
Upon entering judgment the court arranges for a copy to be communicated to the defendant. A final judgment remains enforceable for 10 years.
The deadline for filing of an appeal is no later than 4 weeks after the judgment date and although the judgment can be enforced after the expiry of two weeks after the judgment in most cases it is more cost effective date to await the expiry of the 4th week before taking enforcement steps.
4.1 Enforceable documents
Enforcement requires an enforceable document. Enforceable documents are:
- Judgments which have become enforceable;
- arbitral awards;
- settlement agreements with enforceability declarations;
- undisputed claims below DKK 100,000 with a bailiff’s enforcement declaration;
- mortgage deeds
- bills of exchange; and
The enforcement is carried out by the bailiff at the request of the creditor.
The court fees amounts to DKK 300 for claims up to DKK3,000 and DKK285 plus 0.5% for claims exceeding DKK 3,000.
The debtor is summoned to appear before the bailiff. In case the claim is for no more than DKK 2,500 the creditor is not required to attend at the bailiff court hearing.
At the hearing before the bailiff the debtor will be questioned under oath about his/her financial circumstances to include income and expenditure as well as his/her assets against which the claim can be enforced. The bailiff will put on record against which assets enforcement can take place.
The bailiff may at his/her discretion order payment of the debt by monthly instalments over a period of no more than 10 months. Following continued non-payment the creditor may then proceed to enforcement by execution against the secured assets by way of auction.
If the debtor declares that he is unable to pay or does not own assets, the bailiff will interpret this as a declaration of insolvency. Such a declaration has the effect of granting a 6 month moratorium during which the creditor is prevented from re-initiating execution proceedings against the debtor during a period of 6 months. Other potential creditors are also prevented from initiating enforcement proceedings during that period.
If a debtor fails to attend a hearing before the bailiff for whom s/he has been summoned the creditor may then file a request to the bailiff to ensure debtor’s attendance by involvement of the police.
5. Interim measures
A creditor whose claim is not recognised by an enforceable document may wish to obtain some sort of security over the debtor’s assets before issuing proceedings.
The possibility of using so-called “foreløbige retsmidler” (interim measures) is limited. One provisional measure available is “arrest” (a form of injunction over debtor’s assets).
If an “arrest” is made on the debtor’s assets, the assets are “frozen” and the debtor can only transfer rights to these assets to a third person subject the creditor’s right according to the “arrest” declaration. The conditions for obtaining an “arrest” are:
1) The creditor must have a due claim.
2) The creditor must show that there are strong reasons for believing that the debtor will dissipate assets and thereby avoid enforcement proceedings against those assets.
3) The creditor may be required to give an undertaking to the court for payment of damages. The undertaking will normally be in the form of an unconditional and irrevocable bank guarantee from a Danish bank for the amount for which the “arrest” is requested.
4) Within 1 week after the entering of the “arrest” declaration, a justification action in the form of proceedings in respect of the underlying claim must be brought to validate the “arrest” unless the debtor consents to the “arrest” being made.
Creditors often consider threatening a debtor with a petition for bankruptcy/winding up.
To obtain an order for bankruptcy/winding up the following minimum conditions must be fulfilled:
1) The claim must have fallen due.
2) It must be uncontested that the creditor has a claim exceeding the debtor’s possible counterclaims.
3) The creditor must present a surety for the bankruptcy costs in case the debtor has no assets to cover the costs. The surety will today consist of a cash deposit of approximately DKK 30,000.
Under Danish law you should not use the bankruptcy institute as a substitute for the normal debt collection procedures unless you have a prima facie clear cut case.
Topics: Getting Started and Payments