Debt Collection in Italy: What it is and how it functions. When one should seek an out of court settlement and when it is necessary to turn to the courts.
The aim of debt collection is to recover (total or part of) the debt from the debtor. There are two means of debt collection: by extrajudicial means or by means of the court.
Debt Collection in Italy via Extrajudicial Means
Debt collection by extrajudicial means represents the first stage of the process. The purpose of this phase is to exhort the debtor, in a benevolent manner, to settle their debt.
It is important to note that this is a very important stage, because this often means that the matter can be resolved without requiring the courts.
It allows time and money to be saved because the debt does not have to be collected via judicial means.
How does it work?
The first step is to collect all the necessary information concerning the claim, if there is a contract or a written agreement between the parties, invoices, checks and promise of payment etc.
Based on the information collected, we can prepare a letter of reminder with which we exhort the debtor to settle the debt within a certain time frame.
The purpose of this letter is to determine whether or not the debtor is prepared to pay the amount that is due, or if there are any objections on their part.
In the event of the debtor failing to reply, we supply a second letter of exhortation, containing a warning and a formal notice. This letter offers the last opportunity for the matter to be resolved outside of the courts.
Furthermore, the formal notice has important consequences: it suspends the credit regulation and determines the effective beginning of default interest.
If the debtor declares themselves prepared to pay, we compose a written binding agreement between the parties.
If the debtor refuses to pay or disputes the claim and an agreement cannot be reached, we will have to turn to the courts, to intiate the judicial phase.
Debt Collection via judicial means
Before beginning the judicial proceedings agains the debtor, it is advisable to determine the debtor's solvency, this means one should determine if the debtor is able to meet the financial demands.
Thus first of all, we will conduct some research into their financial capabilities, the budget and the capital of the debtor: if they own real estate or registered mobile assets (motor vehichles, motor cycles and boats etc) if they earn a salary, or if they have a bank account etc.
This is a fundamental intial step, in order that well founded judicial proceedings can be brought agsinst the debtor, to ensure that the proceedings have a reasonable chance of succeeding.
As a matter of fact, if the debtor does not have the sufficient economic means to meet the debt, bringing court proceedings against the debtor would be a waste of time and money, because the legal action cannot be successful.
What means can be undertaken?
This depends on the offical documents on which the credit is based.
- In cases of official credit
documents (checks or promissory notes), this becomes
payable at a deadline.
In cases of a failure to pay, one can immediately initiate an injunction and, if necessary, with an executive order (the repossession of goods), the acqusion of goods by force from the debtor.
- In cases of the debt being covered by offical documents as stated in 1), but are covered by documentation (for example invoices and written agreements etc) it is possible to request a decreed injunction. A decreed injunction is an order delivered by the judge without the defendent being present, based on the documents presented by the creditor, it is ordered if the documents are received relatively quickly and are regarded as sufficient.
Once the injunction is issued, the creditor has to notify the debtor.
They will have forty days to:
- to oppose it. In this case, nomal court proceedings open, which will conclude with a sentence that either confirms or rejects the decree.
If the the debtor opposes and/or does not pay within the deadline, the creditor can begin executive proceedings (an injunction,the forced repossession of goods and the forced sale of goods), and so enforcing the decreed injunction.
In some cases as determined by the law, the judge can order the decree to have immediate effect and to be provisionally carried out.
In these cases the creditor can proceed immediately, without having to wait forty days, to notify the debtor with an injunction before beginning executive proceedings.
The executive procedure to collect debt
As a result of this proceeding the debtor is deprived forcibly of their goods. The first order is the forced acquisition of goods, which is carred out by a bailiff.
Before the reposession of goods is the act of precept. This is a formal act with which the creditor orders, by means of the bailiff, the sum of money due.
The debtor has ten days, from the notification of the order to pay the amount indicated. In absence of the amount due, once ten days have passed, the creditor will carry out the injunction through the forced repossesion of goods.
There are different types of the repossesion of goods by force.
- The repossession of real estate: the debtor's immobile objects. These can be seized and sold or assigned to the creditor.
- The repossesion of mobile assets: the debtor's mobile objects. these too can be seized and sold or assigned to the creditor.
- The repossession of mobile registered assets: the debtor's registered objects: motor vehicles, motorcycles and boats etc.
- The repossession of goods from a third party, the sum of the debt can be seized given there are offical documents that determine the third party's debt to the debtor (salary, annuity and different forms of credit). In this case the executive procedure involves the third party, the debtor of the debtor.
With regard to debt collectionit is also very important to be aware of legal rights.
If too much time lapses from the moment the creditor's right is asserted to when the creditor attempts to recover the debt (with a letter of reminder of warning) one risks not being able to acquire the due amount according to law.
The limitation period of the claim varies according to the type of credit and the offical documents upon which the debt is based.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.