Do you have unpaid invoices on your desk? According to IPSOS, over 89% of businesses have dealt with a similar problem. And one in five have even experienced a situation where their invoice was not paid at all. Have you been in a similar situation? We’ll advise you on how to deal with overdue debts so that you can get your money back as soon as possible. What is the procedure and what to look out for? That’s what we’ll focus on in today’s article.
Debt recovery usually has three main steps:
sending a pre-action notice to the debtor,
filing a lawsuit or an application for an order for payment,
recovery of the debt through execution.
In most cases, the dispute is resolved after the first notice. If the debtor fails to pay, the creditor can file a lawsuit and, after obtaining a final decision, apply for enforcement.
If you want to resolve the debt quickly and without error, we can prepare and send a pre-suit notice to the debtor for you.
IPSOS conducted a survey with a sample of 305 businesses to find out how they deal with invoice problems. The survey included both companies with up to 50 employees issuing invoices to B2B clients (other companies) and self-employed persons.
According to a study by Dun & Bradstreet, only approximately 59% of invoices in the Czech Republic were paid on time in 2023. The rest of the payments are paid late or only after a creditor’s urging. In addition, according to SOLUS, approximately 4.8% of the adult population in the Czech Republic had overdue debts registered in the registers.
We know it’s too late to chase the bull, but we see prevention as step zero. In practice, we have seen many times that small tradesmen in particular do not negotiate contracts in writing or require any confirmation of the negotiation or delivery of goods. By doing so, they create the preconditions for themselves that the payment of the invoice may not take place.
Tip: Don’t know how to write a work contract? Read our article with 12 points that every work contract should contain.
Collecting a debt through our service will usually guarantee you a faster, more efficient and significantly cheaper solution. You’ll save yourself weeks or months of pleas and reminders to pay, and usually save on costly court settlements.
In our experience, we know that a high percentage of debt collection cases are resolved by the pre-suit demand for payment of the amount due.
Although sending a pre-action notice is not a condition for filing a lawsuit, if the creditor fails to send it at least 7 days before the proceedings are initiated, the court may decide not to award costs under the Civil Procedure Code.
Before sending a pre-action notice, it is advisable to check the debtor in the relevant registers to see if he is insolvent or in multiple execution. In such cases, recovery of the debt would be considerably more complicated. However, in our article we will continue to work with the option that your debtor is sufficiently well-off and it is within his/her means to pay the claim.
There are several statutory requirements which, if omitted, could deprive you of an award of legal costs. In the event of a successful claim, the debtor will pay your solicitor’s costs for you. So what should you not leave out in a pre-action notice?
Send the pre-action demand for payment to the debtor’s last known address. In the event of legal proceedings, it is not necessary to prove that it was served. Proof that it was sent is sufficient. We still recommend sending it by registered post to be on the safe side.
At this stage, however, it is already worth considering whether it is worth having the pre-action notice drawn up by a lawyer. Not only will you avoid mistakes that could cost you more in any legal proceedings, but a notice drawn up in this way also has a greater psychological effect.
Not only that, but the demand contained in the summons must correspond exactly to the subject matter of the action, i.e. the legal claim. This is where a lot of people make the mistake on the basis of which the court may not award costs. This can lose you a lot of money.
In our practice, we find that once a solicitor has signed the summons, it radically increases the likelihood that the claim will be paid at that point. We have repeatedly had counterparties who have dealt with several debts end up paying the demand notice sent by our solicitors in priority.
Tip: Read this article on when and how to file a pre-suit notice.
Most often, the counterparty is interested in agreeing on a repayment schedule or a partial remission of the debt with a condition precedent. The third way is to conclude a settlement agreement, where the existing obligation is cancelled and replaced by a new one.
In any case, the debtor must acknowledge the debt in any agreement. It may happen that, despite your efforts to resolve the debt out of court, this does not happen and a poorly drafted agreement would make your position in court proceedings much more difficult.
Tip: You can download a free sample settlement agreement on our website.
However, we are reaching a point where the debtor does not voluntarily pay the debt or the dispute is ultimately not resolved out of court. In this case, you have no choice but to go to court.
The filing of a lawsuit and the subsequent court proceedings raise a number of issues. We will try to answer the questions that we most often address with our clients when they are about to go to court to collect a debt. What are they?
A lawsuit is generally filed in the circuit court located where the debtor resides or has a principal place of business. Of course, you must produce all documents, contracts, emails and other documentary evidence that shows beyond doubt that you have an existing claim with the debtor that he or she has still not paid you.
An application for an electronic order for payment is a specific type of electronic claim. To apply for it, you usually only need to have a signed contract with the debtor or a confirmed invoice for the delivery of certain goods or services in your hands.
Its advantages include faster processing compared to traditional court proceedings and, of course, lower court fees = 4% of the amount instead of 5% for traditional court proceedings.
The court orders the defendant to pay the claim within 15 days or to file a statement of opposition within the same period. If the defendant does not lodge a statement of defence, the entire court proceedings end.
If the defendant does not lodge a statement of opposition within the 15-day period, the order for payment becomes final and enforceable and has the same effects as a final judgment.
However, in the event of a statement of opposition, a hearing shall be ordered. This route is definitely recommended. We recently had an order for payment in our hands less than a week after the application was filed! So it really is very quick.
It may not be a clear disadvantage, but the debt to be recovered must not exceed CZK 1,000,000. The second disadvantage is that the electronic order for payment must be delivered to the debtor by hand. Especially for notorious debtors, this can be a problem.
In case of non-delivery, the court will automatically cancel the electronic payment order and the claimant will lose the possibility of a quick resolution. However, even in these situations it makes sense to file an application for an order.
The court fee and the cost of a lawyer must be taken into account . If you are unsuccessful in the court proceedings, you must calculate the costs of the other party.
However, this is the advantage of an experienced lawyer who can assess your chances before the court proceedings begin and, if necessary, recommend that you withdraw the claim.
The very act of filing can be a psychological tool. However, success can never be predicted one hundred percent. As experienced lawyers say, going to court is like going to sea.
It always depends on the amount of the claim. For amounts up to CZK 20,000, the court fee is CZK 1,000. If you are recovering a debt between 20,000 and 40,000,000 CZK, the court fee is 5% of the amount. For an electronic payment order, the fees are lower and of course the law also provides for cases where you are exempt from the fees.
Don’t despair. Anything can be used as evidence in court and even an acknowledgement of debt in an email or in front of a witness can stand. However, a well prepared written contract is obviously a better starting point. An electronic payment order will always be issued by the court when the claim appears to be justified from the petition, it is usually sufficient to base it on invoices and relevant correspondence.
This is a question with an unclear answer. It always depends on the particular court and its caseload. Thus, the length of the proceedings can range from a few months to several years. The defendant’s activity is also a factor.
“I contacted the Affordable Advocate for help with a defaulter. The Affordable Advocate advised me on how to proceed. Our dispute went all the way to the courts, where the Affordable Lawyer represented me. I won the case and I can highly recommend the services of this website.” Štěpán Mičunek, managing director of HVFree s.r.o.
Unfortunately, there are also situations where you succeed in court proceedings but the defendant fails to fulfil its obligation as stated in the court decision. In such a case, there are two possible options – enforcement of the judgment through the court or an application for enforcement through a bailiff.
In the case of the second option, there are many models of enforcement motions circulating on the internet. However, no one can guarantee their completeness and accuracy, so it is advisable to consult a lawyer in this case.
The execution application is filed through the bailiff. The bailiff is nowadays usually appointed according to the local jurisdiction of the debtor by a random allocation system – you can find a list on the website of the Chamber of Executors.
A search on the internet will bring up a number of collection agencies. We are not going to evaluate their procedures here, which were the subject of an interesting article on iRozhlas.cz. You can use their services only in the case of out-of-court debt collection, otherwise it would be unauthorised legal services – so-called collection, which is an offence or even a criminal offence under the Advocacy Act.
In the case of a law firm, you are guaranteed professionalism, legality and the possibility of obtaining the so-called “surcharge” (the lawyer’s fee for legal services rendered), which is usually awarded to the creditor by the court in the event of a successful court case. In the end, the debtor has to pay you not only the claim but also the amount of the lawyer’s fees.
Tip: If you want to have your claim resolved as soon as possible, the Available Advocate will send a pre-action notice to the debtor within 3 days.
There is a lot of misinformation about how debt collection and debt recovery works. In most cases, however, it is neither complicated nor that financially and psychologically demanding. In a significant number of cases, it is resolved at the first act in the form of a pre-action notice. But don’t worry about a potential lawsuit either. Thanks to the representation of a lawyer, you will be perfectly prepared for everything, and in the end the debtor will pay his fee anyway.
If a debtor fails to pay an overdue debt, the creditor can take several steps: first, the debtor can be asked to pay, ideally by means of a pre-action notice, which will alert the debtor to possible legal proceedings and may avoid further costs. If the summons does not help, the next step is to file an action or application for an order for payment with the court, which may decide without a hearing and order the debtor to pay the debt. If the debtor still fails to pay, the creditor may, after obtaining a final decision, initiate enforcement proceedings through a bailiff. When pursuing enforcement, it is important to have evidence of the existence of the debt (for example, a contract, invoices or communication with the debtor) and to monitor the limitation period, which for most debts is three years from the due date. A timely and correctly chosen procedure can significantly increase the chances of successfully recovering the debt and often leads to payment of the debt before court proceedings are initiated.
It depends on the solution. If the debtor pays after the pre-action notice, the debt can be settled within a few days or weeks. If it is necessary to file a lawsuit and then start foreclosure proceedings, the whole process can take several months or years.
When filing a lawsuit, you pay a court fee, which is usually 5% of the amount recovered (at least CZK 1,000). If the creditor wins the dispute, the court will usually order the debtor to pay these costs and the costs of legal representation.
Yes, but it’s more complicated than that. You can also prove the debt with other evidence, such as invoices, email communications, an order or witness statements. The less evidence there is, the more difficult it can be to litigate in court.
If the debtor has no traceable assets or income, foreclosure may be unsuccessful. However, the claim is usually not extinguished and can be recovered at a later date, for example if the debtor’s financial situation improves or he acquires assets.
According to the Civil Code, the general limitation period is three years after the debt is due. If the creditor files a lawsuit within this period, the statute of limitations is interrupted and the debt can continue to be collected.
A lawyer can help, in particular, with the preparation of a pre-suit notice, filing of a lawsuit or an application for a payment order. A properly chosen procedure can increase the chances of prompt payment of the debt while minimizing the risk of procedural errors.
Collecting a debt through our service will usually guarantee you a faster, more efficient and significantly cheaper solution. You’ll save yourself weeks or months of pleas and reminders to pay, and usually save on costly court settlements.
Ondřej is the attorney who came up with the idea of providing legal services online. He's been earning his living through legal services for more than 10 years. He especially likes to help clients who may have given up hope in solving their legal issues at work, for example with real estate transfers or copyright licenses.
In person and online. Just choose the appropriate service or opt for an independent consultation when you are unsure.
