November 21, 2022
In commercial and business relations a common problem is non-payment or late payment of invoices for already performed services or activities. When it comes to such situations between partners from different countries the debt collection is more complicated due to communication difficulty or due to lack of knowledge of the legislation of the foreign country.
How does the debt collection work in Italy? What are the creditor’s options in such situation and what can be done in case of refusal for payment?
First of all, in order to proceed with the collection of due amounts, the claim must be:
– Certain – there must be enough proof for the existence of the claim;
– Liquid – the debt amount must be clear or can be determined;
– Due, payable – the term for the payment must be expired.
The stages for the debt collection are out-of-court phase and judicial phase.
It is always recommended to try, first of all, to claim the debt out of court in order to possibly avoid a long and expensive process, shorten the time to obtain the amounts due and to reduce the risk of the debtor insolvency, liquidation or bankruptcy.
At this stage, the creditor should send a formal invitation for payment giving the debtor a short term for execution which in Italy is usually between 7 and 15 days. The letter should be sent by registered mail or by certified mail address (pec – posta elettronica certificata). This is necessary in order to interrupt the debt prescription, to fix the moment from which the default and the legal interest are calculated and as a base and proof in possible judicial proceeding.
With the end of the term given in the invitation the creditor could face the following situations – 1) fulfillment of the obligation; 2) rejection and refusal for payment of part of the debt; 3) refusal for payment of the entire debt; 4) lack of response.
In case of refusal for payment of part of the sums or the whole amount before the proceeding in front of the Court the creditor has another option – to start negotiations with the aim to settle an agreement.
This moment has a particular importance because although it could not satisfy the claim at 100% it allows to reject the debtor’s counterclaims and at the same time to obtain a partial payment in a short time avoiding long lawsuits, court costs and legal fees and, lastly, reducing the risk of insolvency, bankruptcy, or unsuccessful enforcement proceedings against the debtor.
If the negotiation ends with solution acceptable for both parties it should be finalized with a settlement agreement (accordo transattivo) with which the parties declare to settle the dispute or provide a release or waiver of claims. The agreement also fixes a short term for the debtor to fulfill his obligation and in case of breach the agreement is no more binding.
In the case of collect failure on the out-of-court stage – lack of payment, lack of consensus on the disputed topics and impossibility to settle an agreement the creditor has no other option but to start a judicial procedure.
The judicial proceeding can be held in two different ways depending on whether the claim is based primarily on documents (invoices, checks, bank statements, etc.) or it is more difficult to prove it.
In the first case, the creditor has the possibility to start a quick procedure for debt collection (procedimento monitorio, ricorso per decreto ingiuntivo). This procedure avoids the ordinary court procedure allowing the judge to order an injunction based only on the examined documents without the necessity of court hearings and if the motion is granted the debtor is obligated to pay within 40 days.
What’s more, there is such quick procedure for injunction also for cross-border commercial matters within the EU (decreto ingiuntivo europeo) which allows the creditor to ask the competent judge where the debtor is based or in some cases the judge of a different Member State to order the payment of the requested sums.
If the debtor does not fulfill the obligation within the 40-day period the injunction becomes enforceable and the creditor can start an enforcement procedure.
In case the defendant files an opposition within the 40-day period – opposizione a decreto ingiuntivo the procedure turns form quick to ordinary one.
The ordinary procedure, which can take up to 2 years, is the only option in case the commercial matters and disputes are more complex.
In conclusion, in case of unpaid invoices and other debts it is very important for the creditor to check in advance the possibilities for an out-of-court solution in order to avoid the costs for the possible legal proceeding and at the same time to obtain part or all the debt.
If the debtor is a legal entity with sufficient assets the judicial stage may be the best solution for the complete satisfaction of the claims.
Of course, each case is different and it is highly recommended to consult your trusted attorneys in order to choose the best strategy for the debt collection.