Debt collection in Luxembourg

The debt collection procedure in Luxembourg begins with an assessment of the debtor’s solvency, his field of activity, the history of the company, the availability of documentary evidence of the debt, current court cases and enforcement procedures, as well as the possibility of challenging the debt. This assessment determines the strategy that will be used on behalf of the client during the collection process.

If the debtor does not have current court cases or outstanding court decisions on debt collection, and he is actively engaged in commercial activities, then it is advisable to use the stage of out-of-court debt collection.

This stage involves active negotiations with the debtor to reach an agreement to pay the creditor’s claims or other possible settlement options (for example, return of goods, transfer of debt to a third party, exchange of services or goods).

Interaction with the debtor begins immediately after sending the notification by mail, email, telephone or instant messengers. This process involves intensive communication with the debtor in order to apply constant pressure. The main task is to establish contact with key decision makers to achieve speedy debt repayment.

The average time for unofficial out-of-court collection is up to 60 days (except in cases where an installment plan for debt repayment has been agreed upon). If this stage does not bring the expected results, or after an initial analysis it becomes clear that it is not applicable, you should proceed to recovery through the court.

Before initiating legal action, you should pay attention to the statute of limitations. The statute of limitations for civil disputes is 30 years, and 10 years for commercial disputes. The legislation does not provide for the possibility of changing the specified limitation periods by agreement of the parties. The consequences of missing the limitation period are applied by the court only if the defendant declares this. The limitation period is interrupted if the debtor acknowledges the debt, for example a written acknowledgment of the debt. After the interruption, the statute of limitations begins to count again.

Luxembourg law provides for judicial collection of debt in the form of general proceedings and by issuing a payment order.

General court proceedings are carried out by filing a summons to the court to summon the defendant, after which the court summons the defendant and prepares for the consideration of the dispute. From the date of receipt of the summons, the defendant has 15 days to appoint a lawyer (in commercial cases heard by district courts, the appointment of a lawyer is not mandatory). The exchange of objections and documents occurs only through the parties’ lawyers. Copies of such documents are transferred to the court registry with confirmation of delivery to the opposing party. In this regard, after the defendant has appointed his lawyer, he is obliged to notify the plaintiff’s lawyer. Before completing the exchange of documents and objections, the parties provide the court with final conclusions according to which their dispute will be considered. Otherwise, they are deemed to have waived them and the court will make a decision only on the basis of the last objections filed. The provision on final conclusions does not apply to simplified preparation.

It should be taken into account that, at the request of the defendant, the plaintiff is obliged to provide guarantees of payment of costs and damages in the event of an unlawful claim. Claimants who are domiciled in the territory of: a member state of the European Union, a member state of the Council of Europe or a state with which Luxembourg is bound by an international convention that provides for exemption from such a guarantee are exempt from providing these guarantees.

After receiving the final conclusions, the chairman of the court sets the day and time for the consideration of the case. On the appointed day, the case must be transferred to the chairman of the chamber for the appointment of a magistrate to investigate the case. The judge sets the deadlines necessary for the investigation of the case gradually, taking into account the nature, urgency and complexity of the case and after ascertaining the opinion of the lawyers. After completion of the investigation, the judge declares the investigation closed and sends it to the chairman of the chamber to organize the subsequent consideration of the case in court.

For cases where the value of the claims does not exceed 100,000 euros and in which only one plaintiff and one defendant are involved, simplified preparation of the case for consideration is provided.

No later than eight days before the start of the hearing scheduled to consider the pleadings, the parties’ attorneys must inform the court in which the case is pending in writing of their intention to conduct the case. Otherwise, the parties shall be deemed to have established their case at the oral hearing, and their counsel shall be excused from appearing at the hearing scheduled for that purpose. After considering the debate, the court makes a decision, which comes into force after the deadline for appeal has expired.

Disputes amounting to up to 15,000 euros are considered by magistrates’ courts. If the amount of the claim exceeds 15,000 euros, the case must be heard in the district court. The decision of the magistrates’ court can be appealed to the district court, and the decision of the district court to the High Court. The appeal must be filed within forty days from the date of service of the decision. At the appeal stage, only lawyers have the right to represent the parties and make decisions on their behalf. Filing an appeal suspends the entry into force and execution of the contested decision. As a result of consideration of the appeal, the appellate court makes a decision, which comes into force from the moment of its announcement.

The procedure for issuing a payment order is applicable to claims for the collection of a sum of money not exceeding 15,000 euros. To implement this procedure, you must submit an application to the magistrate with documents confirming the debt. If the demand seems justified to the magistrate, he issues a conditional payment order demanding payment of the debt and hands it to the debtor. From the date of delivery of the payment order, the debtor has 30 days to file objections. An objection filed within the prescribed period in relation to all or part of the claim suspends the procedure for executing the payment order. In the event of a dispute, each party has the right to request a hearing. If, as a result of the debate at the court hearing, the defendant’s objection is considered justified, the magistrate will note this in a reasoned decision and declare that the conditional payment order issued by him is considered invalid. If the judge decides that the objection is not justified, then the payment order becomes a final decision that is subject to execution. If there is no dispute and after the thirty-day period allowed for the debtor to file an objection, the creditor may request that the conditional payment order be enforced. The magistrate considers such a request from the creditor and, after verifying compliance with the established procedure, makes a final decision. Once a payment order has acquired the force of a final decision, it can be submitted for enforcement within six months. After the expiration of the specified period, the payment order is considered invalid.

After the judgment comes into force, the creditor should initiate enforcement proceedings. As part of the enforcement of a court decision, the creditor’s claims can be satisfied by seizing and writing off funds from the debtor’s accounts; seizure of movable and immovable property of the debtor with their subsequent sale; seizure and sale of securities; arrest and confiscation of company shares; seizure of fruits (six weeks before normal ripening); arrest and confiscation of the debtor’s property, which is in the possession of third parties.

If the debtor has signs of bankruptcy, the option of bankruptcy proceedings for the debtor should be considered. According to the Commercial Code, a debtor who stops making payments and whose credit history is damaged is in bankruptcy. Within the framework of this procedure, provided that the debtor’s assets are absent or insufficient, it is possible to challenge and invalidate the debtor’s transactions made before the opening of insolvency proceedings. Among such transactions, it should be noted, for example: transactions for the transfer of movable or immovable property free of charge, as well as actions, transactions or contracts, paid or gratuitous, if the value of what was transferred by the debtor significantly exceeds the value of what he received in return; all payments on debts that are not yet due; any actions or payments made by defrauding of creditors.

In addition, if the bankrupt or the legal and actual managers, whether connected or not, visible or hidden, remunerated or not, whether in office or retired from the company at the time of the declaration of bankruptcy, contributed to the bankruptcy by serious and characteristic misconduct, then the court has the power to prohibit these persons from carrying out, directly or through an intermediary, commercial activities, or from performing the functions of an administrator, manager, commissioner, auditor of the company, approved company or any similar function. The duration of the ban cannot be less than one year and more than twenty years.

If you have any questions or need support with international debt collection in Luxembourg, our company is ready to provide our expert assistance to effectively resolve your financial issue. Contact us to receive additional information and professional support from specialists of the leading debt collection agency.

# DEBT COLLECTION AGENCY LUXEMBOURG

26.07.2024

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