Germany is EU’s most prolific economy and thanks to this economic stability many individuals and companies access loans which enables them to purchase properties, respectively expand their business operations. However, their solvability is not entirely connected to the country’s economic stability which is why financial problems can lead to failure or repaying the loans they have accessed. One of the most recent examples in this sense was the economic crisis registered in 2008 which still has effects on some debtors.
Loan recovery in Germany is solutioned as any other case of debt collection, and creditors can request the services of debt collection agencies or law firm. With a vast experience in various cases, our debt collection lawyers in Germany can also help in loan recovery situations.
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Legislation applicable to obtaining a loan in Germany
Loan recovery in Germany is based on a set of laws which must be respected by the creditors, but also by the debt collection agency or law firm which will handle the procedure of collecting the debt.
The main law when obtaining a loan in Germany is the Civil Code which provides for entering a contract which also includes credit contracts. Also, under the Banking Act, only licensed financial institutions can approve and grant various types of loans to clients.
When it comes to clients who can no longer pay their loans, financial institutions have the right to recover the money they are owed through a debt collection agency in Germany or a law firm specialized in such matters.
Loan recovery outside a German court
There are two debt collection methods available in Germany: the amicable or extrajudicial procedure and the legal proceedings which are completed in a court of law.
Loan recovery in Germany can be started in an amicable way by the financial institution, however, most of the times, these will request specialized services from an agency or debt collection lawyers in Germany. The stages of amicable loan recovery in Germany are:
- the first contact with the debtor during which he/she is informed about the outstanding amount of money;
- then, the agency or lawyer must send at least 2 or 3 dunning letters to the debtor in which he/she is asked to pay the remaining amount of money;
- the agency or law firm can also try to contact the debtor by email and/phone during this stage of the loan recovery;
- if the debtor answers, an amicable settlement can be established and the new terms for the debt can be created;
- if the debtor fails to answer, the amicable procedure can be transformed into a legal proceeding which means a judge will rule in such a case.
Mediation is often met in debt collection in Germany, especially when it comes to commercial loan recovery. It must also be noted that most credit contracts are insured in Germany, however, financial institutions have the right to recover the money they are owed.
Our debt collection lawyers in Germany can explain the rights of both creditors and debtors and can assist in amicable procedures related to loan recovery.
Court loan recovery in Germany
As mentioned above, if the amicable loan recovery fails to render any results, it is the creditor’s right to take the case to court by filing a petition in this sense.
Debt collection with a German court is often lengthy, however, the results are definitive.
Loan recovery in court can be completed in two ways: in an accelerated procedure which implies obtaining an enforcement order which, if not appealed in a few weeks by the debtor, can be enforced immediately, or in a civil proceeding which implies the following steps:
- the claimant will first need to file a petition in which the case is presented to the court;
- the judge will then send a notification in which the action against him/her is brought to the attention of the debtor;
- both parties are then invited to submit evidence to sustain their cases, in this case, the defendant can present his/her situation;
- in debt recovery cases, the court will hold at least one hearing, however, it is possible for more hearings to be held;
- the judge will issue an order for payment proceedings and an enforcement order for the debt to be recovered.
It is important to note that the seizure of assets is a possibility if the debtor fails to comply with the enforcement order issued by the judge.
For assistance in loan recovery, you can rely on our debt collection lawyers in Germany, so do not hesitate to contact us. We will explain every phase of the amicable or court procedure, but most of all we will try to settle any debt collection case in the shortest time possible.