Coronavirus Crisis FAQ on International & European Debt Collection

6 min.

Do you have questions regarding international or European debt collection from the US during the coronavirus crisis? We gathered the 9 most frequently asked questions for you in this article. Would you like to know more? Feel free to get in touch.

What questions will we answer in this article?

Do I need to change our collection approach when speaking with our past-due European customers?

We recommend that you alter your approach depending on the impact that the coronavirus crisis has had on your client. You need to find out whether the debtor is active and operational. If it is not, the longer you wait, the less likely a recovery becomes. Additional factors that you need to take into account are legal entity, industry, turnover, financial rating, age of the invoices, past attitude and future relationship among others.

It is important to identify the reason why your customer is in default. With this reason, you should be able to determine the type of customer you’re dealing with, whether it is corona-related or not. Based on this, you should be able to decide who to work with, and who you wish to take action against.

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Do I need a written confirmation from our past-due European customers?

A tip that you should always take into consideration in your debtor management process, which is especially important during this Corona time: ask your debtor to send you a proposal on how he intends to pay. Have him write down a payment proposal down on paper. An e-mail is also perfectly fine. Because a debtor has written down a proposal on paper, you have an acknowledgement of the claim. Preferably, it is better if the debtor explicitly acknowledges the claim in writing. By doing so, the debtor confirms that he owes the entire outstanding claim (and possible rent). Some debtors try to avoid this, as a payment proposal on paper is a very useful alternative.

Many debtors will now claim that they are unable to make a payment proposal, because it is unclear from what point onwards turnover can be generated again. In that case, have the debtor make a proposal, in which, for example, he pays a relatively small amount on your claim in the first three months (April, May and June), and larger amounts from July onwards. With this written confirmation you ensure that the claim cannot and will not easily be disputed at a later stage. This simplifies the collection procedure of the outstanding invoice. It avoids having to go through an expensive and lengthy procedure for an unjustified dispute. Especially if the debtor truly cannot pay.

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My debtor has been hit hard during by the coronavirus crisis. I’m very concerned that they will declare bankruptcy sooner than later. What should I do?

It is highly advised to act immediately. If you have a dispute, try to solve it as soon as possible. Try to arrange a payment plan, even if that means taking a discount. As it looks like we are heading towards a recession, it is likely that many companies will no longer be able to fulfil their payment obligations.

You may also consider a final discharge or a return of goods while your debtor is still operating. Try to call your client and discuss the matter. Communication is key. We also recommend verifying your contract/terms and conditions. See if a retention of title clause may apply.

Additionally, we advise consulting with legal counsel as in some jurisdictions, transactions that take place before the bankruptcy are considered suspicious and can be annulled following the claim of the liquidator (most notably applicable in Germany).

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If my customer does declare bankruptcy, is there anything I can do and how quickly do I need to act?

You can lodge your claim. The time to lodge the claim varies per country. Speak with legal counsel to check if a retention of title clause may apply.

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For my customers in Europe, do I need to extend the due dates on my invoices from say net 30 to net 45 or 60?

We do not recommend extending due dates for future invoices as this might become the new standard for the future, a situation you likely want to avoid. We do recommend finding solutions in terms of payment plans, including an upfront reduced payment or prolonging payment terms. The only time we advise to extend due dates is on a case by case basis, or if your customer can prove the impact they took from coronavirus crisis. It is essential to ask for and to receive a payment plan in writing, or over email. In Europe, payment plans can be used in either the collection or legal phase as a recognition of debt.

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My customer in Italy is 90 days past due and keeps saying they will pay once they become operational. What do you suggest we do?

If your customer is past due 90 days at this stage, your customer likely had severe problems in the past and it will not get better. In those situations, it is recommended to speak with legal counsel to resolve the matter amicably.

Alternatively, we recommend that you do due diligence on your customer and look at a variety of parameters to have a fair judgment on their situation. If you can agree to their request, always ask for and receive a payment plan in writing, or over email. It is also advised to ask for a reduced upfront payment. This is to test the goodwill of your client.

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Currently, can we enforce our Force majeure provision in our standard terms and conditions?

This depends on the underlying contract and general terms and conditions on how it was specified and whether your client agreed to your terms and conditions.

For international trade of goods, the Vienna Convention for the international sale of goods applies and therefore is a possibility for Force Majeure. If invoked, you are obligated to inform your client within a reasonable time frame. Before invoking this, we recommend you communicate with legal counsel.

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We have a few scheduled court hearings against our European customers in the coming weeks. Are all the courts in Europe postponed and for how long?

Unless your case is considered an urgent matter, your case will be postponed until the courts get back to normal operations. However, in the Netherlands, bankruptcy proceedings that are commonly used for collections are currently still working. For more information on European Courts please see this article: "Judicial debt collection and the coronavirus: the status of European courts".

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We’d like to take legal action against a certain French customer. If the courts are postponed, what are our available options?

Legal actions can be taken as France offers the opportunity to serve documents. To clarify, documents are officially notified through a bailiff. This is the case if you commence legal action against a corporation in France. Your case will take an extended amount of time before it will be treated. Note that even though courts in France are currently postponed, you can start a legal procedure by notifying the document to the opposing party. We recommend communicating with legal counsel to see if issues can be resolved out of court.

We have an important court date coming up in the Netherlands, we still don’t know if it is going to happen or not. If it does, is there a restriction on who can attend the court hearing?

Usually, court hearings are public. Due to the coronavirus crisis, courts and judges might impose restrictions on the number of people allowed in the courtroom. Also, they may resort to solutions such as video conferencing. For more information on Dutch Courts please see this article: "Judicial debt collection and the coronavirus: the status of European courts".

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