Money Management

Late Payment – How Creditors And Debtors React At Best

A delay in payment can occur quickly and unnoticed. The classic example is when you have ordered something and forget to pay the bill. Sometimes the payment cannot be made because the money is missing. Unexpectedly high expenses, unemployment or a prolonged illness leads to a reduction in income. It becomes difficult to settle all open items. A delay in payment with a reminder is the result. In case law, late payment is defined in the BGB under ยงยง 280 and 286 ff. In the legal sense, a default of payment exists if the invoice has not been paid by the due date. The due dates are specified in the invoice.

Late payments – the initiation of the first steps

When is there a delay in payment?

This question is asked by many debtors, who have an invoice in their hands and have to pay the reminder fees. From a legal point of view, a distinction is made between different reactions to late payment. If a service has been used or goods purchased, the invoice is usually issued within a period of two weeks. If the invoice is paid within this period, the due date is considered to be settled. However, according to the law, the debtor has a further two weeks to pay the

Late payment – How creditors and debtors react at best to settle the bill. A reminder in case of default of payment can only be issued after the expiry of four weeks. The default of payment then occurs automatically.

Recurring payments

The situation is different for regularly recurring payments. These payments are made to energy suppliers, among other things, in the case of payments for ancillary costs or ongoing mixed costs. If the payment is not made on the due date, the default in payment occurs immediately. The company may send a reminder immediately without waiting four weeks. Different provisions apply to credits. Call credits can be terminated immediately if an agreed instalment has not been received. Instalment credits may be reminded. Termination is only possible if at least two successive instalments have not been paid and the arrears exceed an individual percentage. The percentage rate depends on the amount of the loan.

The dispatch of reminders

Voluntary dispatch of reminders

The assumption that the creditor must send three reminders before he can take further action is legally contradicted. The sending of the reminders is voluntary. Many creditors send the first reminder free of charge. The second and third reminders are subject to a reminder fee. The creditor does not have to send reminders if he already points out the legal consequences of non-payment in the invoice. In this case, he can initiate enforcement measures after four weeks without having sent a reminder.

Reaction in the event of late payment

How to react to a reminder?

If a reminder has been written and interest has been demanded for the delay in payment, the debtor should react immediately. When the amount including the dunning charges is transferred, the claim is settled. If the amount cannot be paid in one sum due to payment difficulties, it is important to contact the creditor. It is often possible to arrange for payment in instalments. In some cases, additional costs are incurred for these agreements.

Legal consequences

What are the legal consequences of late payment?

If the delay in payment continues, the creditor can withdraw from the contract or claim damages. The procedure is described in the GTC. First, the creditor will try to get the money from the debtor. If reminders are unsuccessful, legal dunning proceedings can be initiated. If the contract is rescinded, the creditor has the right to claim damages for the lost income. In addition, the debtor must bear the costs of the dunning procedure.

The court order for payment

Conduct in the event of a court order for payment

A court order is issued without a court having to examine whether the costs have actually been incurred. If the debtor receives such a court order, he should first check whether he is really in default of payment. If this is the case, an objection makes no sense. As a rule, the creditor will initiate proceedings. If the creditor is proved right, the debtor will have to bear the entire costs of the proceedings.

The writ of execution

If the debtor does not lodge an objection, the creditor applies for a writ of execution. The amount can then be recovered from the debtor over a period of 30 years. An objection can be lodged against the enforcement order. This is useful if the writ of execution was issued unlawfully. In this case there is a chance of winning the court case.

Costs of the dunning procedure

How expensive will an order for payment procedure be?

If the order for payment becomes legally binding, the debtor must bear the costs of the order for payment procedure. This includes:

  • the sum of the basic debts
  • Interest (5 percent above the base rate, which is based on the key interest rate)
  • Costs for the order for payment
  • costs for the work of a lawyer or debt collection agency
  • Expenses which are proven by the creditor (postage, telephone calls, determination of address, etc.)

The expenses must be listed in such a way that they are comprehensible to the debtor. If legal proceedings are initiated, the debtor must also pay the court costs and the opposing lawyer. After such a procedure, the total sum can amount to a multiple of the actual debt amount.

Late payment by creditors of different legal forms

A delay in payment can have various consequences. If an invoice is not paid, the debtor bears the financial consequences. The consequences are worse if rent or health insurance are not paid. If wages are not paid because the employer is not solvent, this often has serious consequences for the employee.

Late payment by the landlord

According to the legal regulations, the term of payment of the rent is on the tenth of the respective calendar month. If the tenant has not made the payment on this date, there is a default of payment. The Lessor shall charge the costs in the form of interest on arrears. The landlord is only entitled to terminate the lease on the second missed payment. If this happens once and the tenant seeks to talk to his landlord, in most cases no notice of termination will be given. The termination can be averted by paying the rent in full for a certain period of time. An action for eviction is possible if the tenant refuses to accept the termination.

Late payment with private health insurance companies

Members of private health insurance and private supplementary insurance companies actively pay their premiums to the insurer. If the payment is not made on time, this initially leads to a suspension of the contract. This means that the insurance cover expires. This occurs if the insured is in default with two consecutive premiums.

  • Important to know:

If benefits in the sense of the Social Security Code are drawn, a suspension of the insurance contract is not permitted. In this case, the state will pay the premiums or a switch to the statutory health insurance is considered.

Late payment by the employer

A delay in payment by the employer is often a serious cut in the employee’s personal budget. Important bills cannot be settled and payment is delayed. The employee has a legal claim to the payment, which he can enforce in court. If this does not succeed because the employer is not solvent, the claims fall under the insolvency estate and in the worst case are never satisfied. The employee can do nothing more than bridge the period after the dismissal or the court case with savings, help from friends or family or with a loan.

Borrowing in the event of late payment

Taking out a mini-credit can help to absorb a temporary delay in payment. If your credit rating is adequate, it is advisable to convert the outstanding amounts into a loan. The open receivables are bundled and can be paid off in regular instalments.


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