Debt recovery: what’s important to know and how to successfully recover your money?
It is not only ordinary people who cannot avoid debt, but also businesses. Higher debts can melt our nerve cells and sometimes even make us panic. But the latter will not help: you need to make a plan of action to recover your debt and move patiently towards success. So what is important to know about the debt recovery process and how to make it as successful as possible?
According to statistics, around 1 in 10 (9%) of Lithuanians have debts for which debt collection companies have contacted them. The success of debt collection procedures is enhanced by the fact that they can be carried out indefinitely [1].
Statistics provided by the Lithuanian Chamber of Bailiffs [2] also show that the amount of sums recovered by bailiffs continues to grow: in 2023, bailiffs successfully recovered and repaid €280.3 million of debts to creditors. This is a quarter – 25% – higher than the amount recovered in 2022. Another €226.8 million was recovered by bailiffs from people and businesses in 2023, an increase of 18% on 2022. So the trends are very favourable for those who want to recover debts. But what should be done, where to start?
Communication, gathering all possible information about the debtor
The first essential component of the debt recovery process is communication and cooperation with the debtor, whether a person or a company owes the debt. Before contacting the client, be sure to gather all the information about the debt: whether a contract for the sale of goods or services was concluded, which clauses were breached, and whether the client was subject to any penalties for late payment, such as interest or other penalties.
Be sure to find out the reasons for the delay in repayment, when the debt can be expected to be recovered and whether there is any realistic prospect of recovering the money at all.
It is also important to try to gather as much contextual information as possible: the debtor may have other debtors who owe money, some of them may have already gone to court to collect the debt, the debtor may have already had his assets seized or been declared bankrupt, etc.
This information will be useful for you when trying to resolve the situation, to adequately assess whether the debtor can repay the debt to you without the involvement of third parties.
Concreteness searches
Debt recovery, especially if you are not experienced and knowledgeable in this area, can be a very long and tedious process. Often, when you ask the debtor to specify when he or she intends to pay (in full or in instalments), you will hear phrases like “next week”, “next month”, “as soon as we have the funds”, etc. Such promises are very abstract, so try to put the debtor in a more constrained frame. The debtor must be sure to give an exact date when he/she intends to take real action.
For example, if you have spoken to the debtor on the phone, write down the main points of his/her promises (date, amount to be repaid, etc.) and send him/her an email to confirm.
If the debtor has informed you of the expected repayment date by email, on the day of repayment, if you have not received the instalment, make sure you call and ask if the debtor has forgotten his promise, etc.
So don’t let the debtor forget you
Although calls or emails are distracting and time-consuming, it is still a good idea to call the debtor regularly to ask what’s new, if he has taken any measures to settle the debt, and finally, to ask if his financial situation has improved or if there are any positive developments shortly (a new deal, contract, etc.).
By the way, if the whole process goes to court, letters and phone records from the client (although it is necessary to inform the client of the recorded conversations) can help to substantiate that the information you are providing is correct, and is one of the ways of proving that the debtor has a financial obligation to you and acknowledges it.
Be more flexible and willing to negotiate
One of the keys to success is to be more flexible and allow the debtor to negotiate the repayment terms. For example, a debtor may not be able to repay a large amount at once (€10,000 or more), but if you agree to repay the debt in instalments over some time (6-12 months or more), it is likely that the debtor will have a different attitude towards the debt and will eventually be willing to take the step of making the payments into your bank account.
Try to remain diplomatic and calm
Debt recovery is not a pleasant process for both parties. Everyone wants to be paid for goods or services sold or to get back money they have borrowed. Sometimes high-value debts can cripple a business, hinder the achievement of goals and put it in an unenviable position. However, despite these difficulties, you should still try to deal with debtors tactfully, courteously and non-combatively. So, before your next conversation, relax, calm down and take a few deep breaths.
Try not to reproach the debtor, but listen to what he/she says, ask if any details of the conversation were unclear, etc. Remember that when/if the debtor’s situation starts to improve, your more positive communication may lead the debtor to look for ways to meet his/her obligations to you more quickly.
Debt recovery: when should I go to court?
There is no clear-cut answer as to when judicial debt recovery and the assistance of professional lawyers is necessary. It all depends on the following circumstances:
- the specifics of the business;
- the size of the debt;
- the costs associated with debt recovery;
- the documentation available to substantiate the debt;
- the debtor’s willingness to cooperate;
- the debtor’s financial situation, etc.
Professional debt tracing: it is better to apply earlier than when the debt is long-standing
If the debtor avoids answering calls, ignores emails, or refuses to give a timeframe for repayment, this is a clear signal that he/she will not be able to do anything on his/her own and that legal debt recovery with the involvement of a lawyer will be necessary.
If you want to avoid headaches and save time, we recommend that you contact a professional. At Linden, we provide professional debt recovery services in court. You will need to provide all the information you have about the debt. After that, we will take care of everything: we will file a debt recovery action on behalf of the client, prepare the action/statement of claim, collect the necessary data from the registers, keep you informed about the progress of the court case, contact the bailiffs who will start enforced debt recovery from your debtor, etc.
Conveniently, you will know in advance the amount of the stamp duty payable for the preparation of the claim and the court proceedings. At the bottom of this link, you will find a “Pricing” box: by entering the amount of the debt, you will immediately know how much our services will cost. For example, in 2024, the fee for preparing the documents, filing them with the court and administering the case in court until the decision is made is only €225 + VAT for a debt of €10,000.
Finally, take everything as a lesson and learn from your mistakes
Debt recovery takes a long time, it is not a pleasant experience and the whole process requires an investment of time and money. Every experience of this kind makes us stronger and makes us look for measures to avoid falling into the same river a second time.
So, if you have been successful in recovering your debt, you are likely to be more experienced in choosing your partners from now on. One of the easiest ways is to check the company at rekvizitai.vz.lt. Entering the name of the company gives you information about the company’s credit risk: its economic situation, debts to Sodra, etc. If the company’s economic situation is poor and its credit risk is the highest, it is probably not worth the risk of cooperation: you may not receive payment for goods or services.
Debt recovery is just one of our services. We will give you effective advice on how to protect yourself from debt, how to deal with debtors, and help you draw up contracts to avoid the losses that can arise from working with irresponsible partners. “Linden is a trusted partner for those seeking financial sustainability.
[1] https://www.lat.lt/data/public/uploads/2018/01/apzvalga_fiziniu_asmenu_bankroto_bylose.pdf
