Debt Collection in the Netherlands

Practical Guide

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Is there a minimum amount to start a legal action?

There is no minimum amount of debt required to initiate legal action as a creditor in the Netherlands. However, the practicality of pursuing legal action for a small debt should be carefully considered, as the costs and time involved in legal proceedings might outweigh the benefits when dealing with minor claims.

Under Dutch law, the court can order the losing party to reimburse procedural costs to the winning party, as well as out-of-court expenses involved with the recovery. The out-of-court and procedural costs are however calculated through a tiered system established by the law. It is therefore important to choose an efficient strategy to reduce the true costs of recovery.

Will the amount due condition the type of procedure?

Yes, the amount due in debt collection can influence the type of legal procedure in the Netherlands. There is however not a legal procedure that can significantly expedite the recovery process.

For claims up to €25.000, as well as larger claims related to (among other things) rents, hire purchase and employment, subdistrict court proceedings exist. In other cases, the creditor must initiate proceedings with the district court.

Materially, there are very few differences between subdistrict court proceedings and district court proceedings. It is however preferable to initiate subdistrict court proceedings due to the lower court fees involved.

Is it mandatory to send a warning letter before taking legal actions to collect a debt?

In the Netherlands, it is generally advisable to send a warning letter to the debtor before initiating legal action to collect a debt. While it is not legally mandatory for a creditor, sending a formal warning letter serves as a common practice and is part of the code of conduct for Dutch attorneys.

Additionally, the debtor will not be ordered by the court to reimburse the creditor’s procedural costs if the creditor has failed to issue a warning letter. The law even mandates this when collecting debt from consumers. In the case of consumers, the creditor has to send a reminder giving the debtor another 14 days to pay the outstanding invoice, without additional costs. This reminder is also known as the 14-day letter. In this 14-day letter, you must also include a statement that your debtor will be liable for collection costs in the event of non-payment, stating the amount of the collection costs then due. Given the aforementioned, the costs associated with preparing a warning letter are well worth incurring.

The warning letter, also known as a "sommatiebrief" in Dutch, should clearly state the details of the debt, including the amount owed, a brief description of the reasons for the debt, and a deadline by which the debtor is expected to pay. The letter should also indicate the consequences of non-payment, such as legal action that may be taken if the debt is not settled within the specified time frame. To ensure the warning letter has the desired effect, it is wise to have the letter prepared by an attorney.

Depending on the size of the claim, it may also be helpful to include a calculation of the interest that has been or shall be accrued over time. This ought to make clear to the debtor that non-payment will be a costly endeavour.

What are the best practices for creditors to increase the possibility of recovering the debt?

The first step is to collect all documents necessary to evidence the indebtedness of the debtor, such as:

  • the agreements, containing the obligations of the parties
  • amendments to the agreements
  • correspondence between the parties
  • witness statements
  • invoices, proofs of payment, etc.

It is recommended that an attorney be involved at the early stages of the dispute so that the required documents can be evaluated before pursuing legal action.

Establishing a strong legal base serves little purpose if the debtor is insolvent. It is therefore sensible to ascertain the debtor’s financial position before taking formal legal measures. For example, one may be able to assess the annual accounts or the properties owned by the debtor.

If the debtor is insufficiently solvent but is expected to become more solvent in the foreseeable future, it may be useful to negotiate a payment plan. A payment plan can increase the chance of a full debt recovery. An added advantage is that offering a payment plan, if the need arises, proves to the courts that the creditor has acted in a prudent and reasonable manner. This will benefit the creditor’s position in the proceedings.

If it is established that the debtor has sufficient recourse, it is possible to attach assets of the debtor, for instance, its bank account. By attaching the debtor's bank account, the creditor obtains the security of being able to enforce the attachment as soon as it is established in court that the outstanding debt is actually due. This strategy is however not without risk, as the creditor is liable for damages suffered by the debtor if the attachment is deemed to have been unlawful. Even still, the attachment of the debtor’s bank account can prove to be a powerful stimulus for the debtor to fulfil its payment obligation.

How can a foreign creditor start a procedure for international debt in the Netherlands?

Reference is made to the answer to Question 2, the creditor must initiate subdistrict court proceedings for claims up to €25.000. Representation by an attorney admitted to the Dutch Bar Association is not mandatory at the subdistrict court. It is however highly recommended, as the subdistrict court proceedings are subject to formal requirements. Failing to meet these formal requirements could eliminate the possibility of debt recovery.

Before starting proceedings in the Netherlands, an international creditor will need to seek legal advice regarding private international law. This should include determining the applicable law, the competent court and the possibility of enforcement of any judgment. If the Netherlands is indeed the place to initiate legal proceedings, the creditor must find representation.

There are court fees involved with starting legal proceedings. The amount of the court fee depends on the type of proceedings, the amount claimed by the creditor, as well as the type of creditor.

For example, natural persons are obligated to pay between € 86 and € 693 at the subdistrict court, while legal persons must pay between € 128 and € 1,384. At the district court, natural persons are obligated to pay between € 86 and € 2.277, while legal persons must pay between € 2.837 and € 8.519. These differences naturally impact whether debt collection is economical.

Which documents are necessary for the debt collection in the Netherlands?

In the Netherlands, the burden of proof in debt collection cases lies with the creditor, as is common in many legal systems. While there is no specific legal requirement mandating certain documents to prove a claim, it is highly advisable and practical to gather comprehensive documentation to support your case effectively.

The courts are free in their evaluation of the evidence that is presented. In general, courts favour unambiguous documents. Examples of such documents are contracts outlining the terms of the agreement between the parties. These contracts, especially if they contain clear payment terms and conditions, are critical as they establish the legal basis for the debt.

Other examples of unambiguous documents are invoices. Invoices are fundamental to most transactions, specifying the goods or services provided, their quantities, prices, and payment due dates. Proofs of delivery or service, such as signed delivery receipts, work orders, or service completion certificates, also serve as tangible evidence that the agreed-upon goods or services were either provided or ordered.

Correspondence records, including letters, emails, and text messages, can also be useful. These communications establish a history of the debtor's acknowledgement of the debt and can be valuable in proving the creditor's case. Payment reminders and warning letters showcase the creditor's efforts to resolve the matter amicably before resorting to legal action. These documents indicate the due dates, outstanding amounts, and consequences of non-payment. If the debtor fails to respond or comply, these reminders demonstrate the debtor's negligence, reinforcing the creditor's case in court.

Can interim measures be taken?

It is possible to take interim measures in The Netherlands, such as the seizure of property or the (more practical) attachment of (a) bank account(s) of the debtor or the claims of the debtor on third parties. The process of conservatory attachment in the Netherlands involves obtaining the court’s leave to attach a debtor's assets pre-emptively. Before initiating this process, the creditor must submit a formal request to the preliminary relief judge, specifying the nature of the claim, the amount due, and the type of assets to be seized.

The element of surprise is crucial in this procedure. Typically, debtors should not be informed in advance, preventing them from hiding or disposing of their assets.

A major requirement for successful conservatory attachment is a valid reason to suspect that the debtor might conceal or reduce assets' availability for the creditor. This suspicion must be grounded and reasonable. The courts assess the formal requirements, ensuring the claim seems credible. If the court believes the claim is dubious, the request will be denied.

The creditor is obligated by law to commence legal proceedings following the conservatory attachment. If the court ultimately rejects the creditor's claim in the main case, the conservatory attachment can lead to adverse consequences for the creditor. To mitigate this, the court will require the creditor to initiate legal proceedings within a specified period or provide sufficient security to cover potential damages incurred by the debtor due to the seizure. Conservatory attachment is thus an effective method to induce debtors to pay but comes with additional costs and risks.

If, for any reason, the recovery was not possible, is there any other action that the creditor could take to write off such debt in its accountancy?

When a business in the Netherlands faces a situation where a customer's debt is unlikely to be fully recovered, the principle of "good merchant practice" allows for the debt to be written off. This practice is supported by the law under specific conditions.

Firstly, the business owner must make a reasonable assessment of the possibility of collecting the debt. The assessment of these bad debts can be done on an individual basis for each debtor. However, for businesses with a large number of debtors, an average based on past experiences (collective assessment) is acceptable. Crucially, any provision or write-off made in the accounting books must be well-documented.

Given the intricacies of these accounting practices and the need for comprehensive documentation, it is strongly advisable to involve a qualified attorney or financial expert. Their expertise ensures that the procedures adhere to legal standards, protecting the business from potential legal complications in the future.

What happens after the first demand for payment?

In the Netherlands, the creditor can pursue several strategies if the debtor does not comply after the first demand for payment. If the debtor disputes the claim on legally sound grounds, it may be advisable to seek a settlement. If the debtor refuses to comply without justification, it is recommended to initiate legal proceedings at a (sub)district court to seek a judgment for the unpaid amount. Additionally, it is possible to take interim measures, which will be explained further in Question 8.

Sometimes the debtor does not respond to the first warning letter. In such cases, if there is reason to believe the first did not reach the debtor, it is recommended to issue a second letter through different means. A second warning letter essentially serves as a final opportunity for the debtor to settle the debt amicably before facing more severe legal consequences. Another purpose of sending a second warning letter is to demonstrate the creditor's willingness to resolve the issue without immediate legal action, especially when dealing with consumers (Question 3)

If the debtor continues to disregard the payment demand, the creditor is to initiate legal proceedings or take interim measures.

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