Debt collection - what does it mean?

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Economic turnover is based on the fact that some buy and others sell, that is, make a profit. However, it is not always the case that buyers pay ... and this causes problems for sellers. Then recovery comes to the rescue! What is debt collection really? Who and what is it needed for? We answer below.

Debt collection - definition

Debt collection comes from the Latin word "vindicatio". It was already used in antiquity. On the other hand, according to the Dictionary of the Polish Language, the word debt collection means: “pursuing one's rights to goods or payment in a manner specified in the regulations”. This explanation fully describes:

  • purpose of debt collection - recovery of money / things due;

  • nature of debt collection - acting in accordance with applicable law.

Payment control as the first step to recovery

It is impossible to conduct effective debt collection without payment monitoring. Based on the statistics, it is estimated that the most effective way is to collect those receivables that are unpaid up to three months from the payment date, i.e. the so-called "Young debt". Therefore, in order to react quickly and start collecting debts in a time that statistically will most effectively and using low costs recover the debt, it is necessary to conduct and monitor payments related to receivables (usually sales invoices).

Types of debt collection

Basically, there are currently two types of debt collection: soft (amicable) and hard (judicial). How are they different? Mainly used tools and incurred costs of debt collection.

Soft debt collection (amicable)

It is based on a gentle recovery of your receivables, but also encourages contractors to meet their obligations on time. The traditional tools of soft debt recovery are:

  • payment reminders,

  • requests for payment,

  • payment requests with interest notes.

Using traditional tools will not hurt, but you should consider how to increase their effectiveness. Additional provisions on traditional payment orders may help to inform the debtor about the consequences of default, namely messages on:

  • entrusting the case to a debt collection office,

  • transferring the debtor's data to Economic Information Bureaus,

  • publication of debt on the debt exchange,

  • transfer the case to court.

It is also worth using modern methods in the debt collection process. One of them is issuing an opinion about the debtor on his website or social networks, which nowadays have a lot of damage.

Hard debt recovery (judicial)

If the soft debt collection process is ineffective, the creditor should analyze the amount of the debt in comparison to court costs or the costs of servicing a professional debt collection office.

Fees for simplified court proceedings in cases up to PLN 10,000:

  • up to PLN 2,000 - fee PLN 30

  • PLN 2,000 - 5,000 - fee PLN 100

  • PLN 5,000 - 7,500 - fee PLN 250

  • 7,500 - 10,000 PLN - fee 300 PLN

The fee for ordinary court proceedings is 5% of the dispute value, however, not less than PLN 30 and not more than PLN 100,000.

You can use e-court to pursue debt repayment. The advantage is the lower costs of the proceedings, as they amount to 1.25% of the amount that we want to recover in the claim for payment, but not less than PLN 30.

Who will debt collection be useful for?

Basically for everyone! Starting from a private person - an exemplary "Kowalski", through the sector of micro, small and medium-sized enterprises, and ending with large joint-stock companies. Nobody will agree to wait indefinitely for payment for the service / delivery performed. And here, debt collection tools come to the rescue. Moreover, the earlier the debt collection process begins, the greater the chances of its effectiveness at the amicable stage.