A claim may arise from a broad range of legal entitlements. These include contractual rights to payment in money or other financial assets, such as those arising from sales contracts. In the trade of goods and merchandise, receivables play a significant role on a company’s balance sheets. They may also be covered by credit insurance. Generally, receivables in commerce are settled by payment, i.e., liquidation of the claim.
However, disruptions occur frequently-for example in cases of default or insolvency by the debtor. Another common situation is the withholding of payments due to alleged defects, incorrect deliveries or other disturbances in mutual commercial relations. In such cases, receivables often have to be collected.
Collection procedures usually begin with prior dunning where the debtor is requested to pay the outstanding claim within a reasonable period and, failing payment, legal enforcement is then announced. If payment is not made before the expiration of the period, legal action must be sought—either by initiating court proceedings, in the form of a payment order, or by filing a statement of claim directly. If court proceedings are initiated in the form of a payment order, the debtor has a general right to object. In case of an objection, ordinary court proceedings commence; if no objection is filed before the deadline, an enforceable title is issued (in Germany, a writ of execution). If the creditor pursues the claim though ordinary court proceedings, the outcome is similarly a titled claim at the conclusion of the process. This titled claim must then be enforced.
Enforcement
The titled claim proceeds to compulsory enforcement. As the term suggests, this refers to forced collection of the claim in the forms prescribed by law. This may be done, for example, by instructing a bailiff through a garnishment and transfer order. The bailiff will visit the debtor and identify seizable assets. Enforcement can also be carried out by seizing assets—such as real property through compulsory security mortgages followed by foreclosure—or by garnishing bank accounts.
