Introduction

To run a debt collection agency in Holland, no special license is required. As a result there are a large number of small and local agencies and a small number of large active offices. The larger offices also run a credit reporting division, which helps them in getting payment from debtors who do not want to lose their credit- worthiness. 

Apart from competing with each other, collection agencies face stiff competition from bailiffs and solicitors. Bailiffs are appointed by authorities, but very often also run a private collection business. Solicitors, to whom debt collection used to be a sideline business, are now very active in this field. 

On the whole, commercial collection agencies distinguish themselves from other similar services by stressing out-of-court collection. On the one hand, creditors are faced with the need to do at least something when their accounts receivable are aging. On the other hand, they do not want to go to court too early and lose their customer unnecessarily. By offering an intermediary service, with the help of modern communication facilities, collection agencies have their own distinctive person on the market. 

Out-or-court collection 

Clients transfer their claims to collection agencies by simply sending them their invoices and any relevant material such as correspondence. 

The agencies add collection costs according to their tariffs. This is clone without taking info the individual clauses in the general sales conditions of each client. (See below, "Writ of summons").

A telephone call to the debtor accompanies the first dunning letter; this gives an early insight into problems either with regard to the claim itself or with regard to the debtor's financial position. It also facilities an early progress report to clients. 

Further dunning letters and telephone calls follow, to which the principle of increased (but correct) pressure is applied. Payment by instalment is avoided, but, when necessary, is limited to short periods and to large amounts. On the whole, it should be clear within four to six week whether legal steps will be necessary (and possible) or not. 

Of course, the fresher the claim, the better the chances of collection. Creditors are invited to transmit their claims as early as possible. The tariff is low for fresh claims and higher for old claims. Furthermore, to any amount collected within two weeks upon the date of confirmation of the collection order by the agency, half the tariff will be applied. 

A special note is necessary with regards to communications. Holland, being a relatively small country with 16 million people and 500 000 registered businesses, telephone and fax facilities are widespread and not too expensive. Heavy use is made of these possibilities on conjunction with written demands.

It is amazing how easily fax demands will reach a company' s management, whereas letters are often picked out of the mail by department managers or clerks. 

Personal visits are also relatively easy, given the country's size and traveling facilities. However, they are limited to heavier claims and are done at the explicit request of the client, who is invoiced accordingly. 

Out-of-court settlement of claims is the core activity of collection business. It is the quickest and cheapest and therefore the best service a collection agency can provide. If unsuccessful, however, a full range of legal steps are at hand to force debtors to pay their bills. 

Information 

To judge the possibility of legal steps against the debtor, information about his financial position and his business reputation is vital. This information should be passed on to the creditor who has to make the decision to sign a power of attorney, which makes him - in our system - responsible for legal expenses. 

Information is easily accessible in the larger agencies which also operate a credit reporting business. Chambers of commerce register practically all businesses and each individual is registered in his or her city or town. It is possible in Holland to trace private persons through any nationwide agency.  

There is a public registration or real estate and any mortgages thereon. Finally, there is the usual array of registers, industry guides, bankruptcy publications etc. The information required should reflect two kinds of data. First off all, debtor or debtor's company should be exactly identified by name and address, so that legal documents can be drawn up without unnecessary mistakes. In the second place, insight in debtor's financial position and business reputation is required to weigh the changes of collection. 

In the end it is a commercial decision whether legal steps are desirable. Although a creditor's irritation about a debtor who gets "off the hook" is often understandable, it is the duty of the debt collection agency to advise its client against costly procedures when a negative result is almost certain. On the other hand, a strong legal position in a case with a reasonably large amount of money needs all the professional support an agency can muster. Sound business practice should be the main decision factor. 

Legal steps 

Having reached the decision to start legal collection, a creditor or his collection agency has the following choices: 

Court order 

For amounts not exceeding DFL 1 500 a request can be submitted to the lower courts (Kantongerecht) to issue a payment order to the debtor. This is a relatively simple procedure, executed with the help of pre-printed forms. 

If the debtor does not respond to this order and a certain period of time bas elapsed, the order will become a judgment by default and the creditor has a document with executorial power. If the debtor protests against the order, either orally or in writing, the case becomes a normal procedure as described below ("Writ of summons"). 

Writ of summons 

For amounts not exceeding DFL 3 000 a summons has to be brought before the lower court (Kantongerecht); for larger amounts the higher court (Arrondissements- rechtbank) is the juridical body involved. 

There are exceptions to this rule, but they are few. Summons can be brought before the lower courts by the bailiff. To start similar proceedings before the higher courts, one needs the services of a solicitor. In both cases, the bailiff is responsible for the services of the writs and for any executive measures which are the result of the proceedings or the judgment.Proceedings can be separeted into two stages: 

- The written arguments, in which parties explain their points of view, usually in two rounds for each. Parties may appear in person and their explanations are drawn up by the court and added to the documents. 

- The oral argument, which do not necessarily take place, but in which testimonies can be heard or an oath can be taken. 

All this may end in a settlement or a judgment, which depends on the merits of the case and the inclination of the judge. 

In any case, the creditor will have a title with executorial power and again needs the bailiff to start the execution, unless debtor pays on the basis of the decision by the court. 

Attention is drawn to the matter of extrajudicial costs. Normally, legal costs will be included by the sentence. Extrajudicial costs can be added to the principal, but will not be recognized by the courts if it cannot be proved that they are specifically mentioned in creditor' s general sales conditions and that these conditions were applicable in this particular case.

Sales conditions are, as a rule, deemed to apply, if creditor advises his debtor of the existence of these conditions before debtor ordered goods or services. The best policy creditors is to print sales conditions at the back of their quotations or offers, or to include them with each offer submitted to prospective clients. A mere reference to these conditions on the invoice is considered insufficient. 

Only when it is established that debtor has clone business with the creditor for some time and could easily have been aware of creditor's sales conditions, the clauses of these sales conditions will be recognized by court. And even then, surprises are not impossible, as individual judges may have different opinions about the merits of such a clause, especially when the debtor is a private person. 

Execution of a sentence may consist of seizure of real estate or other property and also of the blocking of bank or postal accounts. Third parties may also be involved in the case of a private person who has an income through work with a company or institution; part of his salary may be seized. 

The most attractive possibility is, of course, real estate, although even then, proceedings may take a long time and mortgage holders will claim priority rights. However, the threat of such a seizure may be sufficient to bring debtor to pay his bills. Again, it is important to weigh costs against results. Justice can be very expensive. 

The final executionary step is a petition for bankruptcy. We refer to the relative paragraph at the end of ibis survey. Suffice it to say, that this drastic step should be avoided, if possible, as most creditors in a bankruptcy end up empty-handed. 

Conservatory measures  

When a creditor is certain, that his debtor is selling assets to prevent seizure or other measures, it is possible to request a preliminary seizure from the higher court; again, the services of a solicitor are required, whose reputation alone can be sufficient ground for the President of the Higher Court to grant the request. 

Especially in the case of large claims, this can be a useful instrument in securing one's rights. However, it is an expensive measure and, if at a later stage, the President of the Court would rule that the seizure was not justified, all expenses must be covered by the creditor. Moreover, such a seizure of, for instance, a bank account is only valid for the amount of which was on the account on the date of the court order; if the following day a million guilders would be paid info the account, ibis extra amount would not be part of the Slims seized. 

Conservatory measures can be taken with regard to: 

-Debtor's assets, such as machines, inventory and possibly private property;

-Assets such as shares and other valuables;

-With third parties such as banks and employers;

-Real estate, also in the case that the claim consists of rent etc;

-Debtors whose addresses are unknown, as they no longer have a fixed address in Holland;

-Real estate in general, aircraft and ships. 

Short-term proceedings 

A novelty in Holland is the possibility to use an already existing short-term lawsuit also for claims. So far, there has only been an example of this method in Amsterdam and it has caused quite a stir in debt collection institutions. Two requirements must be met: 

-The urgency of the matter should be beyond doubt (loss of interest is not considered such an urgency);

-Serious defense must not be expected, so that the whole matter can be kept relatively simple. 

For the sake of actuality, ibis possibility has been added to this list. It should be noted, however, that only very few cases have thus been treated and that use of these proceedings for commercial claims is still an experimental matter. 

Apart from the above mentioned possibilities, there are many more juridical considerations to be taken info account, the description of which would exceed the scope contribution. However, we are always willing to answer specific questions about certain details or to find the answer in the many hooks written about Dutch law. 

Bankruptcy 

Bankruptcy is a legal seizure of the complete assets of a debtor in favour of all his creditors. It is declared, when debtor is deemed to be in the position that he has stopped all payments, which, in these days, means that the bank has stopped granting credits. 

One condition is plurality, which means that there should be more than one creditor, although only one of them can file a petition for bankruptcy proceedings. 

The court is the final authority in a bankruptcy, but the daily proceedings are handled by a solicitor, or sometimes, an accountant. 

In the first stage, assets and liabilities are examined; creditors submit their claims to the trustee, who then calls a meeting of creditors to establish the correct size and nature of all claims. 

In the second stage, the trustee draws up a report, shoeing the condition of the bankrupt's estate, as well as a dividend plan for each creditor. If the trustee discover any malpractice, it should have to appear in the report.

Bankruptcies are ended by agreement (offered by debtor) and homologation (approval by the court); or by execution (selling of the assets) and dividing the revenues according to a list of dividends. 

Regretfully, many bankruptcies are simply canceled by lack of any assets. This is especially true in the case of sole proprietorship and small limited liability companies.

In any case, "regular" creditors usually en up with nothing; priority creditors, such as the tax collector, mortgage holders and other leave little to divide. 

During the last two years, a new phenomenon has appeared which can truly can be called an abuse of bankruptcy laws. It has been successfully used by larger companies with many subsidiaries and with a deteriorating financial position. It is called the "mortuary construction" and it works as follows. 

Before entering info bankruptcy proceedings a group of companies is divided info two legal entities. All the profitable subsidiaries are brought into group A, whereas all dying companies are assembled into group B (the mortuary). 

All employees are spread out over both groups. After that, it is examined which companies can be sold and which will be included in bankruptcy. 

The banks have run for cover by demanding that all credit facilities will be part of the balance sheet of group A. They can easily claim this position by threatening to stop all credits if their request is not complied with. The result is, that all other creditors are fighting a losing battle and quite often end up with nothing. 

Bankruptcy laws are examined with regard to possible changes. These will concern extended liability for persons who run a limited liability company, if it can be proved, that there has been mismanagement. Other details may also be changed, but, in general, the above mentioned paragraphs describe the present situation.