Debt Collections In Switzerland

1.1 Amicable Phase

1.1.1 General

Collection Agency Service Switzerland maintains a professional staff that expertly handles the collections process from start to finish. Our commitment to our clients is that all processes will be handled by our professional staff using in-house resources and offices. Our collections agents are well versed in the unique and highly efficient debt collection routine in Switzerland and will attempt to make contact with debtors via telephone contact and written correspondence to their physical address throughout the process. Collection Agency Service Switzerland adheres to all federal laws in Switzerland, as well as those passed by the individual states within the country where debt is most commonly enforced during the amicable phase.

1.1.2 Local agent

Collection Agency Service Switzerland does not currently operate its own facility for dispatching field agents to debtors in the country. While this practice is permitted in Switzerland, it is our preference not to handle any matters by using contracted professionals when our own in-house staff could be trusted with the job. Should this situation change at any time, clients will be notified of the change and will have an opportunity to enlist the support of field visits when contacting debtors.

1.1.3 Interest

Collection Agency Service Switzerland has a policy of always charging interest on a debt when in pursuit of the debtor. This rate is calculated in one of two ways. The first way is to simply use any agreed upon interest rate that is present in the contract between the debtor and our client. If no such stipulation is mentioned in that contract, then Collection Agency Service Switzerland reserves the right to charge the country’s legal interest rate of 5 percent per annum.

Worth noting, however, is that the interest charged to the balance of an outstanding debt is rarely paid by Switzerland’s debtors. Instead, this interest is viewed as a tool that can promote quicker and more effective collection of the outstanding balance.

1.1.4 Debt collection costs

Switzerland maintains a relatively unique way of calculating the costs associated with debt collection, and then assigning those costs to the debtor for payment. The costs themselves are not calculated by Collection Agency Service Switzerland in-house, but are instead assigned by the country’s unique Swiss Debt Collection Union. That body is responsible for handling the collections process in the country and is specially suited to regulate the process. The costs that will be assigned by the Swiss Debt Collection Union will be calculated based on various factors:

– The delay between when the debt was initially due and how long it has taken to receive payment form the debtor toward that balance

– Any relevant amount of interest that has been charged to the debt, as agreed by Collection Agency Service Switzerland and the debtor being pursued

– Any costs resulting from the debt having been paid in a delayed fashion, including the cost of any legal action or documentation

It is the policy of Collection Agency Service Switzerland to forward any granted costs issued by the Swiss Debt Collection Union to our client. That money can then be used to reduce the size of the claim lodged against the debt, or it can be retained with the balance and used as a success fee. This depends on the contractual agreement that exists between Collection Agency Service Switzerland and our client, and will be negotiated before we can begin pursuing the debtor’s outstanding balance.

1.2 Legal Procedures

1.2.1 General

Swiss law states that a pre-legal summons must be issued to all debtors in order to be able to pursue the debtor through the country’s typical legal proceedings. Further details relating to this essential summons can be found in the legal dunning procedure of this collections guide.

1.2.2 Required documents

The legal dunning procedure, as regulated by the laws of Switzerland, can only be pursued when the creditor has supplied us with the proper documentation of the debt’s existence and validity. This can be done by supplying a number of documents, including the following:

– Copies of the original contract, as agreed
– Account statements that show any paid invoices, as well as those still outstanding
– Any statement of account showing payments toward the debt or credits issued toward it

These documents are essential to beginning the pre-legal phase of the process, including issuing a summons to the debtor informing them of collection activities and the possibility that such activities might result in legal action. If legal action does actually resort after sending this pre-legal summons, the client will need to provide further documentation of the debt’s validity, including the following:

– Copies of the contractual agreement, as agreed
– Delivery notices, orders, and order confirmations
– Documents that prove the relationship between the client and the debtor
– Correspondence between the debtor and creditor that prove the debt’s validity
– To prove oral negotiations, copies of any correspondence are needed, as well as access to witnesses and other information to prove the debt’s validity

After these documents have been submitted, Collection Agency Service Switzerland can engage in the legal dunning procedure and pursue standard litigation options against the debtor in the interest of recovering the full amount of the debt’s outstanding balance.

1.2.3 Legal dunning procedure

It is not possible — or legal — for creditors in Switzerland to immediately launch a lawsuit against a debtor who owes them a significant outstanding balance. Instead, the country’s laws and regulations state that a number of pre-legal actions must take place before a lawsuit can be filed or expected to proceed. This includes issuing a pre-legal summons to the debtor notifying them that the balance of the debt is immediately due in full and that it will be pursued by legal processes if a payment is not made.

This is done by Collection Agency Service Switzerland by interacting with the country’s Collections Office, known as the Office des Poursuites or Betreibungsamt. That office is responsible for using the documentation we supply to them and creating a pre-legal notice that will be delivered to the debtor’s physical address. The debtor will be required to pay the full amount of the debt within 20 days, or make satisfactory payment arrangements in order to satisfy the debt over time. They have ten days from the time the letter is delivered during which they can dispute the debt.

If payment is not made within 20 days, or if a dispute is lodged within just ten days, the creditor can request that the Collections Office attaches the debtor’s assets to the debt. In some cases, it is possible for the creditor to file a Bankruptcy Petition with the Collections Office in order to force payment of the debt. This can be done if the debtor is an individual or a merchant. The costs associated with this legal dunning procedure are not eligible for charging to the debtor, and must be paid for by the client. It is the policy of Collection Agency Service Switzerland to include the cost of this process in our fees as charged to our clients.

1.2.4 Lawsuit

A lawsuit can be filed against the debtor by Collection Agency Service Switzerland in one of two cases. The first, and most common, is when a debtor disputes the validity of the debt as set forth in the pre-legal summons delivered to their address. The second way a lawsuit can come into force is if the debt itself — and the relationship between the creditor and the debtor — is exceedingly complex and cannot be resolved outside of the courtroom.

If a lawsuit is pursued by the creditor or a dispute is lodged by the debtor, a legal summons is served to the plaintiff in the case. A conciliation hearing is then scheduled be the court that will be hearing the debt recovery case. Following this conciliation hearing, both sides file written submissions with the court and exchange them with the opposing party. A further hearing is scheduled with the court at a future date, and it is during this hearing that a judgment will be issued based on the evidence that has been gathered and submitted to the court by both parties.

1.2.5 Costs

The fees for hiring a lawyer in Switzerland are notoriously high and, unlike many other European countries, they’re charged on an hourly basis whether or not the case is complex, defended, or long lasting. The fees that lawyers charge are independently set, but are generally based on the lawyer’s overall record and their seniority in the legal profession of Switzerland. Court costs are also charged to the creditor and these costs can represent a significant expense. Typically, these costs can be as high as 5 or 10 percent of the balance owed by the debtor in the case.

Switzerland is politically divided into sections known as cantons, and each of these cantons decides the costs associated with legal actions through their own court system. Costs, then, are analyzed on a case-by-case basis and Collection Agency Service Switzerland will make sure our professionals have all the information needed to produce an accurate estimate of the costs. These costs should always be considered in relation to the debt’s size before legal action is pursued.

1.2.6 Expected timeframe

Generally, it takes between four and six months for the country’s Collections Office to receive the required documentation as provided by Collection Agency Service Switzerland and issue the proper notices to the debtor who is being pursued. This timeframe may be extended, however, if there is opposition either on behalf of the Collections Office or a dispute is filed by the debtor who receives the notice. Execution of this procedure will therefore take another three to six months in most cases. The summary procedure used to lift any opposition to the claim can take more than six months, in addition to the time needed for execution to begin and finish.

Ordinary debt collection proceedings through the court system can, therefore, last between one and three years based on the complexity of the case and the number of objections raised by the office’s regulators and the debtors themselves.

1.2.7 Interests and costs in the legal phase

The costs associated with pursuing legal action against a debtor are generally able to be included as part of the debt’s outstanding balance as long as the creditor wins the case. This amount will be less any attorneys’ fees that have been charged to the creditor during the legal process.

It should also be noted that the judge overseeing any legal proceedings related to a debt has the discretion to charge these costs to the debtor. While the most often scenario does result in the debtor bearing the creditor’s court costs, some cases have seen those costs assigned to the creditor instead. Sometimes, a partial payment of the court costs is issued to both parties involved in the legal proceeding.

1.3 Insolvency Proceedings

1.3.1 General

The insolvency process in Switzerland is generally focused on liquidation and payment of creditors, rather than rehabilitation and reorganization of the company’s debts and assets. This is done by using an equal dividend of the liquidated assets to pay all creditors who file a claim for such a payment, and have that claim approved. Collection can also involve garnishing the income of a debtor in order to ensure full payment.

1.3.2 Proceedings

In Switzerland, insolvency proceedings are generally considered “forced liquidation.” The process is begun by a creditor who has not received payment toward an outstanding debt, and the liquidation is pursued in order to provide at least some form of repayment to the creditor in question, as well as to any other creditors who file a payment of a dividend during the insolvency procedure. Such payments are done based on a priority-based ranking o the creditors, and the country’s liquidation lawyers will typically rank those creditors based on their importance, the size of the debt, and their relationship to the debtor’s company.

Forced liquidation does require that any creditors owed a debt submit a claim with the court within 30 days of the proceeding’s initiation. This date is calculated as 30 days of the issuance of a Bankruptcy Declaration by the court overseeing the proceeding.

During the insolvency proceeding, a trustee will be appointed by those creditors who have lodged a claim against the debtor. This pool of creditors operates by majority rule, with a 51 percent threshold being the required amount needed to appoint a trustee to the liquidation process. The group of creditors appointing the trustee is referred to Swiss law as the Assembly of Creditors.

Bankruptcy will pursue as the debtor’s assets are liquidated to cover their outstanding debts. Creditors can expect to receive a dividend payment after the liquidation of assets is complete. In instances where the amount of liquidated assets cannot cover a payable dividend to creditors, those creditors receive a Certificate of Loss that allows them to write off the expenses associated with the debt, the claim, and the insolvency proceeding.

In cases that do not require forced liquidation of the company’s assets, the debtor may file what is known as a Moratorium and Composition. During this time, the debtor will be required to inform the court about their restructuring and reorganization plans. These plans must provide a clear path to fiscal health for the company in question, and they must be able to afford at least a partial repayment of all outstanding debts owed to the company’s creditors. The judge will need to examine the plan alongside the company’s balance sheet, trading account, and bookkeeping records, in order to verify its effectiveness.

During this time, an office or trustee will be appointed by the court to oversee the lodging of claims by creditors against the debtor. The Moratorium filed with the court is typically granted for four or six months, but can be extended to as many as 24 months in the most serious and complex cases. During this Moratorium period, the company develops a repayment plan or a restructuring plan; the details of any plan developed by the company are implemented before the Moratorium can be lifted. Any proposal generated by the company must be accepted by the majority of the creditors who have lodged a claim against the company. A simple majority does not meet the requirements laid out in Swiss law in this instance. Instead, a proposal must be accepted by at least 66 percent of those creditors deemed to have a valid claim. Alternatively, 25 percent of creditors can be accepting of the plan, as long as they represent at least 75 percent of the claims. Once this approval has taken place, the court will grant it approval and it will become enforceable.

1.3.3 Required documents

To lodge a claim with an insolvent debtor company, we must have the following documentation:

– Original Power of Attorney
– Copies of invoices
– Copies of contracts
– Copies of orders, delivery notices, and confirmations
– Copies of conditions of sale, if relevant
– Copies of relevant correspondence with the debtor

1.3.4 Expected timeframe and outcome

Insolvency typically takes between one and five years. The average dividend paid to creditors is between 20 and 25 percent.