Debt Collections In France

1.1 Amicable Phase

1.1.1 General

Collection Agency Service France maintains a highly professional collections process for our clients in France. We focus on the relationship between the client and the debtor at all times throughout all phases of our collection process. Our professional team of collection specialists make sure that all procedures are carried out in-house, including oral contact with the debtor and written forms of contact that may be issued in pursuit of the debt’s payment. Just as importantly, Collection Agency Service France adheres to all federal and state laws regarding the collection of outstanding debts from individuals and corporate entities.

In the event of a dispute relating to the debt, it is our policy to maintain a professional approach and work toward an amicable solution. This is done by analyzing all of the contractual documents that exist between the creditor and the debtor, including contracts, purchase orders, confirmations, invoices, and delivery notices, as well as any terms and conditions that were agreed to by both parties. Our in-house team of legal experts and solicitors conducts any investigations necessary for recovery of the debt.

1.1.2 Local agent

While our amicable collection process is typically highly effective when seeking to recovery a debt, Collection Agency Service France does maintain a large network of local field agents who can collect a debt from a debtor with an in-person visit. This network of field agents is typically only employed when other amicable attempts at collection have failed to produce the desired results. In France, our field agents are able to meet with debtors and obtain information about their current financial information — including solvency or the lack thereof.

The field agents report this information back to Collection Agency Service France; they also provide a summary of any business dealings or other things that might help recovery of the debt. In France, our field agents are actually able to collect money from the debtors who are visited personally, and that money is put directly toward the outstanding balance owed by the debtor. Additionally, our field agents can negotiate a payment plan if a full payment is not available at the time of their visit to the debtor. These repayment plans are subject to the approval of Collection Agency Service France.

1.1.3 Interest

Collection Agency Service France charges interest to debtors in every case. Currently, the rate charged to debtors is set by the French government and then multiplied by a factor of 3.5. This process is regulated by French laws concerning the maximum amount of interest that can be charged during collection.

1.1.4 Debt collection costs

In accordance with the European Directive, Collection Agency Service France charges a flat fee of 40€ to every debt that is collected by our in-house team of professionals. This is supplemented by a 10 percent penalty clause for the additional costs associated with the recovery of the debt. In some cases, creditors may have special terms set forth in their contractual agreement that may mandate higher or lower costs charged to the debtor when collecting a debt. It is the policy of Collection Agency Service France to follow any directives set forth in this kind of contractual agreement.

It should be noted that French debtors are not generally used to paying the costs of a debt’s recovery. Typically, this is used as a negotiation tactic between the creditor and debtor; it can greatly enhance the chances for debt collection in many cases.

1.1.5 Prescription

The statute of limitations in France lasts five years, though pursuing legal action against the debtor may interrupt this period.

1.1.6 Accepted and most common payment methods

Collected debts are typically satisfied by bank transfer or a cheque payment. Collection Agency Service France does not offer direct debit of checking or savings accounts.

1.1.7 Types of companies

Enterprise individuelle:

This sole proprietorship exposes the owner to unlimited liability with business and private money or assets.

EURL (Entreprise Unipersonnelle à Responsabilité Limitée):

A sole proprietorship with no minimum capital. Liability is limited to the company’s capital or assets.

SASU (Société par Actions Simplifiées Unipersonnelle):

A sole proprietorship with a 37,000€ minimal capital level. Liability is limited to the company’s capital.

SARL (Société à Responsabilité Limitée):

Liability is limited; this partnership can involve between 2 and 100 partners. No minimum amount of capital is required.

SNC (Société en Nom Collectif):

A general partnership company that consists of at least two partners. Capital is not subject to any minimums, and serves as the limit for the partners’ liability.

SA (Société Anonyme):

This limited liability company has at least seven partners and minimum capital of 37,000€; liability is limited to the company’s capital.

SAS (Société par Actions Simplifiée):

A joint stock company with at least 37,000€ in capital. Liability is limited to the amount of capital.

1.1.8 Sources of information

Collection Agency Service France maintains contracts with several reputable reporting agencies in the country that are capable of determining a debtor’s financial situation. Further information about the debtor may be available to our investigators depending on their status and legal form in the country. This information may include property or assets, and is used to determine the best course of action for recovery. Collection Agency Service France employs a large network of tracing agents throughout the country. Those agents employ investigators who can more accurately locate the debtor and determine their assets.

1.2 Retention of Title

The French laws that deal with Retention of Title are actually some of the most robust in any European country. Those laws require that ROT be agreed upon by the supplier and their customer prior to the first delivery of any goods or services. This must happen before the first invoice is issued to the customer for the delivery of such items. Most companies throughout France actually include Retention of Title stipulations in the contracts and trading conditions that are reviewed and agreed upon when first interacting with a potential customer, giving them plenty of legal cover in the event that payment is not delivered on time — or at all.

The customer must acknowledge and sign these documents prior to receiving the first delivery. At the very list, Retention of Title information must be verbally discussed the creditor and the debtor prior to the first delivery and invoice being generated. Proof that these conditions have been agreed to is a vital piece of information that can help companies recover their distributed goods and pursue relevant action through France’s legal system. Without this proof, the robust laws of France can be hard to enforce and goods can be nearly impossible to recover.

Retention of Title is most often used before bankruptcy proceedings began against a company or individual. For this reason, Collection Agency Service France should be able to prove ROT agreements prior to the filing of any such action against the debtor.

1.3 Safeguarding measures

If a debtor is not able to quickly satisfy any outstanding balance, Collection Agency Service France can secure the debt with the debtor’s assets. This process is completed by providing a written acknowledgement of the outstanding debt and asking a judge to allow the process of taking conservatory measures — including the seizing of the debtor’s bank accounts.

1.4 Legal Procedures

1.4.1 General

If the amicable phase does not produce a full satisfaction of the outstanding debt, Collection Agency Service France will send a written notice to the debtor warning them that legal proceedings will commence. Our in-house legal team will decide on the best course of action for recovering that debt, based on available documents and the debtor’s financial situation, and pursue that course of action immediately.

1.4.2 Legal System

The Commercial Court, known as the Tribunal de Commerce, is responsible for handling disputes between businesses or traders. The judges in this court are businessmen and women elected by their peers. Claims for amounts greater than 4,000 EUR may be able to appeal the court’s decision, while others generally cannot.

1.4.3 Required documents

Collection Agency Service France must comply with the country’s legal dunning procedure in order to file a lawsuit against a debtor. This means that we must have access to the following documents:

– Copies of the contract
– Copies of the invoices
– Account statements showing payments or credits against outstanding invoices
– Copies of orders, delivery notes, and confirmations
– Copies of correspondence proving the validity of the claim

1.4.4 Legal dunning procedure

When the size of a debt is relatively small, Collection Agency Service France is able to use the legal dunning procedure to pursue an injunction against the debtor in court. Because of the relatively smaller size of the debt, the debtor’s presence in court is not required. This process is quick and easy, as well as inexpensive, as it doe snot require a lawyer unless the debtor lodges a dispute with the court.

The legal dunning procedure also allows Collection Agency Service France to get an interim order, even if the debtor does not show up in court. If disputed by the debtor, the judge may require the creditor to start the common procedure. This procedure is also very fast, although it does require the creditor to obtain legal representation.

1.4.5 Lawsuit

The lawsuit procedure in France begins immediately after the amicable collection process has failed to produce results, a debtor has launched a dispute against the creditor or vice versa. The primary goal of instituting such a proceeding is to determine the existence of the debt, as well as how much that debt actually is. The process will also seek to define the relationship between the creditor and the debtor. A decision will be made regarding repayment, and the court will decide between instituting an installment plan or requiring one lump sum be paid to the creditor for satisfaction of the outstanding balance. This is all done via letters, rather than a presence in the courtroom itself.

When the judge overseeing the case has the right amount of information, a hearing will be called where the decision will be issued. Both parties must be present for this hearing. A date is set for publication of the final judgment, at which time both parties will be notified via postal mail from the court.

1.4.6 Appeal

The creditor or debtor can appeal the judgment issued by the court if they don’t agree with it. The Court of Appeal will rehear the case within a month from the date of the original judgment having been issued.

1.4.7 Costs

The court where the procedure is taking place determines the cost of any civil law procedures in France. Additional costs are those determined by the lawyer in exchange for their representation of the creditor during the matter. The complexity of the case determines just how expensive it will be for the case to be pursued, and this requires Collection Agency Service France to determine potential costs on a case-by-case basis.

1.4.8 Expected timeframe

Simple commercial cases generally take between 8 and 10 months to complete, though this timeframe can be doubled for more complex commercial cases or those that are frequently disputed by the debtor. Some parts of the country offer a slower judicial system, however, and this may increase the time it takes for a case to complete.

1.4.9 Interest and costs in the legal phase

Each party in a lawsuit has to bear the cost of its own legal fees as paid to solicitors, witness, or experts. When a decision is issued by the judge, any interest, collection costs, or general court fees, can be charged back to the debtor for payment as part of the debt. The court typically only approves a small portion of these costs be charged to the debtor, however.

1.5 Enforcement

1.5.1 Enforcement in debt

Debtors have one month to appeal following their notification of the judge’s decision. After this period, the judge’s decision becomes executive, and this means that a bailiff can start forced execution of the debt’s payment. The debtor has no choice but to pay the debt, unless they wish to go bankrupt.

1.5.2 Enforcement in movable goods

The bailiff will visit the debtor and take away any movable goods that can be liquidated for payment to the creditor. No goods that are essential to the debtor’s daily life or business activity may be seized during this process. Bailiffs consult Collection Agency Service France before seizing any specific goods.

1.5.3 Enforcement in immovable goods.

The debtor’s real estate can be attached to ensure collection of the debt. However, most French companies do not own real estate and this approach is almost never used.

1.5.4 Expected timeframe

The timeframe for enforcement depends entirely on the debtor’s financial situation.

1.6 Insolvency Proceedings

1.6.1 General facts

Insolvency is defined as the moment when a debtor cannot pay their current debts, even when the value of their assets is considered.

The two main insolvency procedures include:

– Bankruptcy
– Receivership

Receivership can additionally be converted to bankruptcy; in France, nearly 90 percent of receiverships actually end in a bankruptcy proceeding.

1.6.2 Proceedings

Receivership maintains the debtor’s assets and institutes a continuation plan, ensuring that creditors receive dividends toward the debt’s balance. Bankruptcy, conversely, involves liquidating the debtor’s assets during cases of extreme financial hardship. Creditors will not receive dividends via this process, typically. Domestic creditors have two months to lodge a claim against the debtor, while international creditors have four moths. These dates are determined by the date of publication in the BODACC journal of insolvency filings.

1.6.3 Required documents

Filing a claim will require Collection Agency Service France to have the following documents on hand:

– Original Power of Attorney, signed by the creditor’s legal representative
– Copies of any contractual documents, including orders, delivery notices, invoices, and confirmations

1.6.4 Expected timeframe and outcome

Almost 90 percent of receivership proceedings convert to bankruptcy. The entire process can take ten years to complete.

1.6.5 Limited companies

Unlimited and limited companies are subject to the same consequences when undergoing receivership or bankruptcy proceedings.

1.6.6 Non-Limited companies/individuals

Unlimited and limited companies are subject to the same consequences when undergoing receivership or bankruptcy proceedings.

1.6.7 Pool of creditors

Courts may decide to build two separate pools of creditors during an insolvency proceeding. The first pool is made up to credit and lending institutions that have done business with the insolvent entity. The second is made primarily of suppliers, distributors, and providers of goods or services to the company. Each pool is separately invited to comment on the recovery plan as it is being drafted by the court.

Representatives of the creditors will inform the creditors when the proceedings have opened and their declaration of claims has been received. The representative will then ask the judge to accept or reject those claims. It should be noted that only the representatives are able to act on behalf of the creditors’ interests.

1.6.8 Rescission

The suspect period begins when the cessation of payments opens. Payments made during the cessation period maybe declared void if the party was aware of the cessation of payments.

1.7 Arbitration and Mediation

French law allows arbitration and mediation, but these are rarely used during disputes.