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Best Strategies for Successfully Collecting a Debt in Italy

Top  Strategie per il Recupero Credito in Italia

Introduction to Debt Collection in Italy

An overview of the debt collection process in Italy

Debt collection is a crucial process to ensure the financial stability of businesses and preserve their ability to operate in the market. It involves activities designed to encourage the payment of unpaid debts, which can be handled either amicably through reminders or through legal procedures when necessary. In Italy, delayed payments are one of the main causes of business bankruptcy, and understanding the debt collection procedures is essential to address and prevent crisis situations.

The lack of liquidity due to unpaid invoices can jeopardize the survival of businesses, especially small and medium-sized enterprises, which often lack the resources to cope with prolonged delays. Therefore, knowing how to properly initiate debt collection, from managing initial disputes to more structured legal actions, allows businesses to protect their rights and minimize financial risks. Understanding and applying debt collection procedures is not just a strategic option, but a necessity to maintain economic balance and protect one’s business in a competitive and often unstable market.

Debt collection in Italy can be divided into two main stages: extrajudicial collection and judicial collection:

Phase A: Extrajudicial Collection

This phase focuses on quick and less costly solutions, aiming for a direct agreement between the parties. Tools used include:

  • Reminder letters, sent by the creditor or specialized agencies, to inform the debtor of the amount due and the potential consequences of non-payment. (see examples of reminder letters)
    • Direct contacts, such as phone calls or meetings, to negotiate payment methods, including installment plans or discounts on the total amount owed.

This Extrajudicial phase offers advantages such as flexibility to negotiate customized terms, maintain good business relations between creditor and debtor, and reduce reputational risks as the dispute remains private. However, it also has limits: its success depends on the debtor’s cooperation and does not provide legal tools to force payment. If unsuccessful, the creditor may be obliged to move to judicial collection.
If, after the reminders, the debtor has not fulfilled a past-due payment obligation, the creditor can send a formal notice (“Messa in Mora”), a document governed by Article 1219 of the Italian Civil Code, which:

  • Requests payment with a specified deadline (usually 15 days).
  • Warns of legal consequences in case of non-compliance (e.g., legal action).
  • Places the debtor in default, suspends the statute of limitations, and starts accruing default interest.

Assistance from a lawyer in these actions can be useful to ensure all procedures are carried out correctly and to increase the chances of reaching an effective agreement without resorting to the courts.

Before the Judicial Phase: Attention to Compulsory Mediation!

Civil and commercial mediation in Italy is an alternative solution to resolve disputes quickly and collaboratively. Introduced by Legislative Decree no. 28/2010, it is mandatory for specific matters such as property rights, inheritance, and banking contracts (more information in our dedicated article). The recent Cartabia reform (Legislative Decree no. 149/2022) has expanded the scope of mandatory mediation, increased penalties for non-compliance with the obligation to participate, and ensured free legal aid for those entitled to it. During compulsory mediation procedure in Italy parties must be assisted by their lawyers (Article 8, L.D. 28/2010).

Mediation is characterized by its flexibility and informality, with an impartial mediator facilitating dialogue without imposing binding decisions, unless both parties agree otherwise. Its main advantages include speed, low costs with tax benefits, confidentiality, and the possibility of tailored solutions that preserve relationships between the parties. Moreover, agreements reached through mediation constitute an enforceable title, making them immediately applicable without further legal proceedings (Article 12, Legislative Decree 28/2010).

 

Phase B: Judicial Collection

If the extrajudicial phase does not provide results, the creditor should pass to judicial collection. In many cases, the creditor can request an injunction, a court order in Italy to compel the debtor to pay. If the debtor does not oppose or pay within 40 days, the creditor can proceed with forced execution, which includes:

  • Writ of injunction (“Precetto”): a formal ultimatum served to the debtor, for all the sums owed.
    • Seizure (“Pignoramento”): if the debtor does not pay, movable or immovable property may be seized and sold.

Difference Between Commercial and Private Debts:

• Commercial Debts: These debts arise from transactions between businesses or between a business and a consumer, as its customer. They are governed by formal contracts that set payment terms, penalties for delays, and other specific clauses. Recovering commercial debts may require sending formal reminders or, in extreme cases, legal suits. Management of the commercial debts must be carefully documented to avoid legal complications.
• Private Debts: These refer to debts between individuals, which often lack formal documentation, making recovery more complicated. These debts are often handled more delicately, especially if personal relationships could be affected by the request for payment. However, it is still important to maintain a formal approach, such as sending written reminders and, if necessary, involving a lawyer.

Legal Options for Debt Collection in Italy

How to Start Legal Action to Recover a Debt in Italy

Injunction Order:

The injunction order is a procedure provided by Articles 633 and following of the Italian Civil Procedure Code, which allows a creditor, with written evidence, to obtain an enforceable title quickly without going through a full trial.
To request an injunction order, the debt must be certain, liquid, and due (Article 633 of the Civil Procedure Code). A debt is certain when the obligation between the debtor and creditor is clear and unequivocal, such as through a signed contract or a recognized invoice. It must be liquid, meaning the amount of the debt must be determined or determinable without ambiguity, such as in the case of an invoice with a specific amount to be paid. Finally, it must be due, meaning the debt must be immediately payable, without suspensive terms or conditions, such as in the case of a payment due without delays. Additionally, it is essential to present written proof, such as a contract or unilateral promise, to show the existence and nature of the debt. The creditor’s lawyer submits a written request to the Italian competent judge, who, upon verifying the documents, may issue an injunction that compels the debtor to pay within 40 days. If the debtor does not object within this period, the injunction becomes enforceable, allowing the creditor to proceed with seizure. In the case of opposition, the debtor may contest the request within 40 days from notification or in exceptional cases such as irregularities in the notification or force majeure after this period.

Italian Regulations on the Prescription of Debts

Prescription ensures certainty of rights over time, establishing that, after a certain period, a right can no longer be asserted. This institution limits legal uncertainty, preventing people from being called to answer for obligations dating back in time, where evidence may be hard to obtain. In Italy, prescription promotes legal stability and security in transactions, reducing the risk of disputes for obligations too old.
In Italy, the prescription of debts is regulated by the Civil Code, particularly Articles 2934 and following. In general, most debts are prescribed after ten years (Article 2946 of the Civil Code), but there are variations depending on the type of obligation. Article 2948 of the Civil Code establishes that debts related to interest and, in general, all sums that must be paid periodically, either annually or at shorter intervals, are prescribed within five years. This includes, for example, interest on loans or rents that must be paid at regular intervals. Prescription can be interrupted by legal actions, such as a payment request or the initiation of legal action. Additionally, prescription can be suspended in certain specific situations, such as between spouses or when the debtor hides maliciously the existence of the debt to the creditor (art. 2941 Italian Civil code).

Practical Tips for Debt Collection

How to Write an Effective Reminder Letter

Writing an effective payment reminder requires clear, professional, and respectful communication, with the goal of obtaining the payment due without damaging the relationship with the debtor. A well-structured reminder must contain essential information to be effective.
First, it is necessary to provide the details of both the creditor and the debtor. The creditor’s name, address, phone number, and email address must be clearly indicated so that the recipient can easily identify them. Similarly, the debtor’s details must be included to ensure the communication reaches the right person. Next, it is important to specify the exact amount to be paid, avoiding ambiguities that could cause confusion. The original due date of the payment must also be stated to emphasize that the deadline has already passed. The invoice number or contract reference will help the debtor quickly identify the debt, and if possible, a brief description of the service or product for which the payment is requested should be included for greater clarity.
To facilitate payment, it is essential to provide the necessary details for the transfer, such as the bank account number, IBAN, and BIC/SWIFT. If other payment methods, such as PayPal or credit cards, are accepted, relevant instructions should be provided.
The tone of the reminder is crucial: it is important to maintain polite and professional language, avoiding accusations or threats, especially in the first reminders. Clarity and conciseness are essential; the message should be expressed simply and directly, avoiding long or complex sentences. Showing empathy for any difficulties the debtor may face can contribute to obtaining a positive response and encouraging cooperation.

Be careful not to confuse reminders with legal notices!
If the reminder does not provide results, the next step is the legal notice, which has greater legal weight than the reminder. The legal notice is a formal act that informs the debtor of the intention to proceed legally if the payment is not made within a specified deadline. The legal notice is not just a warning, but a document that can be used as evidence in court if the matter escalates. The legal notice marks the transition from amicable resolution to legal action, increasing pressure on the debtor and providing the creditor with a solid basis for potential legal proceedings.

Techniques for Negotiating with Debtors

• Role of Negotiation: Negotiation is essential to resolve debt collection matters more efficiently than immediately resorting to legal action.
• Clear and Concise Communication: Use simple, understandable language to clarify the payment terms and avoid misunderstandings.
• Payment Flexibility: Offer different payment options and adapt the plans according to the debtor’s financial situation to facilitate debt settlement.
• Sensitivity to the Debtor’s Financial Situation: Recognize that each debtor may face financial difficulties and adjust the approach to find practical solutions.
• Active Listening: Understand the debtor’s circumstances and personalize the negotiation to meet their needs and financial capabilities.
• Emotion Control: Maintain a calm and professional demeanor to avoid conflicts and reach an amicable resolution.
• Legal Support: If negotiation fails, involving a lawyer can help guide the discussion and follow the correct legal procedures.
• Final Goal: Resolve the matter without resorting to legal actions, aiming for a mutually beneficial solution while preserving professional relationships.

How to Establish Clear Payment Terms to Avoid Future Delays

First, to avoid payment delays, it is essential to establish clear and well-defined payment terms with clients from the beginning. This involves creating a precise schedule that includes due dates, payment methods, and any penalties for late payments, such as an additional fee. It is crucial to state these issues transparently before the client signs the contract to prevent misunderstandings in the future.

Second, to ensure secure and reliable credit management, it is important to assess the client’s creditworthiness and to continuously monitor the financial situation of clients, especially in long-term relationships.

Third, sending payment reminders before the due date and issuing a timely follow-up in case of delay are fundamental practices to ensure payments are made on time. Another relevant strategy is offering incentives for early payment, such as discounts or gifts, which can encourage clients to meet deadlines, improving cash flow and reducing the risk of financial issues.

Moreover, the adoption of automated invoicing and payment systems, which allow for direct email invoicing and online payments, is a great solution to simplify and speed up the entire process (e.g., online invoicing platforms, accounting software, etc.).

Finally, to protect yourself from defaults, you can request guarantees or sureties. These legal instruments provide more security in case the client defaults, such as with bank guarantees or insurance sureties, which allow you to recover the credit from a third party.

Common Traps to Avoid

To avoid compromising debt recovery, it is crucial not to fall into some common mistakes:

  • Ignoring Deadlines: Failing to act promptly can lead to the expiration of the debt. It is essential to act before the legal deadlines expire to avoid losing the right to recovery. Moreover, late action reduces the possibility of recovery in case of less solvent debtors.
  • Illegal or Inappropriate Practices: Unfair pressure, threats, or intimidation can lead to legal damage. It is important to follow legal guidelines to avoid lawsuits or complications.
  • Neglecting Legal Advice: Consulting with a lawyer to evaluate the situation and manage debt recovery can save time and money. Legal advice ensures that every step complies with Italian laws.

Examples of Letters and Communications

Models of Reminder and Payment Request Letters

  • Example of a Reminder Letter:

Subject: Payment Reminder for Invoice No. XXX

Dear [Debtor’s Name],

We would like to remind you that the payment of €[amount] for invoice no. [Invoice Number], due on [date], has not yet been made. We kindly request that you settle the balance by [new due date]. Failure to make payment may result in further actions for debt recovery.

  • Example of Final Notice:

Subject: Final Reminder Before Legal Action

Dear [Debtor’s Name],

Despite previous reminders, the amount of €[amount] for invoice no. [Invoice Number], due on [date], remains unpaid. If payment is not received within [number] days, we will proceed with judicial debt recovery.

Case Studies and Practical Examples in Italy

Various practical cases handled by Lex IBC highlight the importance of adopting an appropriate strategy:

For instance, in the case of a debt of a French agent against an Italian company, the debtor proceeded to pay the full amount only after the issuance of the court order for payment. This example underscores how, in certain situations, resorting to more direct legal instruments may be necessary to ensure compliance with contractual obligations.

In another case, our formal notice was sufficient: the parties, a French company (creditor) and an Italian company (debtor), agreed on a repayment plan, thus avoiding further complications or judicial interventions. This demonstrates how a negotiated approach, even in the absence of formal proceedings, can yield satisfactory results for both parties.

A further significant example involves an assignment of an institutional Belgian creditor. In this instance, the debtor company had ceased operations, but a new company with the same business purpose, located at the same premises in Modena and managed by the same director, was active. Through negotiation, a substantial portion of the debt owed by the first inactive company was recovered from the director without initiating judicial proceedings. Had an agreement not been reached, the creditor would have been forced to undertake a complex and uncertain legal action to attempt to recover the debt from the new company which had the assets of the inactive debtor.

Conclusion

In conclusion, debt recovery in Italy requires a well-structured approach, starting from amicable solutions like reminder letters, negotiations, or mediation to more formal actions like legal procedures when necessary. The process is divided into two main phases: out-of-court recovery and legal recovery, each with its own advantages and challenges. While out-of-court methods offer flexibility and help maintain business relationships, legal recovery, including measures like a court order of payment and forced seizure, guarantees effectivity when required.

It is essential for businesses to establish clear payment terms from the start to avoid delays, staying alert.

The legal expertise of LEX IBC is at your disposal to guide you through every stage of the debt recovery process, offering tailored solutions to protect your business interests and improve financial stability. Let us help you recover your debts efficiently and protect your business from the risks associated with unpaid debts.

Marie Vanswevelt