What does debt collection mean?

The word debt collection originally comes from the Italian incasso, which directly translates to 'box' or 'chest'.

In the Nordic countries, the word debt collection is synonymous with the recovery of money owed, and it is said that ever since there has been trade, there has also been a need for debt collection.

What is debt collection?

Debt collection is a process that is initiated when a debtor/obligor owes money to a creditor and the creditor now wants to recover it.

In Denmark, only lawyers, debt collection companies and the creditor themselves are allowed to carry out debt collection. This means that you are not allowed to collect debts on behalf of others unless you are a licensed lawyer or a debt collection agency.

If the creditor handles the debt collection themselves, it is commonly referred to as self-collection, while debt collection handled by a debt collection company or lawyer is often referred to as third-party debt collection. Regardless of whether it is self-collection or third-party collection, they are two sides of the same coin: debt collection.

Basically, there is no legal difference between debt collection by a debt collection lawyer, a debt collection agency or by the creditor themselves. They can and do basically the same things. However, many choose to outsource their debt collection so that the company can focus on running their business. Collection agencies often have far better processes and greater authority than if the creditor was doing the collection themselves.

What does debt collection include?

Whether it's the creditor, the creditor's debt collection company or a debt collection lawyer, the purpose is the same: to collect one or more unpaid amounts, typically from an unpaid invoice.

Before the debt collection process is initiated, the debtor must be notified. This is done on the basis of a debt collection notice, i.e. a debt collection notice where the debtor has a minimum of 10 days to pay.

The debt collection process itself often varies from creditor to creditor and from debt collection company to debt collection company. The collection process can include reminder letters, interest accrual, calls, installment plans, physical attendance, garnishment and enforcement.

In other words, there is no set script for the actual debt collection process, and it is typically also dependent on how the debtor reacts during the collection process.

What is judicial debt collection?

There are basically two different types of debt collection in Denmark: judicial debt collection and extrajudicial debt collection.

While extrajudicial debt collection is carried out by a debt collection company, a lawyer or by the creditor themselves, judicial debt collection is carried out with the help of the enforcement court or civil court.

To initiate judicial debt collection, the creditor or the creditor's collection partner must prepare a payment demand. The payment demand can be found on the bailiff court's website.

There is no requirement that an out-of-court debt collection process must have been carried out prior to judicial debt collection; it is entirely up to the creditor. In practice, however, most people choose to carry out an extrajudicial debt collection process first, as the enforcement court often has waiting time and fees associated with the start-up.

What are the costs of debt collection?

The price of debt collection in Denmark varies greatly depending on whether you choose a debt collection lawyer, a debt collection company or want to manage the process yourself, either fully or partially.

For example, many debt collection companies operate a "no cure, no pay" model, where the debt collection company takes a portion of the attributed costs if the case is successfully concluded. In contrast, many lawyers typically charge a fixed hourly rate.

The price of debt collection can also vary depending on the size and number of your cases. If you have many annual debt collection cases, it will typically also be possible to negotiate prices and terms.

Who can help with debt collection?

If you don't want to handle your company's debt collection yourself, you should consider a debt collection company like Collectia or look for a debt collection lawyer. You can find a debt collection lawyer on Advokatnøglen, for example.

We recommend that you have a thorough discussion with your potential partner prior to working with them. For example, many debt collection companies have made debt collection easy and affordable with online access and the like.