
Outstanding
An outstanding debt can arise in many ways, but it often occurs in connection with unpaid invoices, where a debtor has not paid a creditor's invoice for a delivered product or service.
An outstanding balance can also occur when a borrower fails to fulfill their obligations to a lender, for example a bank or a private individual.
In this article you can read more about outstanding debts between companies and customers, how an outstanding debt is collected and, not least, what you need to be aware of, such as that an outstanding debt can become time-barred.
What is an outstanding balance?
A financial outstanding is an outstanding balance between a debtor and a creditor - or between a lender and a borrower.
An outstanding debt occurs when a person or company fails to meet their obligations, such as paying an invoice or repaying a loan.
Outstandings can arise both between and across individuals and companies.
Collection of outstanding amounts
Fortunately, if a creditor wants to collect an outstanding debt, there are many good options available.
If the outstanding amount is based on an unpaid invoice, we always recommend a reminder process, possibly followed by debt collection, either in the form of self-collection or with the help of a debt collection agency.
You should start by sending a reminder for the non-payment, for example with a reminder letter, where a reminder fee may apply.
You have the option to send up to three reminders, subject to a reminder fee. If the reminders do not result in a payment from the debtor, debt collection is possible. Debt collection can either be handled by the creditor themselves or with the help of a debt collection agency or lawyer.
The debt collection process always starts with a debt collection notice. This can either be sent by the creditor or the debt collection agency.
Who can help with an outstanding debt?
In Denmark, the creditor, a debt collection agency, a lawyer or the bailiff can help with the collection of an outstanding debt.
In Denmark, you must be an authorized debt collection agency or lawyer to help with debt collection.
An outstanding debt can either be handled through extrajudicial debt collection(lawyer or debt collection agency) or judicial debt collection, i.e. with the help of the bailiff.
How is a financial debt handled?
There can be many reasons for an outstanding debt to arise. Often an outstanding debt is simple, but it can also be a deliberate action by the debtor, for example if the debtor does not have the means to pay or repay, or if the debtor for some reason does not want to pay.
A receivable is treated as an asset for accounting purposes and thus as part of a company's balance sheet. In company accounts, a financial receivable is often recorded as 'trade receivables'.
If the financial outstanding is unintentional on the part of the creditor and there is no prior agreement on the outstanding matter, a reminder process or debt collection process will often be needed to collect the funds.
Obsolescence of outstanding amounts
What most people don't realize is that an outstanding debt can become obsolete.
Most simple outstanding debts, such as unpaid invoices, are time-barred after 3 years. Other types of claims, such as promissory notes, statements of debt or other types of signed and acknowledged debt, generally have a statute of limitations of 10 years. A promissory note is often used when taking out a loan to document the terms and conditions of the loan. The document can be extremely useful if the loan is later recovered, as it provides the creditor with clear documentation of the circumstances of the case.
Regardless of whether it's a 3 or 10-year limitation period, this means that once the 3 or 10 years have passed, the creditor is no longer entitled to the outstanding debt and the money can no longer be claimed.
Regardless of whether it is a 3 or 10 year limitation period, both can be interrupted. Interruption of the statute of limitations is possible with the help of the bailiff.
Help with an outstanding issue
There are many ways to try to settle a debt.
One of the tools that can assist with a financial dispute between two parties is debt collection. Debt collection can either be carried out as self-collection, where the company handles all or part of the collection process itself, or it can be carried out by a debt collection company or a lawyer.
In Denmark, only authorized debt collection companies and lawyers are allowed to help others with debt collection. There are approximately 120 companies authorized by the National Police to operate a debt collection company.