Tightened rules make this possible. It can leave you with a hefty loss, which may not be covered by your credit insurance policy or may be limited. What exactly is the situation and what are possible solutions?
Tightened legal rules
Legal rules in Germany have been tightened. They make it possible for a receiver to reclaim a payment if the creditor (supplier) knew of the buyer's intention to harm other creditors. This presumption already exists when the creditor was aware of the buyer's impending insolvency. Knowledge of this, according to the highest German court, can be inferred from slow payments by the buyer, the agreement of payment deadlines or enforcement of a judgment.
Counter evidence is difficult
Only if the supplier can provide counter evidence that the aforementioned measures were precisely intended to improve the buyer's solvency can recovery of the payments received be avoided. Experience shows that this is difficult to prove in most cases. We are now aware of several recovery actions in which all payments received had to be repaid. A major financial noose, as years of turnover is much more than an outstanding balance.
Coverage through credit insurance?
If the supplier had a valid credit limit at the time of delivery, then the recovery action may be covered under the policy. But this is certainly not always the case! Moreover, the amount of compensation depends on the credit limit valid at the time of damage. Usually, this is much lower than the turnover over a longer period.
Possible solution
There are specialised insurers or credit insurers who issue additional cover for this type of situation. This cover is then tailored to the turnover with the German buyer instead of the (at the time of damage) applicable credit limit. And to prevent the credit insurer from only partially paying out a claim, defence costs are also covered. After all, the more likely a successful defence is, the less likely an obligation to pay out.
How to prevent?
It is wise - in the case of German buyers - to tighten up debtor management. Especially when invoices are not paid on time or in full, all alarm bells should go off. Do not simply accept a payment arrangement and consult with the customer and us on how to resolve it.
If you would like more information on how to cover yourself against reclamation actions by the receiver of your bankrupt German customer, please do not hesitate to contact us. We will be happy to help you.
