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The Ultimate Guide to Debt Collection in Hungary

Welcome to the definitive resource for mastering debt collection in Hungary. Debitura leads the way in facilitating efficient debt recovery by leveraging our vast local knowledge and extensive international experience. This guide is designed to be your compass in the often-complex terrain of Hungarian debt recovery.

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The debt collection process in Hungary

Understanding the debt collection process in Hungary is essential for international creditors. This segment offers a concise overview of the key phases involved, presenting a clear pathway from the initial amicable efforts to potential legal recourse.

Amicable Collection Phase

Initiate with a friendly, out-of-court collection aimed at an amicable resolution. This phase generally includes: Direct Communication, Reach out to your debtor to understand the payment delay. Payment Reminders: Use various communication methods (email, SMS, letters) for sending reminders. Formal Notice: Issue a formal notice letter, outlining the debt and the consequences of non-payment.

Court Proceedings

If the amicable approach fails, escalate the matter through legal proceedings to obtain a court judgment, essential for debt enforcement.

Debt Enforcement

With a court judgment in hand, you can pursue coercive measures like asset seizure and sale, referred to as debt enforcement.

Bankruptcy Proceedings

In cases where the debtor has no assets for seizure, consider filing for bankruptcy. If the debtor is already bankrupt, submit your claim promptly for verification.

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An Inside Look at the Key Players in Hungarian Debt Collection

In Hungary, the process of debt collection is underpinned by a collaborative effort between specialized actors. These key players, including debt collection agencies, court bailiffs, and lawyers, each play a definitive role in ensuring a smooth and lawful recovery process. Below, we detail the responsibilities, typical tasks, and legal framework guiding each actor’s involvement in the Hungarian debt collection landscape.

Debt Collection Agencies in Hungary 

Debt collection agencies in Hungary initiate the recovery process, acting as intermediaries between creditors and debtors. These agencies handle preliminary efforts like sending reminders and conducting negotiations, aiming for a resolution without court involvement. Their operations are regulated by the Hungarian Financial Supervisory Authority, ensuring adherence to fair practices. However, these agencies cannot enforce payments or seize assets without transitioning the case to legal pursuits, setting limits on their capabilities.

Court Bailiffs in Hungary 

Court Bailiffs in Hungary, known as 'végrehajtó', are instrumental in the enforcement stage of debt collection. They are authorized to execute court orders by seizing assets, garnishing wages, or facilitating property auctions. Hungarian law, specifically the 1994 Act LIII on Judicial Enforcement, outlines their jurisdiction and actions. Engaging a bailiff becomes necessary when amicable resolutions fail, and a legal judgment or order is in place. The responsibilities and powers of court bailiffs highlight their pivotal role but also delineate the boundaries within which they can operate.

Source: Hungarian Courts

Lawyers Specializing in Debt Collection in Hungary 

Lawyers specializing in debt collection play a vital role in the Hungarian judicial phase of recovery. They are imperative for preparing and filing legal documents, representing creditors in court, and navigating the intricacies of Hungarian debt collection laws. Legal representation is particularly crucial in cases exceeding the jurisdiction of simplified procedures, such as payment order processes. Lawyers ensure compliance with regulations, notably the Civil Procedure Code, and leverage legal strategies to enhance recovery chances. Though pivotal in escalating claims legally, their services imply court involvement, contrasting with the pre-litigation tactics of collection agencies.

Tap into Debitura's expert network of local debt recovery bailiffs and lawyers. Start your claim now.

Navigating the Path of Amicable Debt Collection in Hungary

In Hungary, amicable debt collection is centered around a strategy that values relationships, emphasizing understanding and negotiation rather than conflict. This approach is designed to preserve a positive connection between the creditor and the debtor, focusing on solutions that are considerate of the debtor's circumstances while also ensuring the creditor can reclaim their funds. It adopts a non-confrontational tactic recommended for claims that are not contested, sidestepping the intricacies and expenses associated with legal proceedings.

It's advisable to begin with amicable, or out-of-court debt collection unless you're dealing with a contested claim or one that necessitates detailed legal examination.

The Integral Role of Collection Agencies in Amicable Settlements in Hungary

In the context of amicable settlements, collection agencies play a crucial role, particularly when creditors are either too busy or lack the necessary know-how for efficient debt recovery. Agencies such as Debitura provide tailored services that commence with the accurate identification of debts and debtors, followed by initiating contact via reminders or official notices. Their neutral perspective, free from personal bias, frequently leads to more effective debt resolution by offering unbiased, professional intermediation.

Benefits of Opting for Amicable Debt Settlement

Choosing amicable debt collection is advantageous for all involved parties; creditors avoid the hefty expenses of legal proceedings and maintain important business relationships thanks to the process's courteous nature. Debtors are offered more flexible repayment plans, easing their financial burden and promoting goodwill towards the creditor. This method emphasizes mutual respect and comprehension, fostering an environment conducive to meeting financial responsibilities.

Moving from Amicable Solutions to Legal Proceedings

Although amicable solutions offer numerous benefits, there are instances where legal action becomes necessary. Indicators for transitioning to legal collection include a lack of response, consistent failure to uphold agreements, or intentional avoidance by the debtor. Resorting to legal action should be a thoroughly deliberated final step, considering the substantial costs and duration of legal processes, and is typically contemplated only after all amicable avenues have been explored.

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The debt collection process in Hungary

Understanding the debt collection process in Hungary is essential for international creditors. This segment offers a concise overview of the key phases involved, presenting a clear pathway from the initial amicable efforts to potential legal recourse.

Overview of the Amicable Collection Process in Hungary

Pre-legal debt collection in Hungary is a crucial phase executed typically by creditors or professional agencies, focusing on negotiation and communication. This section outlines the essential components and best practices of this process.

Amicable Collection - Key Takeways
  • Direct Communication: The strategy includes direct communication methods like calls and visits to negotiate effectively.
  • Peaceful Collection: The process emphasizes peaceful collection methods, considering legal action as a last resort.
  • High Success Rate: The amicable collection process has a high success rate, often resolving cases without needing court intervention.
  • Legal Framework Awareness: Creditors need to be well-versed in Hungarian laws regarding collection costs and late payment interest.
  • Documentation Importance: Proper documentation and registration of agreements are crucial for enforcement.
  • Amicable Recovery Benefits: This approach offers benefits like lower costs, preserved business relationships, and quicker resolutions.
  • Creditor Considerations: Creditors should ensure they have the necessary documentation and understand Hungarian legal specifics.
  • Retention of Rights: Utilization of ownership retention and reclamation rights under Hungarian law is advised to safeguard creditors' interests.
  • Procedural Compliance: The effectiveness of retention of title agreements against third parties requires proper registration in relevant registries.

Navigating the Path of Amicable Debt Collection in Hungary

In Hungary, amicable debt collection is centered around a strategy that values relationships, emphasizing understanding and negotiation rather than conflict. This approach is designed to preserve a positive connection between the creditor and the debtor, focusing on solutions that are considerate of the debtor's circumstances while also ensuring the creditor can reclaim their funds. It adopts a non-confrontational tactic recommended for claims that are not contested, sidestepping the intricacies and expenses associated with legal proceedings.

It's advisable to begin with amicable, or out-of-court debt collection unless you're dealing with a contested claim or one that necessitates detailed legal examination.

The Integral Role of Collection Agencies in Amicable Settlements in Hungary

In the context of amicable settlements, collection agencies play a crucial role, particularly when creditors are either too busy or lack the necessary know-how for efficient debt recovery. Agencies such as Debitura provide tailored services that commence with the accurate identification of debts and debtors, followed by initiating contact via reminders or official notices. Their neutral perspective, free from personal bias, frequently leads to more effective debt resolution by offering unbiased, professional intermediation.

Benefits of Opting for Amicable Debt Settlement

Choosing amicable debt collection is advantageous for all involved parties; creditors avoid the hefty expenses of legal proceedings and maintain important business relationships thanks to the process's courteous nature. Debtors are offered more flexible repayment plans, easing their financial burden and promoting goodwill towards the creditor. This method emphasizes mutual respect and comprehension, fostering an environment conducive to meeting financial responsibilities.

Moving from Amicable Solutions to Legal Proceedings

Although amicable solutions offer numerous benefits, there are instances where legal action becomes necessary. Indicators for transitioning to legal collection include a lack of response, consistent failure to uphold agreements, or intentional avoidance by the debtor. Resorting to legal action should be a thoroughly deliberated final step, considering the substantial costs and duration of legal processes, and is typically contemplated only after all amicable avenues have been explored.

Explore our step-by-step guide for amicable debt collection

Step 1: Initiate Your Debt Collection Case in Hungary with Proper Preparation

Proper preparation is crucial when initiating a debt collection case in Hungary. It ensures a solid foundation for the collection process, increasing the likelihood of successful debt recovery.

Step 1.1: Verify the Validity of Payment Terms

Understanding and verifying the validity of payment terms under Hungarian law is a critical first step in preparing your case for debt recovery.

Common Payment Terms:

  • B2B (Business-to-Business): Payment terms in B2B transactions are usually negotiated between parties but must comply with Hungarian commercial law, ensuring fairness and transparency.
  • B2C (Business-to-Consumer): Payment terms for consumer transactions are regulated to protect consumer rights, often requiring clear communication and agreement on payment deadlines.
  • B2G (Business-to-Government): Transactions with government entities are subject to specific regulations, often involving predefined payment terms based on the nature of the contract.

Regulation regarding payment terms is detailed in the 23/2014. (VI. 30.) NGM regulation, which outlines the requirements for the administrative identification of invoices and receipts.

Step 1.2: Check the Statute of Limitations

The statute of limitations is a law that sets the maximum time after an event within which legal proceedings must be initiated. Understanding this is crucial for debt collection in Hungary.

Statute of Limitations in Hungary:

  • The general statute of limitations is five years, starting from when the claim becomes due.
  • For utilities, the statute of limitations is three years, and for telecommunications, it's one year.
  • The limitation period can be interrupted by legal actions or by the debtor’s acknowledgment of the debt.

An example of a letter to interrupt the statute of limitations must include the date, details of the debt, a clear statement interrupting the limitations period, and a signature. It must be addressed properly, ensuring it complies with Hungarian law requirements.

Step 1.3: Assembling Essential Documents

Gathering the necessary documents is a pivotal part of preparing for debt collection in Hungary. This ensures that you have a solid case backed by concrete evidence.

Essential Documents:

  • Contract agreements
  • Invoices and payment reminders
  • Communication records including emails, letters, and notes from phone calls
  • Any acknowledgment of debt by the debtor

Maintaining a communications record is critical. Document every interaction with the debtor, noting the date, method of communication, and summary of the discussion. This can be done through digital logs or keeping physical copies of correspondence.

By rigorously following these initial preparations, you're setting a strong foundation for your debt collection case in Hungary, amplifying the potential for a positive outcome. The emphasis on correct documentation, understanding legal nuances like the statute of limitations, and verifying payment terms shapes a well-rounded approach to efficient debt recovery.

Step 2: Initiating Communication: Calling Your Debtor

One of the most effective strategies in the amicable phase of debt collection is maintaining an open line of communication with debtors. Directly contacting a debtor can foster cooperation and lead to mutually agreeable solutions. Phone calls, in particular, serve as an excellent channel for negotiations, providing an immediate and personal way to address the issue.

Introduction to Calling Your Debtor

Communicating directly with a debtor is crucial during the amicable collection phase. This step not only opens the door to understanding the debtor's situation but also allows for exploring amicable resolutions. Phone conversations are particularly effective in this context, as they enable real-time dialogue and negotiation, potentially leading to the swift resolution of the debt.

Preparing to Call Your Debtor

In Hungary, strict regulations govern extrajudicial debt collection communications. It is imperative to approach debt collection calls with a deep understanding of these laws, ensuring all communications are transparent, fair, and within legal boundaries. This legal adherence safeguards both parties and upholds the integrity of the collection process.

Before initiating a call, having a comprehensive understanding of the debt in question is essential. This entails gathering all relevant information, such as the debt's origin, itemized breakdown of amounts (principal, interest, fees), and any prior attempts at communication. This preparation facilitates a factual and productive conversation.

Best Practices When Calling Your Debtors


  • Maintain respectful and professional communication, aiming to understand the debtor's situation.
  • Clearly articulate the purpose of the call, along with detailed information about the debt.
  • Discuss feasible solutions, such as payment arrangements that consider the debtor's financial situation.


  • Avoid using aggressive or threatening language to avert harassment claims.
  • Refrain from making demands or promises that fall outside the legal purview.

Documenting the Call

Documenting the details of the conversation meticulously is crucial. This documentation can serve as vital evidence if the collection process escalates to judicial proceedings. Accurate records ensure clarity and accountability for both parties.

Following a call, it's essential to send a written summary of the discussed outcomes and any agreed actions to the debtor. This practice not only provides a clear record of the communication but also reinforces the discussed agreements and next steps.

Compliance and Consumer Protection

Adhering strictly to Hungarian regulations on debtor communication is non-negotiable. These laws are designed to prevent harassment and ensure transparency throughout the collection process. By complying with these guidelines, the integrity of the amicable collection phase is preserved, laying a strong foundation for potential future negotiations.

Adopting a well-prepared, respectful approach to calling debtors can significantly influence the outcome of the amicable collection phase. By understanding and adhering to the legal frameworks, embracing best practices, and documenting every step of the process, creditors can navigate these conversations effectively, fostering a cooperative and productive environment for debt resolution.

Step 3: Initiating Soft Recovery Through Payment Reminders (With Free Template)

Understanding the pivotal role of payment reminders in the amicable phase of debt collection is crucial. Towards this, we navigate the nuanced terrain of friendly reminders and more formal notices within the Hungarian legal context, empowering creditors with the knowledge to undertake this process meticulously and compassionately.

Understanding Payment Reminders in Hungary

In Hungary, a payment reminder serves as an official nudge to debtors regarding outstanding invoices or financial obligations. This not only encapsulates a friendly approach but also marks the onset of more structured dunning procedures should the friendly reminder not yield the intended outcome. The distinction lies in the severity and formality of the communication sent to the debtor.

Legal Framework for Payment Reminders

The Hungarian Civil Code specifies that debtors have a 30-day window to settle their dues following a payment reminder if the contract lacks a clear payment deadline. This reminder plays a critical role in marking the debtor's default status, potentially influencing subsequent collection efforts and legal actions.

Preparing to Send a Payment Reminder

  • Identification of both debtor and creditor
  • Details of the debt: invoice number, amount, deadline
  • A new deadline for clearing the debt
  • Consequences of failing to meet the new deadline

Verification of the debt's validity and clarity in communication are paramount to ensure compliance with the Hungarian legal framework.

Crafting an Effective Payment Reminder

A professionally toned reminder fosters a positive relationship with the debtor, encouraging them to settle their dues. Key elements to include:

  • Invoice and debt specifics: number, amount, previous correspondences
  • Clear expression of a willingness to find amicable solutions

Sending the Reminder

Opting between email and postal mail hinges on the balance between convenience and the need for evidentiary proof. The significance of a delivery receipt, especially in potential legal scenarios, cannot be overstated.

Follow-Up After Sending a Reminder

Should the reminder go unnoticed, subsequent steps might involve additional reminders or escalation to formal collection measures. Flexible negotiations for payment schedules can be a viable pathway should the debtor express an inability to fulfill immediate payment obligations.

Documentation and Record-Keeping

Maintaining exhaustive records of all debtor communication is indictive of due diligence and could play a decisive role in possible legal proceedings. This includes timestamping all correspondences and tracking response patterns.

Utilizing this comprehensive approach to payment reminders not only underscores the creditor's commitment to maintaining constructive debtor relations but also aligns with the legal requisites 

Payment Reminder Template

Below is a legally compliant and best practice payment reminder template that combines a friendly yet firm approach, in accordance with Hungarian laws. This template can be adjusted to fit your specific circumstances and ensures clarity, respect, and a path towards resolution.

To: [Debtor's Name/Company Name]

Address: [Debtor's Address]

Date: [Insert Date]

From: [Your Name/Company Name]

Your Address: [Your Address]

Your Contact Information: [Your Email and/or Phone Number]

Subject: Reminder of Unsettled Payment for Invoice #[Insert Invoice Number]

Dear [Debtor's Name or "Valued Customer"],

I hope this message finds you well. We are reaching out regarding an outstanding payment that appears to have been overlooked. As a valued customer, we understand that things can slip through the cracks, and we are here to assist you through this oversight.

Outstanding Payment Details:

  • Invoice Number: [Insert Invoice Number]
  • Amount Due: [Insert Amount Due]
  • Original Due Date: [Insert Original Due Date]

In alignment with the Hungarian Civil Code, we kindly remind you that the balance was due [Insert Number of Days Late] days ago. We respectfully request that this payment be settled by [Insert New Deadline], which is a 30-day extension from today, in accordance with our legal obligations.

Why is this payment important?

  • It ensures the continued provision of [Product/Service] without interruption.
  • It leads to a healthier business relationship between us.

What are the next steps?

  1. Review the attached invoice and payment details.
  2. Settle the outstanding payment by the new deadline: [Insert New Deadline].
  3. Contact us at [Your Contact Information] if there are any issues or if you need to discuss a payment plan.

If the Payment Is Already Made:

If you have already settled this invoice, please disregard this reminder, and accept our sincere thanks. We would appreciate it if you could confirm the payment date and method, allowing us to update our records accordingly.

Need to Talk?

We understand that financial situations can change. If there are any concerns about settling this payment, please don't hesitate to get in touch. We are more than willing to discuss alternative arrangements that can benefit both parties.

Thank you for your immediate attention to this matter. We value your business and look forward to resolving this outstanding payment amicably.

Warm regards,

[Your Name/Signature]

[Your Position]

[Your Company Name]

[Your Contact Information]

Note: Be sure to customize the template with the relevant details before sending it out. Adjust the tone and details based on your relationship with the debtor and the nature of the debt.

Step 4: Send a Letter of Formal Notice

Demand letters play a pivotal role in the debt collection process in Hungary, serving as a bridge between nonchalant reminders and potential legal actions. They signify the creditor's readiness to escalate matters should payments remain unsettled. Understanding the proper crafting and dispatch of these letters is crucial for a non-intrusive yet firm approach to debt recovery.

Understanding Demand Letters

  • Definition and Legal Standing: A demand letter, as recognized in the Hungarian debt collection framework, is a formal notification dispatched by the creditor to the debtor. It delineates past-due payments and legally intimates potential consequences for non-compliance.
  • Payment Reminder vs. Demand Letter: Unlike a gentle payment reminder, a demand letter carries a formal tone and signifies impending legal consequences. This distinction underscores the demand letter's criticality in the debt recovery process.

Legal Foundations for Demand Letters

Hungarian law dictates a structured approach to debt collection, within which demand letters operate as a formal notice to defaulting debtors. It flags the transition from amicable reminders to potential legal resolution, thereby emphasizing its significance in the collection process.

Essential Information: A legitimate demand letter must contain the debtor's name, the overdue amount, specifics of the original invoice, and a precisely stated deadline for payment. Ensuring these details are accurate and comprehensive is fundamental to the demand letter's efficacy and legal standing.

Crafting an Effective Demand Letter

The construction of a demand letter in Hungary necessitates a delicate balance between firmness and professionalism. Here are some guidelines:

  • Tone and Language: The letter should convey urgency and the seriousness of the situation through a professional tone, avoiding any language that could be perceived as overly aggressive or threatening.
  • References to Prior Communications: Incorporating mentions of previous attempts to resolve the matter amicably can strengthen the demand letter's position.

Delivery Methods and Considerations

Ensuring the demand letter reaches the debtor is pivotal. Considerations include:

  • Digital vs. Physical Delivery: While digital communications offer convenience, sending the demand letter via registered mail ensures there's proof of receipt, crucial for potential legal proceedings.
  • Choice of Delivery Method: Selecting the appropriate method hinges on various factors, including the debtor's history of responsiveness and the nature of your relationship.

Actions Following the Demand Letter

Post-dispatch, several paths may unfold:

  • Ignored Letters: If the demand letter goes unanswered, further steps may involve additional reminders, exploration of payment negotiations, or escalation to legal proceedings.
  • Partial Responses: Any response from the debtor, even if incomplete, opens avenues for negotiations. Assess these meticulously before proceeding.

Documentation and Compliance

Record-keeping of all related communications and responses is essential, not only for internal documentation but also as part of the legal compliance with Hungarian law governing debt collection.

In summary, while the demand letter is a crucial strategy in your debt collection toolkit, understanding its proper use and legal standing in Hungary can optimize your chances of successful debt recovery without needing to resort to court. Remember, each letter must be tailored, both in tone and content, to align with Hungary's legal requirements, ensuring the possibility of amicable settlement before considering legal action.

Step 5: Calculate Late Payment Fees

In the realm of debt collection, understanding the spectrum of permissible fees ensures both compliance and effectiveness. In Hungary, creditors are entitled to add certain costs directly attributable to the case. These include:

  • Legal Proceedings Costs: Expenses incurred during legal attempts to recover the debt, including court fees.
  • Attorney Fees: Charges levied by an attorney engaged in the debt collection process.
  • Collection Agency Fees: If a collection agency is employed, their service charges are recoverable.

In Hungary, the fee structures slightly vary for Business-to-Business (B2B) and Business-to-Consumer (B2C) transactions, with stringent prerequisites for fee imposition to ensure fairness and transparency.

Regulatory Framework and Limitations on Fees

The imposition of additional fees is bound by strict legal guidelines aimed at ensuring reasonability and necessity. The core regulatory principles include:

  • Maximum Chargeable Fees: Fees must not exceed reasonable limits relative to the principal debt, ensuring protection against potential exploitation.
  • Disclosure Requirements: Full transparency in fee structures is mandated, requiring upfront disclosure of potential charges to debtors.
  • Governing Laws: The process is underpinned by Hungarian legal frameworks to facilitate fair and just debt recovery practices.

Step 6: Calculate Interest Rates

When it comes to debt collection in Hungary, understanding how to accurately calculate interest rates on late payments is crucial for both protecting creditor rights and respecting debtor welfare. This section delves into the statutory interest rates applicable in various transaction types, including B2C (Consumer-to-Business), B2B (Business-to-Business), and B2G (Business-to-Government).

Interest rates for late payments in Hungary are regulated by a blend of EU directives and national laws. Notably, the European Union's Your Europe Portal outlines the framework under which businesses are empowered to charge interest on overdue payments, thereby facilitating more efficient debt recovery, particularly for SMEs.

Step 7: Implementing a Payment Agreement for Debt Resolution

Offering a payment plan is a strategic move towards amicably resolving debt collections in Hungary. Not only does it demonstrate a flexible and understanding approach, but it also provides a structured path for debtors to meet their obligations without the need for legal actions. A well-negotiated agreement can serve as a bridge towards resolving financial disputes while maintaining professional relationships.

Formalities: Ensuring a Legally Compliant Settlement

To ensure the payment plan is legally valid and acknowledged as a debt acknowledgment, certain formalities must be observed:

  • Written Agreement: The payment plan should be documented in a written agreement, clearly outlining the terms, payment schedule, total debt amount, and any interest or collection costs applied.
  • Negotiation Record: Maintain a record of negotiations leading to the agreement, demonstrating both parties’ willingness to reach a mutually acceptable solution.
  • Legal Approval: Although not always required, obtaining legal validation or advice on the agreement ensures compliance with Hungarian law and strengthens its enforceability.
  • Security: If deemed necessary, creditors may request additional security from the debtor to safeguard against non-compliance with the payment agreement.

Compliance with these formalities not only solidifies the agreement's legal standing but also provides a clear framework for resolution, minimizing future disputes.

Sample Payment Agreement

Below is a sample payment arrangement compliant with Hungarian law, incorporating best practices for clarity and enforceability:

Payment Agreement

Between [Creditor's Name], hereafter referred to as "Creditor," and [Debtor's Name], hereafter referred to as "Debtor."

Whereas, the Debtor owes the Creditor a total sum of [Total Debt Amount] HUF due to [Reason for Debt]. The parties agree to settle this debt under the following conditions:

The Debtor agrees to pay the total sum in [Number of Installments] monthly installments of [Amount] HUF each, commencing on [Start Date] and concluding on [End Date].

Any delay in payments shall accrue interest at the rate of [Interest Rate], in line with the European Central Bank's reference rate.

This agreement serves as an acknowledgment of the debt by the Debtor.

Failure to comply with the terms may result in legal actions, including execution proceedings, without further notice.

This agreement is governed by the laws of Hungary and is subject to the jurisdiction of [Appropriate Court].

Executed this [Date] day of [Month], [Year].

[Creditor's Signature]                               [Debtor's Signature]

Creditor's Name: _________________Debtor's Name_____________________

Icon - Elements Webflow Library - BRIX Templates

Free Demand Letter Template

Demand Letter Template Compliant with Hungarian Law

[Your Company Name]

[Your Company Address]

[City, Postal Code]


[Email Address]

[Phone Number]

[Today’s Date]

[Debtor’s Name]

[Debtor’s Address]

[City, Postal Code]


Subject: Formal Demand for Payment

Dear [Debtor’s Name],

I am writing to you on behalf of [Your Company Name] regarding your outstanding account balance with us. Despite previous reminders, we have yet to receive payment for the following invoice(s):

  • Invoice Number: [Invoice Number]
  • Invoice Date: [Invoice Date]
  • Amount Due: [Amount Due] HUF

According to our records, this amount was due on [Due Date], making your payment overdue by [Number of Days] days.

Under the Hungarian Civil Code and the EU Directive on combating late payment in commercial transactions, we are entitled to charge interest on late payments and claim compensation for recovery costs. The overdue amount now stands at [Total Amount Due with Interest] HUF as of [Today’s Date], which includes interest calculated at a rate based on the European Central Bank's rate plus a margin, as well as potential administrative costs.

Please consider this letter as a formal demand for the immediate settlement of your outstanding balance. We request that you make the payment no later than [Final Deadline Date] to avoid further legal actions, including but not limited to, filing a claim in court, seeking a payment order, or initiating enforcement proceedings to recover the debt.

This demand letter is sent via [Method of Delivery: Registered Mail/Electronic Communication] to ensure proof of delivery, as is recommended under Hungarian law for such communications.

We value our relationship and prefer to resolve this matter amicably. However, should we not receive your payment or hear from you regarding payment arrangements by the specified deadline, we will be compelled to take further legal steps to ensure the recovery of the debt.

For any questions or to discuss payment options, please contact us at [Contact Information].

Thank you for your prompt attention to this matter.


[Your Name]  

[Your Position]  

[Your Company Name]  

Please review this letter with your legal advisor or a professional debt collection agency like Debitura to ensure compliance with Hungarian law and modifications as per your specific case. Tailoring the communication to not only meet legal standards but also suit your organizational tone and approach is critical in maintaining the balance between assertiveness and professionalism.

Invoking Retention of Title and Right of Reclamation Under Hungarian Law for Unpaid Goods

Understanding the principles of retention of title and the right of reclamation is cornerstone to ensuring creditor security in commercial transactions within Hungary. These legal frameworks provide a safeguard for creditors, particularly in instances where transactions have concluded, but full payments are pending.

Retention of Title in Hungary

In Hungary, the concept of retention of title (RoT) allows a seller to retain ownership over goods until the full purchase price has been received from the buyer. This mechanism serves as a crucial leverage for creditors by safeguarding their interests, should the buyer default on payment. Under Hungarian law, for the RoT to be enforceable, an explicit agreement in writing is essential. This agreement must clearly stipulate that ownership of the goods remains with the seller until full payment is effected by the buyer.

Notably, for the retention of title to be recognized against third parties, particularly in the case of immovable property, such a condition must be registered in the property registry. For movables, registration in the security interest registry, or in the relevant public ledger if applicable, is essential. Failure to properly register the retention of title agreement renders it ineffective against third parties who may acquire the property in good faith, even without the payment being completed by the original buyer.

The legal framework emphasizes that besides contractual agreements between the parties, adherence to procedural formalities, including proper documentation and registration, is indispensable to protect the creditor's rights effectively under RoT provisions.

Right of Reclamation in Hungary

The right of reclamation (RoR) in Hungarian law serves as a parallel mechanism to the RoT, empowering creditors to reclaim goods sold, especially in scenarios involving buyer insolvency or liquidation. This right significantly mitigates the risk creditors face, enabling them to recover the goods or their value from the debtors. The exercise of this right is especially crucial in insolvency contexts, offering creditors a key advantage over other types of claims in liquidation proceedings.

To successfully invoke the right of reclamation, creditors must demonstrate that the conditions outlined in their written agreement with the buyer have not been met, primarily focusing on the failure to complete payment. This prerequisite underscores the role of meticulously drafted agreements in safeguarding creditor rights.

Moreover, the strategic invocation of RoR in insolvency or liquidation contexts can significantly impact the creditor's ability to recover assets, positioning them favorably in the hierarchy of creditors and potentially insulating them from the broader risks of debtor insolvency.

Practical Tips for Enhancing Contractual Safeguards

To maximize the protective benefits of RoT and RoR in Hungary, businesses should meticulously draft their terms of service and sales contracts. Specifically, contracts should include clear, explicit clauses on retention of title and reclamation rights, ensuring these are unambiguously agreed upon in writing. Additionally, for applicable transactions, prompt and proper registration in the relevant registries is critical to enforce these rights effectively against third parties. Adopting these strategies not only fortifies creditor positions but also streamlines asset recovery processes.

Armed with a profound understanding of retention of title and right of reclamation under Hungarian law, creditors can confidently navigate commercial transactions, securing their interests effectively. Moreover, the foundational role of well-constructed agreements and adherence to statutory requirements cannot be overemphasized, serving as key pillars in the arsenal of creditor protection mechanisms.

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Find a Debt Collection Lawyer

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Ban, S. Szabo, Rausch & Partners

Ban, S. Szabo, Rausch & Partners is a Hungarian full service law firm with over 25 years of experience in the field of business law, including corporate law, transactions, litigations, real estate, energy law, TMT and banking.

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Racz Law Firm

Racz Law Firm - the leading Law firm in Budapest - handling your collections efficiently from notice letters to foreclosures. Trusted representation in Litigation, Arbitration, Foreclosure, Liquidation, and Bankruptcy matters for domestic and international clients.

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Vaczi Law Firm

Navigating legal complexities in Győr since 2009, Vaczi Law Firm specializes in effective debt recovery, ensuring your outstanding claims are enforced through meticulous legal procedures. Your path to resolution begins here.

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Debt Enforcement in Hungary

Debt enforcement in Hungary is a critical final step in the debt recovery process, encompassing legal actions to ensure obligations are met. This section provides a comprehensive guide to navigating this complex landscape effectively.

Debt Enforcement - Key Takeways
  • Court Order: A prerequisite for debt enforcement, ensuring legal oversight and fairness in the process.
  • Authorized Enforcers: Typically, bailiffs are authorized to enforce debts, following stringent documentation and procedure requirements.
  • Mandatory Legal Procedures: Adherence to the Bailiff Act and other regulatory laws is mandatory for initiating debt enforcement.
  • Role of Bailiffs: Essential in the recovery process, executing court orders, asset seizures, and salary attachments.
  • Financial Considerations: Creditors must evaluate the costs of enforcement actions against the expected debt recovery to optimize ROI.
  • Asset Tracing: Identifying debtor assets, including hidden ones, is crucial for determining enforceability of debt.
  • Enforcement Timeline: The process duration can vary, influenced by debtor cooperation and complexity of asset recovery.
  • Asset Seizure: A legal means to satisfy debts, with specific laws governing which assets can be seized.
  • Salary Attachment: A court-sanctioned action allowing a portion of the debtor's salary to be directed towards the debt.
  • Legal Framework: Governed by the Hungarian Civil Procedure Code and specific laws pertaining to debt collection and enforcement.
  • Debtor Protection Laws: Ensure fair treatment and prevent the undue hardship of debtors during the enforcement process.
  • Creditor Responsibility: Obliged to follow legal standards, avoiding abusive practices in debt collection.

The Role of Bailiffs in Debt Enforcement

Debt enforcement in Hungary heavily involves the participation of bailiffs, officially known as enforcement officers. These individuals play a crucial role in upholding the execution of court judgments related to debt collection. Below is an exploration of their responsibilities:

  • Bailiffs are tasked with executing court decisions, which involves the recovery of debts as decreed by the court.
  • They operate as independent professionals supervised by the Ministry of Justice, enhancing the integrity and impartiality of their actions.
  • Their monopoly on certain activities, such as the delivery of documents and the execution of legal judgments, places them at the forefront of debt enforcement actions.
  • Enforcement officers also assist with non-judicial debt collection by notifying debtors about their obligations and potential legal proceedings if debts are not settled voluntarily.

The Process of Debt Enforcement

The pathway to executing debt enforcement in Hungary is meticulous and regulated to balance the interests of creditors and debters. Key stages include:

  1. Initiation: The process begins upon the failure of out-of-court collection efforts, leading creditors to seek strict legal measures.
  2. Obtaining Court Judgment: Creditors must secure a court judgment confirming the debtor's obligation, which provides the legal backing for subsequent enforcement measures.
  3. Enforcement Measures: Employing methods like wage garnishment, seizure of assets, or other legal steps to recover the owed amounts.
  4. Resolution: The process aims at the satisfaction of the creditor's claim from the debtor's assets or income, respecting legal guidelines and the principles of fairness.

Legal Framework for Bailiff Operations and Debt Enforcement

Hungarian debt enforcement and bailiff operations are encapsulated within a robust legal framework ensuring fidelity, efficiency, and fairness:

The legal activities and the role of enforcement officers are definitively outlined in national laws and decrees, ensuring clear procedural directives.

A strong ethical code underpins these operations, providing a balanced respect for both debtor and creditor rights.

Ongoing efforts aim to reform the enforcement system, enhancing its humanity, efficiency, and adherence to the rule of law, including the imposition of fixed terms for appointments based on performance evaluations.

Pre-Enforcement Actions

Before engaging the formal debt enforcement process, certain preliminary steps are recommended to ensure readiness:

  • Investigation and Negotiation: Direct communication with the debtor is emphasized to understand their financial situation and negotiate feasible repayment plans.
  • Asset Evaluation: Assessing the debtor's assets, including those not readily apparent, forms the backbone of determining payment capability.
  • Legal and Financial Preparation: Evaluating the potential return on investment from legal action against the debt amount and considering the necessity of court orders before proceeding to litigation.
  • Settlement Attempts: Preferably, disputes are settled out of court through mutual agreement, highlighting the importance of early negotiations and compromise.
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Explore asset seizure and salary attachment options

Seizure of Assets in Hunary 

Asset seizure is a powerful debt enforcement tool utilized in Hungary when a debtor fails to comply with repayment obligations. This process involves legally confiscating property or assets owned by the debtor to repay the owed amount. Seizing assets is a step taken after obtaining a court judgment or enforcement order against the debtor.

  • When to Use in Debt Collection: Asset seizure is typically a last resort, utilized when all other amicable and legal efforts (including negotiations and payment plans) have failed to resolve the debt.
  • Advantages: Provides a tangible means for creditors to recover debts, ensuring that non-compliant debtors are held accountable.
  • What Assets Can Be Seized: Various assets can be targeted, including real estate, vehicles, bank account funds, and other valuable belongings.

Process of Asset Seizure

The following outlines the asset seizure process in Hungary:

  1. Obtaining a Court Judgment: Creditors must first obtain a legal judgment or enforcement order against the debtor, confirming the debt's validity and amount.
  2. Enforcement Request to Bailiffs: The creditor submits an enforcement request to a bailiff, who is responsible for carrying out asset seizures and sales.
  3. Asset Identification and Valuation: The bailiff identifies and assesses the debtor's assets to determine which can be legally seized and sold to cover the debt.
  4. Seizure and Sale: Assets deemed suitable for seizure are taken into possession by the bailiff, who then arranges for their sale. The proceeds from the sale are used to repay the creditor, after deducting associated legal and operational costs.
  5. Distribution of Proceeds: Any remaining proceeds after debt repayment are returned to the debtor.

It's essential for creditors to understand the legal framework governing asset seizures in Hungary to ensure compliance and effectiveness in debt recovery efforts.

Garnishment Rights and Salary Attachments in Hunary 

Garnishment and salary attachments are legal processes by which a creditor can intercept a portion of a debtor's income or funds held in financial accounts. This method is used to satisfy outstanding debts and can be applied to wages, bank account balances, and other income sources.

  • When to Use in Debt Collection: Garnishment is considered when direct payment from the debtor is unfeasible, and there is verifiable income or account balances that can be legally accessed.
  • Advantages: Ensures a portion of the debtor's income is consistently directed towards repaying the debt, providing a reliable recovery path for creditors.
  • Debtor Protection: Hungarian laws protect a certain portion of the debtor's income from garnishment to ensure they can meet basic living expenses.

Process of Garnishment and Salary Attachments

The following outlines the process for garnishing wages or attaching salary in Hungary:

  1. Obtaining a Court Judgment: Similar to asset seizure, a legal judgment or enforcement order is required to initiate garnishment.
  2. Issuance of Garnishment Order: The court issues a garnishment order directed at the debtor's employer or financial institution, mandating the withholding of a portion of the debtor’s wages or funds.
  3. Determination of Garnishable Amount: The amount that can be legally garnished from the debtor's income is determined, ensuring the debtor retains sufficient funds for basic needs as prescribed by law.
  4. Continuous Payment: The garnishment process involves regular payments from the debtor's income or accounts until the debt, including any applicable interests and costs, is fully repaid.

This enforcement strategy requires a nuanced understanding of legal obligations and protections to ensure fair and effective debt recovery. Creditors should navigate this process with the assistance of knowledgeable legal professionals.

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Insolvency Proceedings in Hungary: A Creditor's Guide

In Hungary, insolvency or bankruptcy represents a crucial aspect of debt recovery. This section outlines the process, legal framework, and strategies for creditors aiming to recover claims through insolvency proceedings.

Insolvency Proceedings - Key Takeways
  • Bankruptcy as a Debt Collection Strategy: Bankruptcy can indirectly aid debt recovery by distributing a debtor's assets among creditors.
  • Governing Laws: Insolvency proceedings are governed by Act XLIX of 1991 on Bankruptcy and Liquidation Proceedings, ensuring a structured process for debtors and creditors alike.
  • Initiation Conditions: Bankruptcy can be initiated by the debtor, creditors, or by court/administrative authority under specific conditions.
  • Prioritization of Claims: Claims are prioritized, with secured creditors generally having a higher recovery chance than unsecured ones.
  • Cost Implications: Proceedings are subject to fees, with the debtor bearing the cost and creditors potentially paying a claim registration fee.
  • Timeframe for Proceedings: The duration varies based on the case's complexity and legal system efficiency, impacting debt recovery prospects.
  • Outcomes for Creditors: Effectiveness for creditors depends on the debtor's asset situation and priority of their claims.
  • Bankruptcy Petition Process: Involves submitting detailed documentation, adhering to submission deadlines, and participating actively in proceedings.
  • Rights of Secured vs. Unsecured Creditors: Secured creditors have priority over unsecured ones, influencing the division of debtor's assets.
  • Post-Bankruptcy Scenarios: Options for debt recovery include liquidation or reorganization plans, with secured creditors typically favored.
  • Documentation and Legal Prioritization: Required claim forms and supporting documents are essential for entering the creditors' list and influencing priority.
  • Creditors' Role and Protection: Creditors can form a committee, vote on reorganization plans, and challenge detrimental transactions to protect their interests.

The Legal Framework for Insolvency Procedures

Understanding Hungary's insolvency law framework is crucial for effectively navigating bankruptcy proceedings. Hungarian insolvency proceedings are governed by the Act XLIX of 1991 on Bankruptcy Proceedings and Liquidation Proceedings (Csőd és Felszámolási Eljárásokról), which outlines distinct processes for bankruptcy and liquidation. These laws aim to ensure an orderly and fair resolution to insolvency cases.

  • Types of Insolvency Proceedings: Hungary distinguishes between bankruptcy proceedings intended for reorganization and liquidation proceedings aimed at concluding creditors' claims by asset distribution.
  • Thresholds and Conditions: A company is considered insolvent if unable to pay its debts within 30 days of the due date. Creditors or the debtor itself can initiate insolvency proceedings based on these conditions.

Source: General Information on Bankruptcy and Liquidation Proceedings - Hungarian Courts

Creditor's Rights and Priorities in Insolvency Proceedings

Understanding the priority of claims is essential in insolvency proceedings as it dictates the order in which creditors will be paid from the debtor's assets.

  • Secured vs. Unsecured Creditors: Secured creditors hold precedence over unsecured creditors, having claims on specified collateral assets of the debtor.
  • Priority Ranking: Within unsecured claims, employee wages, taxes, and essential services may receive preferential treatment.
  • Registration of Claims: Creditors must timely register their claims to participate in asset distribution.

Strategies for Maximizing Recovery from Insolvent Estates

To maximize debt recovery chances, creditors should consider the following strategies:

  • Early and Thorough Claim Submission: Ensure claims are substantiated with detailed documentation and submitted within stipulated deadlines.
  • Active Participation: Engage in proceedings actively, possibly joining a creditors' committee to have a say in critical decisions.

The Cost and Duration of Insolvency Proceedings

Bankruptcy proceedings in Hungary are accompanied by administrative costs, including court fees and charges related to the insolvency practitioner's activities. The duration varies based on case complexity and can range from several months to a few years.

  • Cost Implications: Registration fees for claims, court fees, and insolvency practitioner charges can affect recovery.
  • Duration Insights: The efficiency of the legal system and the complexity of the debtor's financial situation are significant factors.
Explore our step-by-step guide for insolvency proceedings

Step-by-Step Guide for Debt Recovery via Insolvency in Hungary

Traversing the terrain of insolvency to recover debts in Hungary requires a comprehensive understanding of the legal framework and procedural navigation. This step-by-step guide distills the essence of filing for bankruptcy as a creditor, offering a roadmap to channel your claims through insolvency proceedings efficiently. Backed by Debitura's decade-long expertise, each step herein provides actionable advice, bolstering your pursuit of debt recovery in Hungary.

Step 1: Check the Conditions for Filing for Bankruptcy (Filing Your Debtor)

Before embarking on the path of bankruptcy proceedings, it's imperative to ascertain whether your debtor fulfills the conditions for such an action. The initial criterion is the debtor's insolvency or impending insolvency, meaning they are unable, or will likely be unable, to fulfill their payment obligations. Further, there should be a substantial and unaddressed claim against the debtor. It's crucial to document all attempts at debt recovery prior to filing for bankruptcy, as this evidence may bolster your application. For detailed regulations, refer to the Act XLIX of 1991 on Bankruptcy Proceedings and Liquidation Proceedings (Cstv.).

Step 2: Filing a Bankruptcy Petition

Once you've confirmed eligibility, the next move is to file a bankruptcy petition against your debtor. This document must be filed with the court where the debtor’s headquarters were registered on the day of filing. The petition should detail the nature of the claim, evidence of the debtor's insolvency, and any prior attempts at settlement. It's important to ensure that all documentation is comprehensive and in compliance with Hungarian legal standards. There is a fee associated with filing, which varies based on the case's complexity. Guidance on formulating and submitting the petition can be found on the European e-Justice Portal.

Step 3: Notice of the Hearing

Following the acceptance of the bankruptcy petition, a hearing date will be scheduled. You will receive a notice of this date, and it is critical to prepare your case comprehensively by this time. The objective is to present a clear, unequivocal argument for the necessity and justification of bankruptcy proceedings against your debtor. Preparation might involve gathering additional evidence of insolvency, documenting the impact of owed debts on your operations, and potentially prepping witnesses who can attest to the debtor’s insolvency.

Step 4: Your Debtor Can Object to Your Application (Defense)

Anticipate your debtor's defense against the bankruptcy petition. They might challenge the claim's validity, dispute the insolvency status, or present evidence of ongoing efforts to repay debts. It is vital to review their defense critically and prepare counter-arguments. Familiarize yourself with common defenses and consult with legal counsel to anticipate strategic responses. This preparation ensures you are not left at a disadvantage during subsequent proceedings.

These first steps are foundational to navigating through bankruptcy proceedings for debt recovery in Hungary. A meticulous approach to each phase, underpinned by thorough documentation and legal compliance, positions creditors for a favorable outcome.

Stay tuned for the continuation of this guide, covering the hearing, decision-making process, potential for opposition, appeal and judicial review, and post-bankruptcy scenarios for creditors. Each step offers crucial insights to empower creditors in their quest to recover debts through insolvency proceedings in Hungary.

Remember, bankruptcy proceedings can be complex and might require professional guidance. Debitura, with its extensive experience in Hungarian debt recovery, is equipped to provide the support you need through these proceedings. Our expertise guarantees authoritative, engaging, and comprehensive navigation through the intricacies of insolvency for optimal debt recovery outcomes.

Step 5: The Hearing

The hearing is a critical step in the bankruptcy proceedings in Hungary, functioning as the juncture where vital decisions regarding the bankruptcy petition are deliberated upon by the court. This process ensures a fair and transparent discussion of the insolvency case and allows both the debtor and the creditor to present their perspectives and evidence. The hearing in Hungary usually adheres to the following structure:

  • Preparation: Creditors need to prepare all their documentation and evidence supporting their claim against the debtor. This can include contracts, failed communications, and financial records. Being well-prepared can significantly influence the outcome.
  • Representation: Both parties, the creditor and the debtor, have the right to be represented by lawyers. Given the complexity of insolvency laws, having legal representation is advisable to navigate the proceedings effectively.
  • Presentation: The court will allow both parties to present their case. This is the opportunity for the creditor to lay out the reasons for filing the bankruptcy petition and for the debtor to respond to these claims, possibly contesting them.
  • Deliberation: After presentations, the court may deliberate on the provided evidence and arguments. This could take place in a single session or multiple sessions, depending on the case's complexity.
  • Interim Decisions: The court might make interim decisions concerning the management of the debtor's assets or other matters relevant to the bankruptcy proceedings.

Debitura's experience emphasizes the importance of thorough preparation for the hearing. Ensuring that all documentation is orderly, claims are clear, and legal representation is competent can significantly impact the proceedings' outcome.

Step 6: Decision

Following the hearing, the court will come to a decision regarding the bankruptcy petition. This involves careful consideration of the evidence presented, the legal framework guiding insolvency proceedings, and the specifics of the case. The decision could take several paths:

  • Approval of Bankruptcy Proceedings: If the court finds the petition justified, it will approve the bankruptcy proceedings. This initiates the process of asset distribution according to Hungarian law's priority rules and aims to satisfy the creditors' claims to the extent possible.
  • Dismissal: The court may dismiss the bankruptcy petition if it deems that the conditions for bankruptcy are not met, or the creditor's claims are not sufficiently substantiated.
  • Reorganization: In some cases, the court may opt for reorganization rather than outright liquidation. This allows the debtor a chance to regain solvency under a court-approved plan.

The decision marks a significant milestone in the debt collection process, determining the creditor's ability to recover their claims. It's essential for creditors to be prepared for all possible outcomes and to consult with their legal representation on the next steps, depending on the court's decision.

Step 7: Opposition, Appeal, and Judicial Review

The decision of the court is not always final, as Hungarian law provides mechanisms for both parties to challenge the decision:

  • Opposition: The debtor can oppose the decision if they believe it was unjust. This must be done within a specific timeframe and requires substantial evidence to support the claims of injustice.
  • Appeal: Both the creditor and the debtor have the right to appeal the decision. An appeal could lead to a reevaluation of the case by a higher court, potentially altering the bankruptcy proceedings' outcome.
  • Judicial Review: In some instances, aspects of the case may be eligible for judicial review, especially if there are questions about applying the law.

Debitura advises creditors to carefully consider the benefits and drawbacks of pursuing an appeal or opposition. While these steps can potentially lead to a more favorable outcome, they also extend the timeframe of the debt recovery process and may incur additional costs.

Step 8: Post-Bankruptcy Scenarios for Creditors

After the completion of the bankruptcy process, several scenarios may unfold for creditors, each affecting the likelihood and extent of debt recovery:

  • Asset Distribution: If the bankruptcy leads to liquidation, the debtor's assets are distributed among the creditors according to priority rules. This may only partially satisfy the claims, depending on available assets.
  • Reorganization Success: If a reorganization plan is approved and successfully implemented, creditors might recover their debts over time, potentially in full or in part, according to the plan's terms.
  • Failed Reorganization: Should the reorganization attempt fail, the entity may yet undergo liquidation, leading to asset distribution as described above.

Debitura emphasizes the importance of closely following the post-bankruptcy process, ensuring that claims are rightfully registered and engaging actively in proceedings, when necessary, to maximize debt recovery chances.

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Recovering International Debts in Hungary

In an age where business boundaries dissolve across borders, international debt recovery becomes a complex yet imperative undertaking for global creditors. Hungary, with its unique legal and business environment, presents particular challenges in this arena. For foreign creditors seeking to navigate these complexities successfully, partnering with a local debt collection agency like Debitura equipped with 10 years of experience and solid partnerships with local attorneys proves invaluable. Understanding the nuances of Hungarian laws and cultural practices can significantly enhance the chances of successful debt recovery.

Collecting cross border claims - Key Takeways
  • Cultural Insights: Knowledge of local business culture is crucial for effective communication and debt recovery strategies.
  • Language Proficiency: Navigating debt collection without language barriers increases efficiency and understanding.
  • Legal Representation: Local legal representation or partnership with a local agency like Debitura is advisable for navigating the Hungarian legal system.
  • EU Regulations: Hungary, as an EU member, adheres to EU directives affecting debt collection, including GDPR for data protection.
  • European Payment Orders: Utilize European Payment Orders for streamlined recovery of uncontested cross-border debts in Hungary.
  • Litigation vs. Mediation: Consider alternative dispute resolutions as they can be more cost-effective and faster than court proceedings.
  • Consumer Protection: Be aware of Hungary’s robust consumer protection laws that may influence debt collection efforts.
  • Debt Collection Agencies: Agencies like Debitura can manage the collection process, adhering to local and international regulations.
  • Local Customs and Practices: Understanding and respecting local customs enhances creditor-debtor relations and facilitates payment recovery.
  • Interest and Fees: Familiarize with regulations regarding permissible interest rates and recovery fees to avoid legal pitfalls.
  • Professional Licensing: Ensure your debt collection partner is licensed and adheres to Hungarian and EU collection standards.
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Challenges for International Creditors Recovering Debt in Hungary

Addressing debt recovery in Hungary presents unique challenges for international creditors. Due to cultural, linguistic, and legal system differences, the approach to debt collection must be carefully strategized. Here are the key obstacles faced:

  • Cultural and Language Barriers: Understanding and respecting Hungary's cultural norms and communication styles are crucial. Misinterpretations arising from language differences can further complicate interactions.
  • Diverse Legal Frameworks: Hungary, like other countries, has its own set of laws governing debt collection. These may differ significantly from those in the creditor's country, necessitating a deep understanding of local legal procedures.
  • Extended Collection Timelines: The intricacies of cross-border debt collection often result in longer recovery times compared to domestic cases.
  • Enforcement Complications: Enforcing a judgment across borders can be cumbersome, entailing additional legal hurdles and potentially higher costs.

EU Wide Regulation: The European Late Payment Directive in Hungary

In an effort to standardize and streamline debt recovery practices across the European Union, Hungary adheres to the European Late Payment Directive. This regulation mandates:

  • Business-to-business payment terms not exceeding 60 days unless expressly agreed upon and justified.
  • Public authorities to settle their invoices within 30 days.
  • Automatic entitlement for creditors to charge interest on late payments and compensation for recovery costs.

This Directive aims to foster a culture of timely payments within the EU, offering protection and clear ground rules for international creditors pursuing debt recovery in Hungary. More about this directive can be found on the EUR-Lex website.

Enforcing Cross Border Claims in Hungary via the European Enforcement Order (EEO)

The EEO simplifies the recognition and enforcement of judgments across EU member states, Hungary included. Key aspects include:

  • Automatic Recognition: Judgments certified as EEO in one member state can be enforced in Hungary without further declaration of enforceability.
  • No Substance Review: The contents of the judgment cannot be contested during the enforcement process in Hungary.

This mechanism significantly reduces bureaucratic barriers, facilitating smoother and faster debt recovery processes for international creditors. The official EU guidance provides detailed information on the European Enforcement Order.

Recover Uncontested Monetary Cross Border Claims via European Order for Payment (EOP)

The EOP procedure offers a streamlined method for recovering uncontested monetary claims across EU borders, including Hungary. It involves:

  • Submitting a standard form application outlining the debt details.
  • Automatic recognition and enforcement of the EOP in all member states without the need for a declaration of enforceability.

This procedure reduces the complexity and duration traditionally associated with cross-border debt recovery. Find more about the EOP procedure on the official e-Justice portal.

Resolve Minor Cross Border Disputes via the European Small Claims Procedure (ESCP)

The ESCP provides an efficient avenue for resolving low-value (up to €5,000) cross-border disputes within the EU. It is characterized by:

  • A simplified process largely conducted in writing, minimizing court appearances.
  • Decisions under the ESCP being automatically recognized and enforceable across the EU.

This procedure aids international creditors in swiftly resolving minor disputes in Hungary without the procedural complexities of local courts. More information is available on the European Small Claims Procedure page.

Freeze Hungary Debtors' Assets via the European Account Preservation Order (EAPO)

The EAPO empowers creditors to prevent debt evasion by freezing debtors' assets in their bank accounts, applicable across EU member states, including Hungary. This order can:

  • Be issued without the debtor's prior knowledge, preventing asset transfer or concealment.
  • Secure the owed amount in the debtor's account until the creditor can enforce their claim.

An effective precautionary measure, the EAPO ensures that creditors have a tangible enforcement mechanism at their disposal. Detailed guidelines on obtaining an EAPO can be found on the European e-Justice portal.

Successfully navigating the complexities of international debt collection in Hungary requires a blend of patience, research, and often, professional assistance. By leveraging EU-wide regulations and specialized procedures such as EEO, EOP, ESCP, and EAPO, creditors can enhance their likelihood of recovering debts across borders, while maintaining compliance and ethical standards.

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Country Risk Rating

Doing Business in Hungary: Navigating Payment Terms, Corporate Structures, and Risks

Understanding the business environment in Hungary is crucial for international creditors. Familiarizing yourself with local payment practices, corporate structures, and the risk landscape is essential for effective operations. This section offers insight into Hungary's business dynamics, aiding in risk management and decision-making processes.

Our analysis concludes that the risk of doing business in Hungary is medium-low. Based on this medium-low score, we recommend being careful providing credit and considering charging upfront payment or using credit insurance when trading if you don't know the customer in Hungary well. If possible, provide a short credit period or even better upfront payment. The medium-low risk score is based on the following factors:

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Key Takeways
  • Diverse Corporate Structures: Hungary offers a range of corporate structures, adaptable to different business needs.
  • Extended Payment Terms: Average Days Sales Outstanding (DSO) indicates a trend toward longer payment cycles.
  • Increased Payment Delays: An observable rise in late payments, impacting cash flow across sectors.
  • Economic Growth: Despite global challenges, Hungary's economy shows resilience and growth potential.
  • Political Stability: A stable political environment contributes to a predictable business climate.
  • Investor Confidence: Continuing foreign investments signal strong investor confidence in the Hungarian market.
  • Legal Frameworks: EU directives and local laws offer mechanisms to address late payments and insolvencies.
  • Credit Insurance: Credit insurance is increasingly used as a tool to mitigate financial risks.
  • Liquidity Management Challenges: Businesses navigate liquidity issues due to delayed payments and economic fluctuations.
  • Inflationary Pressures: High inflation rates pose challenges for pricing, costing, and financial planning.
  • Technological Adoption: Leveraging technology for optimizing payment processes and reducing DSO.
  • Competitive Environment: The market's competitiveness necessitates strategic planning and risk assessment.
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Understanding DSO and Payment Behaviour in Hungary

In Hungary, the landscape of B2B transactions is marked by a cautious credit approach, reflecting broader economic uncertainties. According to the 2023 Atradius Payment Practices Barometer, there has been a significant 10% decrease in B2B sales made on credit terms, the sharpest decline observed among Eastern European countries surveyed. This shift points to a subdued domestic economic activity driving businesses to reconsider their credit policies (Source: Atradius Payment Practices Barometer 2023).

Despite the downturn, 46% of all transactions still rely on trade credit, with half of the Hungarian companies using it as a pivotal short-term financing tool. The average payment period has been slightly tightened from 43 to 41 days, indicating an increased risk aversion among businesses. Notably, late payments have surged, affecting 40% of the total value of B2B sales on credit, even as companies enforce stricter trade credit policies. 

Identifying Challenges:

The Hungarian market is currently grappling with several challenges, prime among them being an alarming 20% increase in late payments over the past year. This surge in delayed payments has exacerbated the financial strain on businesses, particularly affecting the construction sector where the average collection period has dramatically extended to 69 days. Companies are now dedicating more internal resources to credit management, thereby incurring higher costs (Source: Atradius Payment Practices Barometer 2023).

Moreover, bad debts account for 5% of all B2B sales on credit, signifying a considerable amount of unrecoverable funds. To manage liquidity pressures, businesses, especially within the transport sector, have adopted the practice of delaying payments to their suppliers. 

Exploring Solutions and Strategies:

  • Improving Internal Credit Management: A noteworthy 60% of Hungarian companies prefer handling customer credit risk in-house. This approach enables better monitoring of payments and early detection of potential delays, ensuring improved cash flow..
  • Utilizing Credit Insurance: Particularly within the machinery sector, 44% of businesses have turned to credit insurance as an effective mechanism to curb customer credit risk. This strategy offers a safety net against potential defaults, securing the company's financial stability.
  • Employing Factoring: Businesses are increasingly adopting factoring as a flexible solution to release tied up liquidity. This practice allows immediate access to operational funds, which is critical during economic downturns.

Considering Risk Mitigation Tools:

Given the precarious payment landscape in Hungary, it's imperative for businesses to adopt a diverse set of credit management strategies. Beyond traditional internal management, the strategic use of credit insurance and factoring can provide essential buffers against financial instability. This multifaceted approach is key to navigating the uncertain economic conditions prevailing in Hungary, ensuring the sustenance and growth of businesses in challenging times. 

The 2023 survey underscores the necessity for efficient credit management in safeguarding financial health. As Hungarian businesses tread cautiously in a risk-averse environment, the adoption of innovative and comprehensive credit management solutions will be crucial in overcoming the challenges posed by late payments and the management of Days Sales Outstanding (DSO) (Source: Atradius Payment Practices Barometer 2023).

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Overview of Corporate Structures and Their Implications for Creditors in Hungary

Understanding the corporate structure of your business partners in Hungary is not just about paperwork. It critically determines who is responsible for your claims, impacting your strategies for debt collection. This guide offers a comprehensive snapshot of Hungarian corporate structures, their characteristics, liability aspects, and what they mean for international creditors.

Introduction: Significance of Knowing the Corporate Structure

Every business relationship carries a level of risk, more so when it's with companies in a foreign legal terrain. In Hungary, the company's structure defines the extent of liability and, subsequently, your approach to debt collection. Grasping these intricacies enables creditors to make informed decisions, effectively manage risks, and ensure successful recovery of dues.

Corporate Structures in Hungary: A Detailed Overview

In Hungary, businesses can operate under various legal forms, each with unique characteristics and implications for liability. Understanding these can significantly impact a creditor's ability to collect payment. Below is an examination of the main company types you'll encounter.

  • Sole Proprietorship (Egyéni vállalkozó): This is the simplest form of business entity, where the individual owner is personally liable for all business debts. This means creditors can pursue personal assets for debt recovery.
  • Partnerships: There are two main types - General Partnership (Közkereseti társaság, Kkt.) and Limited Partnership (Betéti társaság, Bt.). In a General Partnership, all partners have unlimited joint and several liabilities. In a Limited Partnership, at least one partner must have unlimited liability, while others may have limited liability based on their contribution.
  • Limited Liability Company (Korlátolt felelősségű társaság, Kft.): This is the most common corporate form. Owners (shareholders) are liable up to their investments in the company. Creditors can only claim against the company’s assets.
  • Joint Stock Company (Részvénytársaság, Rt.): There are two types - public (Nyrt.) and private (Zrt.). Shareholders' liability is limited to their investment. This structure is suitable for larger enterprises and entails stringent reporting and operation standards.

Implications for Creditors

For creditors, the key lies in evaluating the risk based on the debtor company's structure in Hungary. While entities with limited liability offer protection to their owners, they often pose significant hurdles in debt recovery processes as claims are restricted to company assets.

On the other hand, associations or businesses where personal unlimited liability is applicable provide a more direct route to debt recovery, enabling creditors to go after personal assets. However, these usually encompass smaller businesses, potentially limiting the recovery amount due to the size of operations.

Thus, before extending credit, it’s essential for international creditors to assess not just the financial health of the Hungarian company but also its legal form. This diligence can vastly improve recovery outcomes in case of debts.


For international creditors aiming at successful debt collection in Hungary, comprehending the nuances of local corporate structures is imperative. The type of business entity not only influences the risk profile of a transaction but also delineates the path for debt recovery. Armed with this understanding, creditors can navigate the Hungarian business landscape more effectively and mitigate risks associated with international transactions.

Sources: KPMG Hungary

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Explore detailed country risk analysis

The economic risk in Hungary

Our conclusion based on the economic risk factors, is that the economic risk in Hungary is medium-high (4 out of 6). An economic risk of 4 out of 6 is relatively high in Europe.

GDP and economic growth are critical drivers for economic risk.
The GDP of Hungary is 182,28 bn. USD (2021), growing by 7,1% per year.

In terms of the size of its economy, Hungary ranks #54 out of 183 countries and has a medium-sized economy.

In terms of growth rate, it is ranked #44 out of 183 countries and is therefore considered a fast-growing economy.

GDP per capita is 18773 USD, ranking Hungary number #44 out of 183 countries. This means the purchasing power of citizens in Hungary is high compared to the rest of the world.

You can see a more detailed picture of GDP and economic growth in Hungary in the table below:

GDP and economic growthLatest value
Economic growth: the rate of change of real GDP7,1%
Gross Domestic Product, billions of U.S. dollars182,28
GDP per capita, current U.S. dollars18772,67
GDP per capita, Purchasing Power Parity33517,97

Another critical driver for the economic risk score is the inflation rate and the interest rates. You can see a more detailed picture of monetary KPIs in Hungary in the table below:

Monetary KPI'sLatest value
Inflation: percent change in the Consumer Price Index5,1%
Business credit interest rate, percent2,97%

The inflation in Hungary was 5,1% in 2021 which is considered a medium inflation rate.

Looking at the interest rate for businesses, it is 2,97%.

The business environment risk in Hungary

Our analysis shows that the business environment risk in Hungary is medium (3 out of 6), which is a relatively high risk score in Europe.

The business environment risk are determined by the level of economic freedom and rights in a country. You can see the critical facts for Hungary in the table below:

Economic freedom indexLatest value
Property rights index (0-100)66
Freedom from corruption index (0-100)49
Fiscal freedom index (0-100)84
Business freedom index (0-100)60
Monetary freedom index (0-100)78,8
Trade freedom index (0-100)84
Investment freedom index (0-100)80
Financial freedom index (0-100)70
Economic freedom, overall index (0-100)67

As you can see in the table, the property rights index is 66 in Hungary, which is considered quite low in Europe.

The business freedom index is based on 10 indicators, using data from the World Bank’s Doing Business study. The Index is 60 in Hungary, a quite low score for a country in Europe.

Hungary's overall economic freedom index is 67 out of 100 and is based on factors such as the rule of law, regulatory efficiency, and market openness.

The political risk in Hungary

The political risk in Hungary is medium, with a score of 3/6. This is a relatively high political risk score in Europe.

The governance and political stability indicators are critical drivers for political risk. An overview of Hungary can be seen in the graphs below:

Governance and political stability indicators Latest value
Rule of law index (-2.5 weak; 2.5 strong)0,53
Government effectiveness index (-2.5 weak; 2.5 strong)0,63
Control of corruption (-2.5 weak; 2.5 strong)0,04
Political stability index (-2.5 weak; 2.5 strong)0,86
Corruption Perceptions Index, 100 = no corruption43
Shadow economy, percent of GDP20,49%

The rule of law index analyses to which extent agents have confidence in and abide by the rules of society, in particular the quality of contract enforcement, property rights, the quality of the courts, and the police's ability to enforce court orders.

When trading with businesses in a country, the rule of law index is critical as it describes your ability to enforce commercial contracts.

In Hungary, the rule of law index is at 0,53 points, with the score going from -2.5 (weak) to 2.5 (strong). Hungary has, therefore, a high rule of law index, which means you should have a good chance of enforcing your contracts. If your individual customers have good creditworthiness, you should therefore feel relatively safe when providing credit.

Other drivers for the medium political risks are the weak control of corruption, the average political stability index, and the medium-large shadow economy that is 20,49% of Hungary's GDP.

The commercial risk in Hungary

In Hungary, the commercial risk score is 2/4, which in our model is a low score. This low commercial risk score is relatively low compared to the average in Europe.

The commercial risk is relying on a country's international trade relationships. You can see some of the key facts for Hungary in the table below:

International trade and investment Latest value
Exports of goods and services as percent of GDP81,33%
Exports of goods and services, annual growth10,26%
Imports of goods and services as percent of GDP80,57%
Trade balance as percent of GDP0,76
Trade balance, billion USD1.48
Foreign exchange reserves, billion currency units43.48

Hungary has a foreign exchange reserve of 43.48 bn. USD.

Hungary has a positive trade balance of 0,76% of GDP. What this means is that Hungary imports fewer goods and services than the country exports.

The annual growth of exports of goods and services has been growing 10,26% annually - now 81,33% of GDP. Import of goods and services represents 80,57% of the GDP in Hungary.

The financing risk in Hungary

We have calculated the financing risk to be 3/4, which equals a medium risk. A medium financing risk score is relatively high for countries in Europe.

The country's banking system, efficiency, and stability influence the financing risk. You can find the extra information for Hungary in the table below:

Banking system efficiency and stabilityLatest value
Interest rates on bank credit to the private sector2,97%
Real interest rate: Bank lending rate minus inflation-3,65%
Index of legal rights for creditors and borrowers (0 = weak to 12 = strong)9
Credit information sharing index, 0 (low) - 8 (high)6

In Hungary, the credit information sharing index is 6 on a scale from 0 (low) to 8 (high). The consequence of that number, is that the access and quality of credit information available in Hungary is medium.

This makes it easy for you to understand the credit risk of your counterpart in Hungary. You would be able to find a good local credit rating agency that can help you analyse the creditworthiness of your specific customers.

Your juridical rights as a creditor are 9 out of 12 and, therefore, strong.

The medium financing risk for creditors also impacts the low interest rate in the private sector of 2,97%.

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