Debt Settlement, insolvency

About debt settlement and insolvency in general

Debt settlement and insolvency are two sometimes closely related areas that play a cardinal role in the financial stability and long-term success of both an individual and a company.

Effective debt settlement enables a client to effectively manage and recover financial claims from its partners. This includes:

  • tracking claims,
  • ensuring that payment deadlines are met,
  • effectively resolving payment problems.

Insolvency occurs when a company cannot pay its debts or fulfil its obligations. In the event of insolvency, both the debtor and the creditor have various solutions at their disposal. For the debtor it is bankruptcy, while for the creditor it is a payment order or liquidation. But what is a payment order? What is the difference between a payment order and liquidation, and which one should be used? Here is a guide to the debt settlement process.

Payment notification

On the creditor side, there are therefore two options in the event of non-payment by the debtor. One is the liquidation procedure before the court and the other is the payment order procedure before a notary and likely before an enforcer. Both are preceded by a payment notification, or more precisely, a payment notification is a necessary precondition for liquidation proceedings, whereas a payment notification is a useful and cost-effective step before filing for a payment order.

The legal process of debt settlement starts with the lawyer who sends a demand letter, a payment notification to the debtor. The notification contains the legally required formalities and content, as well as details of the claim and the evidence on which it is based. A lawyer's payment notification is often sufficient to make the debtor to settle the debt and avoid further expenses.

If the debtor shows a willingness to pay the debt on the basis of the payment notification, the claim settlement process may even stop at that point, if the parties agree.

However, if the debtor fails to respond to the payment notification, a payment order, a liquidation procedure or a court procedure can be initiated to recover the debt.

Kecser Law Firm using its legal expertise and experience to help clients enforce their claims effectively and in compliance with the law, thus increasing the chance of successful and full debt recovery. At Kecser Law Firm, we are able to prepare payment notifications in English, Polish and Vietnamese, besides Hungarian.

Payment order, European payment order

The payment order is a quick and cost-effective method of debt recovery. It can be used if both the debtor and the creditor are domiciled in Hungary. In many cases, the payment order can avoid the slower and more costly civil litigation proceedings. The use of the payment order is mandatory for claims below the statutory threshold, before in such cases civil litigation proceedings can be initiated.

A final payment order has the same force as a final court judgment - it can be enforced effectively. According to research by the Hungarian Chamber of Notaries, almost 70% of orders for payment issued become final, which is another indication of the effectiveness of this procedure.

The EU equivalent of the order for payment is the European order for payment. Such a procedure can be initiated if the debtor and the creditor are domiciled in the European Union but not in the same country. The logic of the European order for payment procedure is the same as that of the Hungarian order for payment procedure, but partly with different procedural rules. Kecser Law Firm has extensive experience in the initiation and conduct of both Hungarian and European Union-wide order for payment proceedings.


The initiation of liquidation proceedings against a debtor is an excellent way to manage claims against companies. We can use this solution if the debtor company has not contested the claim or if we are in possession of a final court judgment/order for payment.

We usually recommend this type of debt management when the debtor company is a genuinely operational company with assets. In this case, we can force the debtor to pay its debts by initiating liquidation proceedings - if the debtor wants to avoid being liquidated. So, our basic aim when opening proceedings is usually not to actually liquidate the debtor company, but to force the debtor company to pay its debts.

If you need assistance in debt settlement, contact Kecser Law firm and our experts will find the most appropriate solution for collecting your debt.

H-1097 Budapest, Nádasdy u. 12. 6th floor, 613.

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