Debt collection in Mexico

The debt collection procedure in Mexico begins with a legal and financial review of the debtor, the nature of the obligation, the documents proving the debt and the real possibilities of enforcement. At this stage, it is important to analyze the contract, invoices, account statements, proof of delivery of goods or provision of services, business correspondence, acknowledgment of debt, promissory notes, checks, bills of exchange and other credit documents. It is also useful to verify the debtor’s company information in the public commercial registry and, where movable collateral exists, to check the relevant collateral records. This analysis helps determine whether Debt collection in Mexico should start with out-of-court negotiations, ordinary or oral commercial proceedings, commercial enforcement proceedings, recognition of a foreign decision, forced enforcement or commercial insolvency proceedings.

If the debtor is not involved in a relevant court proceeding, there are no clear signs of insolvency and the debtor continues to conduct business, it is usually reasonable to begin the stage of out-of-court debt collection. This stage allows the creditor to verify the debtor’s actual position, seek voluntary payment, document the debtor’s responses and decide whether to continue negotiations, request additional security or prepare a court claim.

At this stage, different settlement options may be negotiated: full payment, a payment schedule, return of goods, set-off, written acknowledgment of debt, provision of security, transfer or assumption of debt by a third party, delivery of documents that may accelerate recovery or another agreement permitted by law and consistent with the nature of the obligation.

Contact with the debtor may be made after sending a formal notice by post, email, courier or another method that allows proof of dispatch and the content of the claim to be preserved. Communication must remain within legal limits: without threats, intimidation, insults, documents that appear to be court documents, or collection actions directed at third parties who are not connected with the debt. The purpose is to identify the decision-makers, record the debtor’s position in writing and obtain payment, security or a response that is useful for the next stage of recovery.

The duration of out-of-court debt collection depends on the debtor’s response, the quality of the evidence, the amount of the debt, the existence of identifiable assets and the need to act quickly to prevent asset dissipation. If the debtor does not respond, denies the debt without grounds, breaches a payment agreement or the initial analysis shows that negotiations will not adequately protect the creditor’s interests, the start of judicial debt collection should be assessed.

Before initiating court recovery, the applicable statute of limitations must be determined. In Mexico, there is no single limitation period for all debts: the term depends on the nature of the obligation, the document on which the claim is based and the type of action to be filed. In commercial matters, if the Mexican Commercial Code does not establish a shorter period, the ordinary limitation period may be completed after ten years. For certain credit documents, such as a direct claim based on a bill of exchange or promissory note, the General Law on Credit Instruments and Operations provides a three-year period counted from maturity. In civil matters, rules of the Federal Civil Code or local civil law may also apply. Commercial limitation may be interrupted by court action, acknowledgment of the obligation or renewal of the document on which the creditor’s right is based.

Judicial debt collection in Mexico depends on the nature of the legal relationship and the document proving the claim. If the debt arises from commercial acts, business contracts, commercial invoices, supply of goods, provision of business services or credit documents, the main regulation is usually found in the Mexican Commercial Code. If the debt is civil in nature, the corresponding civil and procedural rules may apply, including the National Code of Civil and Family Procedures in the areas where it is already in force.

In commercial disputes, the main judicial routes for debt collection are ordinary commercial proceedings, oral commercial proceedings, commercial enforcement proceedings and oral commercial enforcement proceedings. The ordinary or oral route is used when the creditor must prove the existence, due date and amount of the debt through a contract, invoices, correspondence, proof of delivery, account statements or other evidence. The enforcement route applies when the claim is based on a document that allows enforcement, such as a final court decision, a non-appealable arbitral decision, a public instrument, judicial acknowledgment, certain credit documents or other documents provided by law.

The claim must be filed with the competent court together with the documents proving the debt and the available evidence. If some documents are held by the debtor or by a third party, the creditor should identify them as precisely as possible in order to request their production or inclusion in the case file. In commercial proceedings, electronic messages, electronic documents, business correspondence, accounting records, proof of delivery, account statements and other materials capable of proving the existence and enforceability of the obligation may also be relevant.

After admitting the claim, the court arranges service on the defendant. In oral commercial proceedings, the defendant must file a response within the period provided by the Mexican Commercial Code and state a position on the alleged facts. In oral commercial enforcement proceedings, after the demand for payment, attachment and service, the defendant has a specific period to respond and raise the defenses permitted by law. The procedural strategy depends on whether the debtor acknowledges the obligation, denies the contractual relationship, disputes the amount, challenges the authenticity of documents, alleges payment, set-off, expiration of the limitation period or other defenses.

If the debt is supported by an enforceable document, the enforcement procedure may allow faster measures from the beginning, including a demand for payment and attachment of sufficient assets to secure the creditor’s claim. If the creditor does not have an enforceable document, it will usually be necessary first to follow a declaratory route to obtain a court decision recognizing the debt and then request enforcement.

The possibility of appeal in commercial matters depends on the type of proceeding, the value of the case, the nature of the decision and the rules applicable under the Mexican Commercial Code. In cases subject to monetary value, the admissibility of an appeal may be linked to periodically updated amounts, so this factor forms part of the procedural strategy from the preparation of the claim.

In civil and family matters, Mexican procedural regulation is in transition toward the National Code of Civil and Family Procedures, which enters into force gradually. During this process, local procedural rules or transitional provisions of the relevant state may still apply in certain matters. In commercial debts, the main procedural regulation is found in the Mexican Commercial Code, although territorial jurisdiction, enforcement and some practical steps depend on the court handling the case.

If the creditor already has a foreign court decision, an arbitral decision or another decision issued outside Mexico, the analysis should begin with recognition and enforcement of foreign decisions. This procedure allows a decision issued by a foreign authority to produce legal effects in Mexico and, where the requirements are met, to be enforced against the debtor’s assets located in Mexican territory.

To prepare this procedure, it is usually necessary to analyze whether an applicable international treaty exists, whether the decision is final or enforceable in the country of origin, whether the debtor was properly served, whether the debtor had a real opportunity to defend the case, whether the foreign authority had jurisdiction and whether the decision is compatible with Mexican public order. For foreign arbitral decisions, the rules on recognition and enforcement of such decisions in Mexico are also relevant.

The Mexican court does not reopen the dispute on the merits of the debt as if it were a new case. The main function of recognition is to verify the conditions for the foreign decision to have legal effect in Mexico and, after that stage is completed, to allow enforcement through the asset-related measures available in Mexico.

When a court decision, a recognized foreign decision or another enforceable act can be enforced in Mexico, the creditor should initiate the stage of forced enforcement. At this stage, the objective is to turn the decision into actual asset recovery by identifying the debtor’s property, bank accounts, receivables, income, movable property, real estate or other assets against which enforcement may be directed.

During enforcement, measures may include attachment of accounts and property, retention of receivables, enforcement against specific income, valuation and judicial sale of attached property, and application of the sale proceeds to the debt, interest, court costs and other recognized amounts. In commercial matters, where a decision ordering judicial sale exists, the Mexican Commercial Code allows the sale of retained or attached property under the applicable rules on valuation, notice and judicial sale.

If the commercial debtor shows signs of insolvency, the creditor should assess the possibility of initiating or participating in commercial insolvency proceedings. This procedure does not necessarily mean immediate liquidation: it may include a stage aimed at preserving the business and reaching an agreement with creditors, and a liquidation stage where financial recovery is not viable.

Mexican commercial insolvency law treats a general failure to meet obligations as relevant when a commercial debtor fails to pay two or more creditors and the statutory criteria are met. Important elements include obligations overdue for more than thirty days that represent at least thirty-five percent of all the debtor’s obligations, and insufficient liquid assets to cover at least eighty percent of overdue obligations. These criteria are important when choosing between an individual claim, enforcement against already identified assets or participation in insolvency proceedings.

In commercial insolvency proceedings, acts carried out to the detriment of creditors during the retroactive period may also be examined. Relevant acts may include transactions made free of charge, transfers at a clearly undervalued price, early payments, debt releases, transactions on unusual terms or acts carried out with knowledge that they harmed the creditors as a whole. If the act is declared ineffective, the property, rights or value may return to the estate subject to the proceedings, increasing the possibility of payment to recognized creditors.

If you need to assess a debt case in Mexico, prepare documents for negotiations, choose the appropriate judicial route, start recognition of a foreign decision or support enforcement of a decision against the debtor’s assets, Grandliga can analyze the situation and propose an international debt collection strategy adapted to the available documents, the debtor’s location and the identified assets.

19.08.2024

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