Debt Collection in the Dominican Republic

The debt collection process in the Dominican Republic begins with a legal and financial assessment of the debtor, the debt and the available documents. At this stage, it is necessary to determine whether the debtor acts as an individual, a trader, a commercial company or a foreign counterparty with a presence or assets in the country; whether the debtor continues to conduct business; whether there are court cases, enforcement proceedings, registered guarantees or signs of insolvency; and whether the debt may be disputed because of insufficient evidence, partial payment, set-off, limitation period issues or prior breach by the creditor.

In practice, this assessment may include checking commercial registration data, tax registration, real estate information, movable guarantees and other available information about the debtor’s activity, assets, encumbrances and guarantees. It is also important to review the documentary basis of the claim: contract, invoice, delivery document, purchase order, business correspondence, debt acknowledgement, partial payments, guarantee, promissory note, court judgment, arbitral award or another title that helps determine the appropriate recovery route.

If the debtor has no pending proceedings that make immediate court action more appropriate, continues to conduct business and the debt is sufficiently documented, the creditor may start the out-of-court collection stage. The purpose of this stage is to obtain voluntary payment, record the debtor’s position and prepare the evidence file for a possible court claim.

This stage may include negotiations for full payment, partial payment, a payment schedule, return of goods, set-off of mutual claims, provision of security, assumption of the debt by a third party or another commercial settlement that does not weaken the creditor’s legal position.

Contact with the debtor should be organized through a clear and verifiable payment demand, followed by documented communications by mail, email, telephone, messaging tools or authorized representatives. The purpose of this stage is to identify the persons with decision-making authority, obtain a specific response, record the positions of the parties in writing and preserve evidence of any debt acknowledgement, payment proposal, refusal to perform or settlement reached. If the debtor does not respond, denies the debt without sufficient grounds, transfers assets or shows signs of insolvency, the creditor should proceed to judicial debt collection, enforcement measures or insolvency-related procedures.

Before initiating court proceedings, the creditor should determine the limitation period applicable to the specific claim. Under the Civil Code of the Dominican Republic, real and personal actions are generally time-barred after twenty years. However, special limitation periods apply to certain categories of claims: for example, a trader’s claim for goods sold at retail to private persons who are not traders is time-barred after one year, and a claim arising from contractual civil liability, where no longer limitation period applies, is time-barred after two years.

The consequences of the expiry of the limitation period are not applied automatically: the relevant objection must be raised by the interested party. The limitation period may be interrupted by a court summons, a court order, a seizure notified to the person against whom the limitation period is to be interrupted, or by the debtor’s acknowledgement of the debt. Therefore, in a commercial debt dispute, it is important to preserve not only the contract and invoices, but also emails, messages, minutes, partial payments, payment agreements and any documents that may prove acknowledgement of the obligation.

Dominican law allows judicial debt collection to be organized according to the nature of the obligation, the amount claimed, the debtor’s domicile, the quality of the available documents and the existence of assets that may be subject to enforcement. The claim may be heard by the Justice of the Peace Court where the law gives that court jurisdiction, or by the Court of First Instance where the matter falls under the ordinary civil or commercial procedure.

Where the claim falls within the jurisdiction of the Justice of the Peace Court, the defendant is summoned by an act served by a bailiff. In personal or movable property matters, the summons is addressed to the justice of the peace of the defendant’s domicile and, if the domicile is unknown, to the place of residence. The act must allow the debtor to understand the claim, the date of appearance and the documents on which the creditor relies. In this type of procedure, the parties may appear in person or through a representative, provide explanations, file documents and ask the judge to take the measures necessary to establish the facts of the case.

In matters heard by the Justice of the Peace Court, the court may hear the parties, encourage a settlement where possible, order investigative measures and examine the documents submitted. If the debtor acknowledges the obligation, proposes payment or accepts part of the debt, that position should be documented. If the debtor denies the debt, fails to appear or does not present a sufficient defense, the judge decides on the basis of the evidence submitted and the rules applicable to the case.

A judgment of the Justice of the Peace Court may be appealed to the Court of First Instance where the law allows an appeal. The ordinary time limit for appealing judgments of justices of the peace is fifteen days from notification for persons domiciled in the same municipality, with the increases provided by law where the party is outside the municipality or outside the Dominican Republic.

Where the claim must be heard by the Court of First Instance, the procedure begins with a summons served by a bailiff. The defendant is summoned before the court of the defendant’s domicile or residence; where there are several defendants, the creditor may bring the claim before the court of the domicile of one of them. The summons must identify the parties, state the claimant’s attorney, the acting bailiff, the subject matter of the claim, a summary of the grounds, the competent court and the time limit for appearance.

The summons must be accompanied by communication of the documents, or the relevant parts of the documents, on which the claim is based. This is especially important in a debt claim, because the court will assess the contract, invoices, purchase orders, delivery documents, business correspondence, debt acknowledgement, partial payments, guarantees, account statements and other materials proving the existence, enforceability and amount of the claim.

After the summons, the defendant must appoint an attorney and choose an address for procedural communications in the city where the court hearing the case is located, unless special rules provide otherwise. Failure to appoint an attorney may have important procedural consequences, because the case may move forward without an active defense by the defendant. Where there are several defendants and only some of them appoint an attorney, the proceedings continue as adversarial proceedings in relation to those who participate.

Once the time limits for appearance have expired, either party may request that a hearing be scheduled. At the hearing, the parties present their reasoned conclusions, discuss procedural objections if any, request the necessary investigative measures and argue the merits of their claims. The judge may grant moderate time limits for supporting written submissions, replies and counter-replies within the limits provided by procedural rules.

If the defendant is domiciled outside the Dominican Republic, service is carried out under the rules applicable to summonses abroad. In such cases, the summons is made at the address of the public prosecutor attached to the court that must hear the claim, and the documents are transmitted through the appropriate procedure of the Ministry of Foreign Affairs. The time limit for appearance increases according to the defendant’s place of residence: fifteen days for the United States of America, Cuba, Haiti and Puerto Rico; forty-five days for Mexico, Central America, Panama and the other Antilles; sixty days for South American states or territories with a coastline on the Caribbean Sea or the Atlantic Ocean; sixty-five days for South American states or territories with a coastline on the Pacific Ocean and the other parts of the Americas; sixty days for European states or territories, except Russia, and for North African states or territories; and one hundred twenty days for Russia and any other place.

After the hearing on the merits is completed, the court closes the debates and proceeds to issue its decision. In a debt claim, the outcome depends on proof of the debt, the enforceability of the obligation, proper service on the defendant, absence of expiry of the limitation period, validity of the documents and the debtor’s procedural position. If the judgment confirms the debt, the creditor may proceed to the enforcement stage once the decision is enforceable under the law.

A judgment of the Court of First Instance may be appealed to the appellate court. In civil and commercial matters, the ordinary time limit for appeal is one month. Where the judgment is adversarial or deemed adversarial, the time limit runs from notification of the judgment to the person ordered to perform, to the representative or at the person’s domicile. Where the judgment is not adversarial and is not deemed adversarial, the time limit runs from the day when opposition is no longer admissible.

Where the party entitled to appeal resides outside the Dominican Republic, the time limit of one month is increased by the time limit applicable to summonses according to the place of residence. Therefore, in international debt disputes, the date of notification of the judgment and the actual domicile of the party are important for correctly calculating the appeal period.

An appeal allows the challenged judgment to be reviewed within the limits of the appeal, the conclusions filed and the grounds relied upon by the parties. At this stage, the parties may discuss procedural issues, assessment of documents, existence and amount of the debt, limitation period, partial performance, set-off, lack of standing, defects in service and other defenses raised in a procedurally admissible form.

If the judgment was rendered in default, notification must be made by the bailiff appointed in the judgment or by order of the president of the court that rendered it. Notification must be made within six months after the judgment is obtained; otherwise, the judgment is deemed not to have been rendered. The notification must also mention the time limit for opposition or the time limit for appeal, depending on the applicable procedure.

Against certain decisions rendered in a single or last instance, a cassation appeal may be filed before the Supreme Court of Justice, acting as the court of cassation. Cassation is not a new appeal on all facts of the case; it is directed at reviewing the correct application of the law, the legal reasoning of the judgment and defects that may justify setting aside the challenged decision.

Under Law No. 2-23, a cassation appeal in civil and commercial matters is filed by a duly reasoned cassation memorandum signed by an attorney and submitted to the General Registry of the Supreme Court of Justice. The ordinary time limit is twenty working days from notification of the judgment. In urgent proceedings, the time limit is ten working days from notification of the decision; and in real estate enforcement matters, where the appeal is admissible, the time limit for appealing adjudication judgments and incidental judgments is ten working days from notification of the decision.

The cassation memorandum must identify the parties, the attorneys, the challenged judgment, the court that rendered it, the grounds of appeal, the conclusions, the date and the attorney’s signature. It must also be accompanied by an authentic copy of the challenged judgment and the documents on which the cassation appeal is based, if any. After filing the memorandum and the list of documents, the appellant must notify the other parties that participated in the proceedings decided by the challenged judgment within no more than five working days from filing.

In cassation, new grounds are not admissible before the court of cassation, except pure points of law, grounds arising from the challenged judgment and constitutional issues. If the Supreme Court of Justice grants the appeal, it may set aside the challenged judgment in accordance with the effects provided by law. If the appeal is dismissed or declared inadmissible, the challenged decision remains effective and the creditor may continue the actions necessary to enforce the claim.

If the creditor already has a foreign court decision against a debtor domiciled in the Dominican Republic, holding assets there or conducting business in the country, the strategy usually does not begin with a new claim on the merits of the debt, but with recognition and enforcement of the foreign court decision. Law No. 544-14 generally allows recognition of foreign court decisions in contentious matters, but recognition may be refused where the decision is manifestly contrary to public order, where the defendant was declared in default without effective proof of summons, where the decision is incompatible with another decision between the same parties, or where the decision does not meet the required authenticity and validity requirements.

Applications for recognition of foreign court decisions in contentious matters fall within the jurisdiction of the civil and commercial chamber of the Court of First Instance of the National District. For foreign documents to have evidentiary force in the Dominican Republic, they must meet authenticity, legalization or apostille requirements and, if they are drafted in a language other than Spanish, they must be accompanied by a translation. Once the foreign decision is recognized, the creditor may proceed to enforcement against the debtor’s assets, accounts, rights or receivables located in the country.

After a Dominican judgment becomes effective, or after a foreign court decision is recognized and enforceable in the Dominican Republic, the creditor should initiate the enforcement procedure. Depending on the type of asset and the available title, recovery may be carried out by attachment or opposition over amounts owed by third parties, including banks and credit institutions; enforcement seizure of movable assets; real estate enforcement; seizure of pending or unharvested fruits; and other measures aimed at converting seized assets, rights or claims into funds to satisfy the debt.

In an attachment or opposition over amounts owed by third parties, the act must state the title and the amount for which the measure is taken; if the claim is not liquid, the judge may make a provisional assessment. In the enforcement seizure of movable assets, the seizure must be preceded by a payment demand made at least one day earlier. In real estate enforcement, there must also be a payment demand with a copy of the enforceable title; real estate seizure may be carried out only thirty days after that demand, and if the creditor lets more than ninety days pass without proceeding, the demand must be renewed.

If the debtor shows signs of insolvency, the creditor should assess the tools provided by Law No. 141-15 on restructuring and judicial liquidation of companies and individual traders. This law replaced the former commercial bankruptcy regime and establishes mechanisms to protect creditors when the debtor faces financial difficulties, preserve business continuity where possible and order liquidation where recovery of the business is not viable.

A creditor may request the debtor’s restructuring where the creditor’s claims represent at least fifty minimum wages and one of the conditions provided by law exists, such as failure to pay an obligation for more than ninety days, the existence of seizures or enforcement actions affecting a significant part of the assets, notice of suspension of payments, or the opening of insolvency proceedings abroad in relation to the debtor’s parent company or principal place of business. From the filing of the restructuring request, suspensive effects may arise in relation to property claims, enforcement actions, evictions and seizures of the debtor’s movable and immovable assets, subject to the exceptions provided by law.

At this stage, it is important to analyze the debtor’s asset movements during the two years preceding the restructuring request. Upon a duly grounded request by any creditor, the conciliator may bring an action for nullity against acts carried out by the debtor that constituted an unjustified diversion of assets from the estate and caused harm to creditors. The law presumes certain acts to be harmful, subject to proof to the contrary, including transfers without consideration or at a price significantly below market value, contracts in which the debtor assumes a manifestly excessive counter-performance, debt forgiveness or reductions granted by the debtor, payments of obligations not yet due, the granting or increase of guarantees for prior debts without reasonable consideration, and transfers to creditors receiving a benefit greater than what they would receive in a judicial liquidation.

Transactions with related parties should also be reviewed. In the case of legal entities, acts may be presumed harmful when carried out with managers, members of the management body, their relatives, persons directly or indirectly representing at least thirty percent of the subscribed and paid-in capital, persons with decision-making power in meetings or the ability to appoint the majority of the management body, as well as companies controlled by the debtor, companies controlling the debtor or companies under common control.

The annulment of such acts is intended to restore the assets of the estate and ensure equal treatment among creditors. Restitution to the estate may include the asset, the sum of money, fruits and accessories. In addition, a person who acquires assets to the detriment of creditors may be liable for damages to the estate even if the assets have been transferred to a third party or lost, unless that person proves good faith and lack of knowledge of the origin of the assets.

Law No. 141-15 also contains a sanctions framework. Criminal consequences may arise for traders, formal or de facto managers and other persons who, from the filing of the restructuring request or during the procedure, create guarantees or carry out acts of disposal without authorization, pay prior debts in violation of the law, hide or disguise assets, declare simulated claims, remove assets from a legal entity subject to restructuring or judicial liquidation, dispose of company assets as their own or act abusively in their personal interest to the detriment of creditors. Criminal jurisdiction may be activated by the public prosecutor based on a report or complaint submitted by the verifier, conciliator, liquidator, any creditor or the workers’ representative.

If you need support with debt collection in the Dominican Republic, Grandliga can assist at every stage of the process: debtor and document analysis, preparation of an out-of-court payment demand, negotiations, selection of the appropriate court procedure, recognition and enforcement of foreign court decisions, initiation of enforcement, asset search and assessment of restructuring or judicial liquidation measures where the debtor shows signs of insolvency.

# DEBT COLLECTION AGENCY DOMINICAN REPUBLIC

29.08.2024

1948