Debt Collection in Ecuador

The process of debt collection in Ecuador begins with a legal, financial and documentary assessment of the debtor. At this stage, it is necessary to determine whether the debtor is an individual, an Ecuadorian company, a branch, a commercial representative or a foreign counterparty with assets in Ecuador. The analysis also covers the debtor’s business activity, address, representatives, corporate history, pending court cases, enforcement procedures and signs that the debt may be disputed.

If the debtor is an Ecuadorian company, it is important to check its tax registration number, available corporate information, company status, legal representatives, signs of inactivity, liquidation, termination of business, recent management changes or reduced commercial activity. This review helps determine whether the case should begin with negotiation, court proceedings, protective measures, enforcement of an existing document or a search for assets.

The initial analysis also includes a review of the creditor’s documents: contract, invoices, purchase orders, delivery or service records, business correspondence, debt acknowledgement, promissory notes, bills of exchange, guarantees, payment agreements, foreign court judgment, arbitral award or mediation agreement. In Ecuador, the type of document directly affects the procedural route: court collection based on an enforceable document, a special simplified procedure for monetary debts, abbreviated court proceedings, ordinary civil proceedings, recognition of a foreign decision or subsequent enforcement.

If the debtor has no significant pending litigation, no clear signs of insolvency and continues to carry out business activity, the out-of-court stage may be started. If the analysis shows a risk of asset dissipation, lack of cooperation, artificial dispute of the debt or actual cessation of business, the strategy should be directed from the beginning toward the appropriate court procedure.

The out-of-court stage includes formal communications and negotiations with the debtor to obtain full payment, a payment schedule, debt acknowledgement, additional security, return of goods, set-off, settlement agreement or another lawful solution compatible with the nature of the obligation.

The debtor may be contacted by letter, email, phone, messages or another channel that allows the creditor to preserve evidence of the content, date of sending and identity of the parties. At this stage, it is important to reach the persons authorized to make decisions, clarify the debtor’s position and record any response, acknowledgement, payment proposal or refusal.

An out-of-court notice has its own function: it structures the creditor’s claim, helps preserve evidence and may lead to settlement before court proceedings. Formal court notice within judicial proceedings has a different legal effect and is carried out under Ecuadorian procedural rules.

Out-of-court debt collection in Ecuador usually focuses on an initial period of up to 60 days, unless the parties agree on payment by instalments or another method of performance. If this stage does not produce the expected result, if the debtor breaches the agreement reached or if the initial analysis shows that negotiation does not sufficiently protect the creditor, the case should be prepared for court collection.

Before starting court collection, it is necessary to check the limitation period applicable to the specific obligation. In Ecuador, a claim based on an enforceable document generally has to be brought within five years, while an ordinary civil claim generally has a ten-year limitation period. If a claim based on an enforceable document is not brought within the relevant period, it may still continue as an ordinary claim within the period provided by law, provided that the obligation and the evidence still support the creditor’s position.

The limitation period is not assessed only by the name of the document. It depends on the nature of the obligation, the due date, the document proving the debt, the existence of an enforceable document, partial payments, debt acknowledgements and the court procedure chosen. In the special simplified procedure for monetary debts, if no special period is established, the general limitation rules for the corresponding claim apply.

The limitation period may be interrupted by the debtor’s express or implied acknowledgement of the debt and also by formal court notice of the claim. If court notice is completed within the statutory period calculated from the filing of the claim, the interruption may have effect from the date of filing. The consequences of limitation apply in the proceedings when the debtor raises limitation as a defence against the creditor’s claim.

Ecuadorian law provides several routes for judicial debt collection, and the choice of procedure depends on the document proving the obligation, the amount of the debt, the due date, the existence of an enforceable document and the complexity of the defences that the debtor may raise. In practice, a debt claim may proceed through court collection based on an enforceable document, a special simplified procedure for monetary debts, abbreviated court proceedings or ordinary civil proceedings.

Court collection based on an enforceable document is used when the creditor holds a document to which the law gives enforceable effect and the obligation is clear, unconditional, determined and currently due. If the obligation consists of a monetary amount, the debt must be fixed or calculable by a simple arithmetic operation. Such documents may include a sworn statement made before a competent judge, an authentic copy of a public deed, private documents legally recognized or recognized by a court decision, bills of exchange, promissory notes, wills, out-of-court settlements and other documents to which the law gives enforceable effect.

The application for court collection based on an enforceable document must be accompanied by the relevant document. If the creditor provides evidence of the debtor’s assets, the judge may order protective measures over those assets within the amount claimed. In the case of a mortgage-backed claim, seizure of real estate may also be requested. These measures are especially important when there is a risk that the debtor may hide, sell or reduce assets during the proceedings.

After formal court notice, the debtor may pay or perform the obligation, file objections supported by evidence, provide security to suspend a specific protective measure or bring a counterclaim based on another enforceable document. If the debtor does not answer, does not perform the obligation or relies on objections that are not permitted for this type of procedure, the judge may issue a decision ordering performance of the obligation.

In court collection based on an enforceable document, the debtor’s objections are limited to specific grounds: lack of enforceable effect of the document, formal invalidity or falsity of the document, total or partial extinction of the obligation, the existence of a judicial act connected with usury or unjustified private enrichment, and preliminary objections provided by law. If the debtor’s objections are properly grounded, the court schedules a single hearing to address settlement, objections, evidence and the parties’ arguments. An appeal in this procedure does not suspend enforcement of the decision, and an appeal on points of law is not available in this type of procedure.

Ordinary civil proceedings apply to claims for which the law does not provide a special procedure. In a civil or commercial debt case, this route may be necessary when the creditor has no enforceable document, when the amount of the debt or the legal relationship requires broader examination of evidence, when the debtor denies the obligation, challenges the contract, disputes delivery of goods or provision of services, raises reciprocal breaches, damages, interest, set-off or other facts requiring full judicial examination.

Ordinary civil proceedings begin with filing a statement of claim before the competent court. The claim must identify the parties, describe the debt, set out the facts, indicate the legal grounds, state the amount claimed, formulate the request for recovery and attach or identify the available evidence. Documents already in the creditor’s possession should be filed with the claim, because timely disclosure and submission of evidence are important for the later development of the case.

After the claim is admitted, the judge orders formal court notice to the defendant. In ordinary civil proceedings, the defendant has thirty days from the last notice to file an answer. The answer must clearly address the facts and claims, state what is admitted and what is denied, raise objections, attach available documentary evidence and identify other means of proof. If the defendant brings a counterclaim against the creditor, the claimant receives the relevant period to respond.

Failure to answer or failure to take a clear position on the facts may be assessed by the court under procedural rules. If the answer, counterclaim or evidence identified by the defendant does not meet legal requirements, the judge may require clarification or completion within the period provided by law. For the creditor, this stage is important because it shows whether the debtor’s defence is based on a real dispute, a procedural objection, set-off, documentary challenge or delay strategy.

After the answer is filed or the period for answering expires, the judge schedules a preliminary hearing. This hearing is held within the period provided by law and has a central role in ordinary civil proceedings. At this hearing, the court reviews preliminary objections, procedural validity, jurisdiction, the subject matter of the dispute, third-party claims and procedural issues that may affect the final decision. If a defect can be corrected, the judge may order correction; if an incurable objection is accepted, the case may end without examination of the merits.

At the preliminary hearing, the judge must promote settlement between the parties. If the parties reach a full settlement, it may be approved by the court and the proceedings end with enforceable effect. If the settlement is partial, the case continues on the unresolved issues. The dispute may also be referred to a legally established mediation centre. For the creditor, a court-approved settlement or mediation record may become an effective basis for later enforcement if the debtor defaults again.

If no full settlement is reached, the preliminary hearing continues with the examination of evidence. The parties may object to the opposing party’s evidence, request exclusion of irrelevant, unnecessary or unsuitable evidence and define the facts that must be proven at the merits hearing. This stage helps structure the dispute and prevents the case from becoming an open-ended discussion without clear limits on the debt, documents and defences.

After the preliminary hearing, the judge schedules the merits hearing. At this stage, admitted evidence is examined, witnesses and experts are heard, documents and other evidence are reviewed, and the parties present their arguments. At the end of the hearing, the judge issues a decision under the procedural rules. In debt collection cases, the decision may fully or partially recognize the obligation, reject the claim, resolve objections, determine interest, court costs and other consequences of the claim.

Abbreviated court proceedings apply to categories of cases that the law expressly assigns to this route. In debt matters, this procedure may be relevant when the dispute is not suitable for court collection based on an enforceable document or for the special simplified procedure for monetary debts, but the law allows a more concentrated examination than ordinary civil proceedings, for example in certain professional fee disputes and other cases provided by the applicable rules.

In abbreviated court proceedings, amendment of the claim is not allowed, and a counterclaim is admissible only if it is connected with the main dispute. The defendant has fifteen days to answer the claim and the counterclaim. The case is resolved in a single hearing divided into two stages: the first stage concerns procedural regularization, definition of the disputed issues and settlement; the second stage concerns evidence and arguments. The single hearing is held within the period provided by law, which makes this route more concentrated than ordinary civil proceedings.

For the creditor, the practical difference between the procedures is significant. Court collection based on an enforceable document gives a stronger position when such a document exists; the special simplified procedure for monetary debts allows recovery of documented monetary debts up to fifty unified basic wages when there is no enforceable document; abbreviated court proceedings concentrate the dispute in one hearing when the law assigns the case to that route; and ordinary civil proceedings allow a broader examination when the debt requires fuller evidentiary or legal analysis.

The special simplified procedure for monetary debts may be used when the creditor seeks recovery of a determined, monetary, due and payable debt, provided that the amount does not exceed fifty unified basic wages and the obligation is not recorded in an enforceable document. This procedure is especially important for commercial debts supported by documents but not strong enough for court collection based on an enforceable document.

The debt may be proven by documents signed by the debtor or marked with the debtor’s physical or electronic sign, invoices, delivery records, certifications, electronic documents, documents issued by the creditor that make the prior relationship credible, and other evidence accepted by law. This procedure may also apply to certain claims for rent, property administration fees, membership obligations, education fees and other documented monetary obligations.

The application must state the origin of the debt, its exact or calculable amount and the documents proving it. If the amount does not exceed three unified basic wages, the law allows the application to be filed without mandatory legal representation, although legal assistance helps organize the evidence, avoid jurisdictional mistakes and prepare for later enforcement.

Once the application is admitted, the judge grants the debtor fifteen days to pay and orders formal court notice to the debtor. That notice interrupts the limitation period. If the debtor does not appear, does not object or does not pay within the period, the court decision becomes final, has the effect of a decided matter and allows the creditor to move to enforcement, including seizure of the debtor’s assets. If the debtor files a grounded objection, the case continues in a single hearing, where settlement, conciliation or a court decision may follow.

A first-instance decision and certain interim court acts may be appealed when the law allows it. The appeal is made orally at the relevant hearing and must be reasoned in writing within ten days from notification. The other party has ten days to respond, after which the second-instance court schedules a hearing, hears the parties and decides the appeal.

After the appeal decision, clarification, supplementation and an appeal on points of law may be available in the cases and on the grounds provided by law. This is not a third instance and does not repeat the full examination of the case. It is an extraordinary review aimed at correcting significant legal errors in judgments and court acts that end proceedings on the merits and are issued by provincial courts, tax courts or administrative courts.

The appeal on points of law is filed in writing within ten days after the challenged court act or judgment becomes enforceable, or after the court act accepting or rejecting clarification or supplementation becomes enforceable. The filing must identify the challenged decision, the case, the parties, the notification date, the legal rules breached or mandatory procedural acts omitted, the ground of review relied on and the specific reasons explaining how the legal error occurred.

This appeal may be based, among other grounds, on wrongful application, non-application or erroneous interpretation of procedural rules that caused incurable invalidity or denial of the right of defence; lack of reasoning or contradictory decisions; decision on matters outside the dispute; granting more than was claimed; failure to decide disputed issues; legal errors in the assessment of evidence leading to incorrect application of substantive law; or breach of substantive legal rules, including binding judicial positions.

The appeal is filed before the same judicial body that issued the challenged decision. The relevant provincial court or other competent court checks whether the filing was made within the legal period and sends the case file to the National Court of Justice of Ecuador. After the file is received, a judge is assigned to check admissibility. If there are correctable formal defects, a period may be granted to clarify or complete the filing; if the legal requirements are not met, the appeal may be declared inadmissible.

If the appeal on points of law is admitted, the parties are notified and the file is transferred to the relevant specialized chamber of the National Court of Justice of Ecuador. The other party may submit a reasoned response within the period provided by law. The reviewing court schedules a hearing and decides whether to uphold the decision, set it aside in whole or in part, correct the reasoning, issue the appropriate decision, or declare invalidity and send the case back to the competent court.

Filing an appeal on points of law does not by itself prevent enforcement of the decision. The applicant may request suspension of enforcement when filing the appeal, but must provide sufficient security to cover possible losses caused to the other party by the delay. If the security is provided within the legal period after the appeal is reviewed, enforcement may be suspended; if the security is not provided, enforcement continues.

If the creditor already has a foreign court judgment, foreign mediation record or equivalent document with enforceable effect, recovery in Ecuador may require recognition and enforcement of a foreign decision before forced collection begins. The application is filed with the specialized chamber of the provincial court at the address of the person against whom the decision is to be used. If that person has no address in Ecuador, enforcement may be connected with the place where the debtor’s assets are located or where the decision must produce effects.

During recognition, the Ecuadorian court checks formal conditions: authenticity of the document, finality of the decision, legalization or certification, translation when necessary, proof that the debtor was notified and could exercise the right of defence, and sufficient information to carry out formal court notice in Ecuador. The court does not re-examine the merits of the foreign dispute but determines whether the decision may have legal effect in Ecuador.

Foreign arbitral awards have a special regime. In Ecuador, a foreign arbitral award may have effect and be enforced under the rules applicable to arbitral awards, without a new judicial review of the merits of the arbitration dispute. To prepare enforcement, the creditor should have the arbitral award, the arbitration agreement, proof of finality or enforceability, legalized or certified documents when necessary, required translations and information about the debtor’s assets in Ecuador.

Once the judgment, arbitral award, mediation record or other enforcement title becomes enforceable, the creditor may initiate forced enforcement. In the enforcement of a final court judgment, the judge determines the calculation of principal, interest and court costs, then issues an enforcement order and gives the debtor five days to perform the obligation.

If the debtor does not pay within the period, the creditor may request recovery measures against the debtor’s assets and property rights. Enforcement may include seizure of movable and immovable property, vehicles, receivables and other enforceable assets, followed by valuation, forced sale and allocation under procedural rules.

The debtor’s objections at the enforcement stage are limited. They may be based only on circumstances arising after the enforcement title was created: actual payment, transfer of property in payment, settlement, debt forgiveness, renewal of the obligation, merger of debtor and creditor in the same person, set-off, or loss or destruction of the item due. Such objections do not automatically suspend enforcement, so advance preparation of information about the debtor’s assets increases the practical effectiveness of recovery.

If the debtor shows signs of insolvency, the creditor may consider initiating collective creditor proceedings. When the debtor is a registered merchant, the procedure may develop as creditor proceedings or bankruptcy, depending on the circumstances. Insolvency may be presumed, among other cases, when the debtor, after receiving an enforcement order, does not pay, does not identify sufficient assets, identifies disputed assets or assets located outside Ecuador, or when the value of seized assets is insufficient to cover the obligation.

In insolvency proceedings, the court may take measures to bring creditors together, preserve the debtor’s assets, consolidate enforcement procedures, appoint an administrator or custodian, seize assets, register the state of insolvency or bankruptcy and publish information about the opening of the procedure. In certain cases, additional measures related to the debtor’s appearance and protection of the creditor estate may also be adopted.

The debtor’s assets are distributed among creditors under insolvency procedure rules. If there are several creditors, parallel enforcement procedures, hidden assets, suspicious transfers or insufficient property, collective proceedings may allow a more orderly review of the debtor’s assets and transactions carried out before the opening of the procedure.

If the debtor’s assets are insufficient to satisfy creditors’ claims in full and culpable or fraudulent bankruptcy is established, transactions that harmed creditors, improperly reduced the debtor’s assets or transferred assets to third parties to obstruct recovery may be reviewed. Cancellation of harmful transactions may allow the assets or their value to return to the estate available for payment of debts, together with claims for losses against the responsible persons.

The debtor may also initiate a preventive arrangement with creditors when the debtor has sufficient assets to cover the obligations but expects that timely payment will not be possible. In that case, an agreement with creditors and a payment plan may be proposed within the limits of the law. For the creditor, insolvency proceedings are especially relevant when individual enforcement does not allow effective recovery of the debt.

Grandliga assists clients at all stages of debt collection in Ecuador: debtor and asset analysis, document review, out-of-court negotiations, selection between court collection based on an enforceable document, the special simplified procedure for monetary debts, abbreviated court proceedings or ordinary civil proceedings, recognition of foreign decisions, forced enforcement and insolvency proceedings. In each case, the strategy is determined by the type of obligation, available evidence, limitation period, location of assets and the realistic possibility of recovering the debt in Ecuador.

# DEBT COLLECTION AGENCY ECUADOR

16.09.2024

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