Debt Collection in Chile

The debt collection in Chile process begins with a legal, financial and registry review of the debtor. At this stage, it is important to verify the debtor’s correct identity, tax identification number where applicable, company registration status, authority of representatives, actual business activity, documents proving the debt, pending civil or enforcement cases, ongoing enforcement proceedings, signs of insolvency and the existence of assets, rights or other property that may be attached in Chile.

In commercial disputes, this review should include contracts, purchase orders, electronic invoices, proof of delivery of goods or performance of services, business correspondence, acknowledgements of debt, partial payments, guarantees, promissory notes, bills of exchange, checks, notarized documents and any other evidence that helps determine whether the creditor may proceed directly through enforcement proceedings or must first obtain a court judgment confirming the existence and amount of the debt.

If the debtor continues to operate, there are no clear signs of insolvency and the documents support the claim, an out-of-court stage may be started to seek voluntary payment, document the debtor’s position and prepare the proper judicial strategy. If the initial review confirms that the creditor already has an enforceable title, an invoice with enforceable effect or an enforceable court judgment, the strategy may be directed immediately toward a more effective judicial or enforcement route.

The out-of-court debt collection stage in Chile is based on documented communications with the debtor, review of the amount owed, negotiation of full or partial payment and preparation of a solution that protects the creditor’s legal position. The parties may agree on a payment schedule, return of goods, written acknowledgement of debt, security, set-off, assignment of the claim or another commercially justified settlement option supported by the available documents.

The debtor may be contacted by mail, email, telephone, messaging or other available channels, while preserving evidence of sending, the content of the claim and the debtor’s replies. If the matter concerns consumer debt, out-of-court collection in Chile must follow specific limits: the communication must correctly inform the debtor of the default and must respect proportionality, reasonableness, transparency, truthfulness, consumer dignity and privacy, as well as the legal limits on frequency and content of contacts.

The usual working period for informal out-of-court collection may be up to 60 days, unless the parties have documented payment by installments or another settlement arrangement. If the debtor does not respond, denies the debt without sufficient basis, breaches an agreement, hides asset information or the initial review shows that the amicable stage is not suitable, judicial debt collection in Chile should be prepared according to the available document, claim amount, limitation period and location of assets.

Before starting court proceedings, the applicable limitation period must be reviewed for the specific claim. Under Chilean civil law, the general rule is three years for enforcement actions and five years for ordinary actions. After three years, an enforcement action is converted into an ordinary action and, once converted, lasts only two additional years. For this reason, it is not enough to identify the debt maturity date; it is also necessary to determine which document supports the claim and which type of action may be used.

Special rules may apply to debts evidenced by bills of exchange or promissory notes. Law No. 18,092 provides that the holder’s exchange actions against the persons obliged to pay prescribe one year from the maturity date of the instrument. For invoices, it is necessary to check whether the invoice was accepted, whether it was challenged within the legal period, whether receipt of goods or services was confirmed and whether the invoice has enforceable effect.

The consequences of limitation apply when the debtor invokes them in the relevant proceedings. The limitation period may be interrupted by legally relevant acts, including acknowledgement of the obligation by the debtor or the appropriate court action. After interruption, the period begins to run again according to the legal nature of the applicable claim.

Enforcement proceedings are a particularly important route for debt collection in Chile when the obligation is evidenced by a document to which the law grants enforceable effect. The Chilean Code of Civil Procedure allows this route, among other cases, on the basis of a final judgment, an authorized copy of a notarized deed, an approved settlement record, a private document acknowledged by the debtor or by the court, a judicial acknowledgement of debt, certain credit instruments and other documents to which the law grants enforceable effect.

In practice, the creditor must prove that the obligation is determined or determinable, due, currently payable and supported by a sufficient document. If the court considers that the document allows enforcement, it may issue an enforcement and attachment order. This order requires the debtor to pay and, if payment is not made immediately, allows attachment of sufficient assets to cover the principal debt, interest and costs.

After the payment demand is served on the debtor within the territorial jurisdiction of the court where the claim was filed, the debtor has eight business days to file objections. If no objections are filed within the legal period, no separate judgment on the merits is required, and the enforcement and attachment order allows the attached assets to be realized and payment to be made to the creditor under the enforcement procedure.

If the debtor files objections, the enforcement procedure enters a disputed stage limited to the defenses allowed by law. These may include payment, limitation, lack of the necessary requirements of the enforceable title, lack of jurisdiction of the court and other legally permitted defenses. If the objections are rejected, enforcement continues until the assets are realized and the debt is paid. If the objections are upheld in whole or in part, the procedure may be terminated, limited or adjusted according to the court decision.

In commercial disputes, an invoice with enforceable effect may be decisive. Law No. 19,983 regulates the transfer and enforceable effect of an invoice copy when the legal requirements are met. For electronic invoices, confirmation of receipt of goods or services, or an objection to the invoice, must be reported within the legal period of eight days through the system provided by the Chilean Internal Revenue Service. Therefore, before filing a claim, it is important to review not only the contract and invoice, but also delivery of goods or performance of services, acceptance or objection to the invoice, electronic records and the full documentary trail of the transaction.

Chilean law allows judicial debt collection to be structured through enforcement proceedings, ordinary court proceedings and small-claim proceedings. The choice of route depends on the documentary strength of the debt, claim amount, existence of a dispute, limitation period, need to obtain a declaratory judgment first and possibility of moving directly to enforcement measures.

Ordinary court proceedings are used when the creditor needs to obtain a prior court determination of the existence, enforceability or amount of the debt, or when the available documents do not allow direct enforcement proceedings. The proceedings begin by filing a claim with the competent court, together with documents proving the legal relationship, the creditor’s performance, the debtor’s breach, the amount claimed, interest and other applicable accessories.

If the claim meets the legal requirements, the court orders service on the defendant so that a response may be filed. The time limit for filing a response is 18 days if the defendant is served within the territorial jurisdiction of the court before which the claim was filed. If the defendant is located in another jurisdiction, the period may be extended according to the applicable procedural rules.

In the response, the defendant must state the defenses, indicate the facts and legal grounds relied upon and respond to the creditor’s claim. Further written exchanges between the parties may then follow, each subject to its own procedural period, allowing the disputed issues to be defined before the evidentiary stage.

If the defendant fully admits the claim, does not dispute material facts or the parties request a decision without further steps, the court may move toward a decision according to the state of the case. If there are material, relevant and disputed facts, the court opens the evidentiary stage and determines the facts that must be proved.

Within three days after the decision opening the evidentiary stage, the parties may request that disputed facts be amended, excluded or added. In ordinary court proceedings, the ordinary period for presenting evidence within the territorial jurisdiction of the court is 20 days. If evidence must be produced outside that territory or outside Chile, the rules on extension of the period apply.

After the evidentiary stage ends, the parties may submit written comments on the evidence within the applicable procedural period. The court then assesses the documents, statements, witness testimony, other evidence and legal arguments submitted by the parties, and issues a final judgment on the creditor’s claim.

Small-claim proceedings apply to claims exceeding 10 and not exceeding 500 monthly tax units, unless a different special procedure applies. This route preserves the basic structure of ordinary court proceedings but uses shorter time limits: the defendant has eight days to respond to the claim, and the evidentiary period is 15 days, with extensions where allowed by procedural rules.

A final judgment of the court of first instance may be challenged by appeal within the general period of ten days from service. For other appealable decisions, the general period is five days unless a special rule provides otherwise. The appeal must contain factual and legal grounds, as well as specific requests, so that the higher court can review the decision within the scope raised by the appellant.

For certain decisions, a cassation appeal may be filed when the legal grounds exist and the procedural requirements are met. The cassation appeal must be filed within fifteen days from service of the challenged decision. The Supreme Court of Chile does not act as an ordinary third-instance appeal court, but reviews the case within the specific limits of cassation.

If the creditor already has a foreign court judgment, foreign arbitral award or another decision issued outside Chile, the strategy should include recognition and enforcement of foreign decisions. In Chile, a foreign decision normally requires prior authorization from the Supreme Court of Chile before it can take effect and be enforced in the country.

To obtain this authorization, the foreign decision to be relied on in Chile must be prepared with proper legalization or apostille and a Spanish translation where required. The application is filed with the Supreme Court of Chile, the materials are referred to the judicial prosecutor of the Supreme Court for an opinion, and the Court then decides whether the foreign decision may be enforced in Chile.

Once authorization is granted by the Supreme Court, enforcement is requested before the court that would have heard the matter at first or single instance if the case had originally been brought in Chile. For an international creditor, this stage is especially important when the debtor has bank funds, real estate, movable property, receivables, company interests or other assets located in Chile.

Once a Chilean court judgment, enforceable title or recognized foreign decision can be enforced, the creditor moves to the enforcement stage. In general terms, an enforcement action lasts three years, subject to the rules on conversion of an enforcement action into an ordinary action, special titles and specific procedural circumstances.

During enforcement, the creditor’s claims may be satisfied through attachment of the debtor’s funds, receivables, movable property, real estate, vehicles, securities, company interests and other assets that may be legally attached. The practical value of this stage depends on timely identification of assets, charges, restrictions, prohibitions, pending disputes and recent transactions that may affect actual recovery.

If the debtor shows signs of insolvency, the creditor should assess whether to participate in insolvency proceedings or initiate judicial liquidation under Law No. 20,720 on reorganization and liquidation of the assets of companies and individuals.

Forced liquidation may be relevant when the debtor fails to pay an obligation contained in an enforceable title; when there are two or more overdue enforceable titles against the debtor arising from different obligations, at least two enforcement proceedings have been initiated and the debtor has not provided sufficient assets to satisfy the debt and costs within the legal four-day period; or when the debtor or its managers cannot be found and its offices or premises are closed. This route does not automatically replace individual recovery, but it may be useful when recovery depends on gathering assets, verifying claims, controlling the debtor’s conduct and distributing available property among creditors.

At this stage, if the debtor’s assets are insufficient to satisfy creditors in full, avoidance actions may be considered in relation to acts or contracts that harmed the body of creditors or improperly reduced the available estate.

After reorganization or liquidation proceedings have started, creditors may, and the supervisor or liquidator must where applicable, bring avoidance actions in relation to certain acts performed or contracts entered into by the debtor company within the year immediately preceding the start of the proceedings. These include any early payment, regardless of the form used; any payment of overdue debts made otherwise than as provided in the contract; and any mortgage, pledge or other security created over the debtor’s property to secure previously assumed obligations.

If the acts or contracts were made free of charge or with persons related to the debtor company, the period may be extended to two years. Acts or contracts entered into with any person within the two years preceding the start of the insolvency proceedings may also be avoided where it is shown that the counterparty knew of the poor condition of the debtor company’s business and that the act harmed the estate or altered equality among creditors.

In addition, amendments to agreements or corporate documents made within the six months preceding the start of the relevant insolvency proceedings may be revoked if they reduce the debtor’s property. A successful action returns the property or its economic value to the estate, increasing the possibility of satisfying creditors’ claims and covering the costs of the proceedings.

If you need support with debt collection in Chile, Grandliga can assist at every stage of the case: document and asset analysis, out-of-court negotiations, preparation of the judicial strategy, enforcement proceedings, ordinary court proceedings, small-claim proceedings, recognition and enforcement of foreign decisions, enforcement against assets and measures related to the debtor’s insolvency or liquidation. The work is structured according to the document proving the debt, the debtor’s conduct, available assets in Chile and the creditor’s international position.

# DEBT COLLECTION AGENCY CHILE

24.09.2024

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