Debt Collection in Costa Rica

The debt collection process in Costa Rica begins with an assessment of the debtor’s solvency, their line of business, the history of the business, the availability of documentary evidence of the debt, current litigation and enforcement proceedings, and the possibility of disputing the debt. This assessment determines the strategy that will be used on behalf of the client in the collection process.

If the debtor has no current litigation or outstanding judgments for debt collection and is actively engaged in commercial activities, then it is advisable to use the out-of-court debt collection stage.

This stage involves active negotiations with the debtor in order to reach an agreement on the payment of the creditor’s claims or other possible settlement options (e.g. return of goods, transfer of the debt to a third party, exchange of services or goods).

Interaction with the debtor begins immediately after sending a notice by mail, email, phone or instant messenger. This process involves intensive communication with the debtor in order to exert constant pressure. The main objective is to establish contact with key decision makers in order to achieve the fastest possible debt collection.

The average time for informal extra-judicial collection is up to 60 days (except in cases where a payment plan has been agreed upon). If this stage does not bring the expected results or after an initial analysis it becomes clear that it is not applicable, it is necessary to proceed to collection through the courts.

Before initiating judicial collection, it is worth paying attention to the limitation period. The general limitation period is 10 years. For claims related to commercial activities, the limitation period is 4 years. The consequences of missing the limitation period apply only at the request of the debtor. The limitation period is interrupted by an explicit or implied acknowledgement of debt, which the debtor makes in favor of the creditor. After the interruption, the limitation period begins to count anew.

Costa Rican law provides for judicial debt collection in ordinary judicial proceedings and by issuing a payment order.

In court hearings, the parties must appear with the participation of a lawyer, unless they are professional lawyers. All written documents must be certified by a lawyer, otherwise the documents will not be accepted for consideration.

The ordinary judicial process is carried out by filing a statement of claim with the court, after which the court makes a decision on the acceptance of the claim, notifies the defendant and prepares for the consideration of the case on the merits. If the claim meets the legal requirements, the defendant will be sent a notice warning to provide an answer to the claim within thirty days.

The defendant must provide a written answer in which he answers all the facts set out in the claim in the order in which they were presented, reasonably explaining whether he rejects or admits them. He must also clearly express his position on the demands and their assessment, set out the legal grounds and express his opinion on the evidence presented and offered by the plaintiff. If the defendant does not answer the facts, the court will warn him, indicating the deficiencies that must be corrected within five days. If the defendant fails to correct these deficiencies, the facts to which he/she has not given an appropriate response will be considered admitted.

If the defendant fails to provide an answer, the court will consider the facts provided by the plaintiff as proven, unless they are refuted by the evidence available in the case. If the defendant admits the claims, fails to respond to the claim or responds to it late, an early decision will be made without further proceedings, except in cases where there are signs of procedural fraud.

After receiving the answer to the claim, if there are no procedural issues requiring an interim decision, the court will schedule a preparatory hearing, which must be held as soon as possible. At this hearing, the court attempts to reconcile the parties to the dispute, clarifies the subject of the dispute and the amount of the claims, accepts the evidence and schedules hearings to provide additional evidence, and also resolves a number of other procedural measures.

If the nature or circumstances of the case, the absence of evidence to be presented, or any other reason, at the discretion of the judge, do not justify an additional hearing, the parties shall be given an opportunity to present their conclusions at the end of the preliminary hearing, and the court shall then render a judgment.

If necessary, an additional hearing shall be held within twenty days of the preliminary hearing, unless a longer period is required. At this hearing, the evidence requested by the parties shall be presented and examined. The court shall then hear the closing arguments of the parties and render a decision in the form of a judgment.

The procedure for issuing a payment order is applicable to the collection of monetary obligations that are clearly defined and enforceable, based on public or private documents, regardless of their enforceability. To implement this procedure, the creditor must submit a request for the issuance of a payment order. If the court finds that the request complies with the procedural requirements, it shall issue an order requiring the debtor to pay the debt within 5 days or to object to the claims made within the same period. If the defendant admits the claim, does not object within the prescribed period, or if the objection is unfounded, the decision to comply with the requirements is executed without further proceedings. In the event of a justified objection, an oral hearing is scheduled, which is held in accordance with the rules established for simplified proceedings. The verdict decides whether the decision to comply with the requirements is confirmed or revoked. If the objection is accepted by the court, the plaintiff may request a transfer to the general judicial process, to consider the dispute in a simplified manner.

The decision of the court of first instance may be appealed within 5 days from the date of notification of the decision. The appeal is considered in a court session with the participation of the interested parties. After the hearing, the appellate court makes a final decision. The decision of the appellate court may be appealed to the Supreme Court of Costa Rica within 15 days from the date of notification of the contested decision. As a result of the consideration of the appeal, the Supreme Court makes a decision that comes into legal force from the moment of its announcement and is not subject to appeal.

After the court decision comes into legal force, the creditor should initiate the enforcement procedure. As part of the enforcement of the court decision, the creditor’s claims can be satisfied by seizing and writing off funds from the debtor’s accounts; seizing the movable and immovable property of the debtor with their subsequent sale; seizing and confiscating securities and financial instruments.

If the debtor has signs of insolvency, the creditor should consider the option of bankruptcy of the debtor. The legislation provides for a number of characteristic signs of insolvency, among which it is necessary to highlight cases when the debtor: failed to fulfill two or more obligations on time, which caused damage to different creditors, while there is insufficient property to pay them; ceased business activities, or all of his legal representatives disappeared or are absent, without taking the necessary measures to fulfill their obligations in a timely manner. At this stage, in case of insufficient assets of the debtor to fully satisfy the claims of creditors, it is possible to cancel the transactions of the debtor that caused damage to the debtor or deprived him of assets. Among such transactions, it is necessary to highlight in particular: gratuitous transactions made by the debtor within two years prior to the opening of bankruptcy; increase by the debtor of guarantees on the debtor’s property in favor of existing obligations made by the debtor within a year prior to the opening of bankruptcy; payment of obligations, the term of performance of which has not come at the time of filing an application for the beginning of bankruptcy. As a result of the cancellation of such transactions, it is possible to return back to the debtor what he lost from such transactions and, due to this, increase the liquidation estate to satisfy the claims of creditors and cover the costs of implementing the bankruptcy procedure.

If you have any questions or you need support on international debt collection in Costa Rica, our company is ready to provide its expert assistance for the effective resolution of your financial issue. Contact us to get additional information and professional support from specialists of the leading debt collection agency.

# DEBT COLLECTION AGENCY COSTA RICA

03.09.2024

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