Debt Collection in Ecuador

The debt collection process in Ecuador 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 court cases 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 court cases 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 messengers. 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 to achieve the fastest possible debt recovery.

The average time for informal out-of-court collection is up to 60 days (except in cases where a debt repayment installment plan has been agreed upon). If this stage does not produce 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 limitation period for debts arising on the basis of a written agreement is 10 years, for debts arising on the basis of an oral agreement it is 5 years, for debts arising on the basis of invoices it is 3 years. The consequences of missing the limitation period apply only at the request of the debtor. The limitation period is interrupted when the debtor acknowledges the obligation, explicitly or implicitly. After the interruption, the limitation period begins to count anew.

Ecuadorian law provides for judicial debt collection in ordinary and simplified judicial proceedings.

The ordinary judicial process is carried out by filing a statement of claim with the court, after which the court decides whether to accept the claim, notifies the defendant and prepares for the trial of the case on the merits. Once the judge finds the claim clear and complete, he will send it to the defendant with a warning that the case may be heard in absentia. The defendant has 15 days to simultaneously file suspensive and final defenses to the creditor’s claim.

The answer to the claim must contain defenses that are raised against the plaintiff’s claims and the documents attached to the claim, categorically indicating what is admitted and what is denied. The judge must ensure that the answer is clear and that the defenses contain the factual and legal grounds on which they are based. If the judge finds that the demands have not been met, he will order the defendant to clarify or supplement the answer. The failure to answer the claim or to make a clear defense to the plaintiff’s claims will be considered by the judge to be against the defendant and will be considered a mere denial of the cause of action.

Once the debtor has filed an answer to the claim, the plaintiff cannot withdraw from the lawsuit unless he pays the defendant’s legal costs.

If the dispute is purely a question of law, the judge will consider the case file and make a decision. If the defenses concern facts that must be proven, the judge will set a date and time for the parties to appear in an attempt to reach a settlement that will end the litigation. Failure by one party to appear will be considered as a sign of bad faith, which will be taken into account when deciding on the reimbursement of legal costs.

If both parties appear, the judge will order each party to state its case in turn on the record, especially stating the concessions it is prepared to make in order to achieve a settlement. Such concessions will be effective only if made as part of the conciliation and will not in any way alter the factual or legal issues raised in the claim and the answer.

If the parties reach an agreement, it will be recorded in the record. The judge, if he finds that the agreement is lawful and covers all the claims, will confirm it by order and declare the proceedings closed. If the agreement covers only some of the claims and is lawful, the judge will confirm it by order and order that the proceedings continue on the remaining issues not included in the conciliation agreement, unless in the judge’s opinion those issues cannot be considered and determined only jointly because of their nature.

If the parties fail to reach a settlement, the statement of each party will be recorded in the report and the procedure will be considered complete. These statements will be taken into account when making a decision to assess the unreasonableness or malice of the party who may be accused of not reaching a settlement. If a settlement is not reached, the judge will schedule a hearing and give the parties 10 days to present any evidence requested by the parties. After the time for presenting evidence has expired, the judge will review the case file and make a decision. The parties may present their legal arguments before making a decision.

A summary trial is applicable to cases in which the amount in dispute does not exceed $5,000. The claim is filed with the court along with the evidence available to the plaintiff or with a notice of evidence to be presented at the settlement hearing and trial. The judge will set a date for summoning the defendant, who will have eight days to respond to the claim by stating his objections, attaching the available evidence and specifying the evidence to be presented at the conciliation and trial hearing.

After the expiration of the specified time, regardless of whether a response has been given, the judge will set a date for the conciliation and trial hearing, which must take place no earlier than three days and no later than eight days after the date set.

If the defendant fails to appear at the hearing, the judge will declare him in default, consider the evidence presented as requested by the plaintiff, and make a decision.

If both parties are present, the judge will facilitate a conciliation between them. If the conciliation covers the entire dispute, the judge will make a decision approving it, if it is not contrary to law. If no agreement is reached or it is partial or is not approved, because it is contrary to law, the judge will order the evidence requested by the parties to be presented.

The hearing will include the taking of witness statements, answers to questions, expert testimony, and examination of documents and objects, after which the parties will be given the floor to present their arguments, beginning with the plaintiff.

After hearing the arguments, the judge will issue a decision on the same day, which will be written and duly reasoned within forty-eight hours, and will notify the parties within a further twenty-four hours.

The decision of the court of first instance may be appealed within 3 days from the date of notification of the decision. The appeal is heard in a court session with 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 Ecuador within 5 days from the date of notification of the contested decision. In the event that adequate security is provided, the effect and execution of the decision of the appellate court will be suspended. 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.

Once the judgment has entered into legal force, the creditor should initiate enforcement proceedings. The judgment may be brought for enforcement within 5 years. Within the framework of the enforcement of the judgment, the creditor’s claims may 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. Signs of insolvency are cases when the debtor, after receiving the order for enforcement, does not pay and does not transfer property to pay off the debt; the transferred property is insufficient to pay the debt; the transferred property is the subject of a dispute, is not at the disposal of the debtor, is located outside of Ecuador. In the bankruptcy procedure, the debtor’s assets will be distributed among creditors in accordance with the rules of the insolvency process. If the debtor’s assets are insufficient to fully satisfy the creditors’ claims and at the same time it is established that there is a fact of culpable bankruptcy (if insolvency is caused by the debtor’s careless or wasteful behavior) or fraudulent bankruptcy (if insolvency is caused by the debtor’s malicious actions with the aim of harming creditors), then it is possible to cancel the debtor’s transactions that caused damage to the debtor or deprived him of assets, as well as compensation for losses from the guilty parties. As a result of using these provisions, it is possible to increase the chances of satisfying creditors’ claims in full.

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

# DEBT COLLECTION AGENCY ECUADOR

16.09.2024

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