Debt collection in El Salvador

The debt collection process in El Salvador begins with an assessment of the debtor’s solvency, industry, business history, documentary evidence of the debt, current court cases and enforcement procedures, and the possibility of challenging the debt. This assessment determines the strategy that will be used on behalf of the client during the collection process.

If the debtor does not have current court cases or outstanding court decisions on debt collection, and he is actively engaged in commercial activities, then it is advisable to use the stage of out-of-court debt collection.

This stage involves active negotiations with the debtor to reach an agreement to pay the creditor’s claims or other possible settlement options (for example, return of goods, transfer of debt to a third party, exchange of services or goods).

Interaction with the debtor begins immediately after sending the notification by mail, email, telephone or instant messengers. This process involves intensive communication with the debtor in order to apply constant pressure. The main task is to establish contact with key decision makers to achieve speedy debt repayment.

The average time for informal out-of-court collection is up to 60 days (except in cases where an installment plan for debt repayment 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, you should proceed to recovery through the court.

Before initiating legal action, you should pay attention to the statute of limitations. The statute of limitations for ordinary actions is 20 years, for executive actions 10 years. For claims related to the collection of the cost of retail goods sold, the statute of limitations is 2 years. The consequences of missing the limitation period apply only at the request of the debtor. The limitation period is interrupted if the debtor directly or indirectly acknowledges the debt, for example a written acknowledgment or agreement to pay the debt in installments. After the interruption, the statute of limitations begins to count again.

El Salvador law provides for judicial collection of debt in the ordinary court, summary proceedings and writ proceedings.

The usual judicial procedure is carried out by filing a statement of claim with the court, after which the court decides to accept the claim, notifies the defendant and prepares for consideration of the case on the merits. The usual judicial procedure is applicable for cases in which the amount of claims exceeds 25,000 Salvadoran colones, or for cases in which it is impossible to estimate the amount of claims even approximately. 

In litigation, the parties must be represented by lawyers. If the claim is accepted, the court issues a ruling and orders the defendant to appear in court.

Once the claim is accepted, the court summons the defendant to hear his position within 20 days of receipt of the notice. In an answer to the claim, the defendant may deny the facts stated by the plaintiff, state the reasons for his opposition to the plaintiff’s claims, and provide exceptions that he considers appropriate. The judge may consider the defendant’s silence or evasive answers as an indirect admission of facts known and unfavorable to him.

Failure of the defendant to appear within the specified period entails an announcement of his absence, which will not prevent the continuation of the process, but his absence is not perceived as tacit consent or recognition of the facts of the claim. The Defendant will be notified of the Failure to Appear decision, and no further notice will be given from that point on, other than the decision ending the process.

After completion of the initial stage or upon expiration of the deadline for the defendant to appear in court, the judge will schedule a preliminary hearing within three days, which must take place no later than sixty days from the date of the court summons.

A preliminary meeting is held with the aim of attempting to reconcile the parties, eliminating procedural defects that may have been present in the initial statements; identifying and receiving evidence that the parties intend to use at the stage of providing evidence as a substantiation of their claims or objections.

If the parties do not reach an agreement or do not express their readiness to enter into it immediately, the meeting will continue to consider any defects stated by the parties if they constitute an obstacle to the lawful continuation of the process and its conclusion with a decision on the merits.

The parties, together with the judge, if appropriate, will determine the facts on which there is disagreement, as well as those facts that are admitted or agreed upon by both parties, the latter being excluded from the trial. If all the facts are agreed upon and the trial comes down to a question of law, the preliminary hearing will be concluded and the time limit for rendering a decision will begin. On facts on which there is disagreement, the parties will be given the floor to offer evidence they consider necessary.

To do this, the court will determine the start date of the stage of providing evidence, which should be within sixty days after the preliminary hearing, depending on the complexity of the preparation and the number of required meetings.

After the examination of the evidence and before the end of the hearing, the parties are given the opportunity to make closing arguments. After closing arguments are completed, the judge declares the hearing closed and ends the hearing of the case. From this moment the countdown for making a court decision begins.

Within fifteen days from the date of completion of the hearing on the case, the court makes a decision and notifies the participants in the case within a period not exceeding five days from the date of the decision.

The simplified judicial procedure is applicable for cases in which the amount of claim does not exceed 25,000 Salvadoran colones and is implemented by filing a claim, after which the court decides to accept the claim. If the statement of claim is accepted, the judge will indicate in the decision of acceptance the date and time of the hearing, which will take place no earlier than ten days and no later than twenty days from the date of service of the summons.

If the defendant fails to appear, the case will be considered in absentia. If the defendant appears, the judge will conduct a public hearing and attempt to reach a settlement between the parties to avoid further litigation. If reconciliation is not reached, the hearing continues. The parties present their positions, present evidence, and then make their closing arguments orally. At the end of the hearing, the judge may impose a sentence immediately if possible. If this is not possible, he must verbally announce the decision. In any case, the verdict must be rendered within fifteen days from the completion of the hearing.

Writ proceedings are applicable for the collection of a debt that is certain, overdue and collectable in an amount not exceeding 25,000 Salvadoran colones. To implement this procedure, the creditor must submit a request for an order to collect the debt. If the court finds that the request meets the procedural requirements, it will issue an order directing the debtor to pay the debt within 20 days or to file an objection within the same period. If the debtor does not file an objection within the specified period, the order becomes a final decision and can be forcibly executed. If within the specified period the debtor protests the order, the creditor’s claims will be considered within the framework of a simplified judicial procedure.

The decision of the court of first instance can be appealed within 15 days from the date of notification of the decision. The complaint is considered in a court hearing with the participation of interested parties. After the hearing is completed, the appeal court makes a decision within 20 days. The decision of the Court of Appeal may be appealed to the Supreme Court of El Salvador within 15 days from the date of notification of the contested decision. As a result of considering the complaint, the Supreme Court makes a decision that comes into force from the moment it is announced and is not subject to appeal.

Once the judgment becomes final, the creditor must obtain an enforcement order and initiate enforcement proceedings. The final court decision can be submitted for execution within 2 years from the date of entry into force. As part of the enforcement of a court decision, the creditor’s claims can be satisfied by seizing and writing off funds from the debtor’s accounts; seizure of movable and immovable property of the debtor with their subsequent sale; seizure and confiscation of securities, dividends and financial instruments; arrest and control of the company.

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 are cases when the debtor is unable to fulfill its liquid and overdue obligations, or when the debtor does not have enough assets to pay off debts, or when the debtor closes the premises for a period of more than 15 days if the debtor has obligations , which should be performed. At this stage, if the debtor’s assets are insufficient to fully satisfy the creditors’ claims, it is possible to cancel the debtor’s transactions that caused damage to the debtor or deprived him of his assets. Among such transactions, we should highlight in particular: gratuitous and onerous transactions, if the benefit received by the debtor is clearly lower than that provided to him; any transactions made by the debtor for the purpose of defrauding the creditor, provided that the debtor’s counterparty knew about such deception; payment of any improper obligations. 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 thereby 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 need support with international debt collection in El Salvador, our company is ready to provide our expert assistance to effectively resolve your financial issue. Contact us to receive additional information and professional support from specialists of the leading debt collection agency.

# DEBT COLLECTION AGENCY EL SALVADOR

21.08.2024

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