Debt Collection in Honduras

The debt collection process in Honduras 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 extra-judicial collection is up to 60 days (except in cases where a debt repayment installment plan is agreed upon). If this stage does not bring the expected results or after the initial analysis it becomes clear that it is not applicable, you should 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 the collection of the cost of goods sold at retail, the limitation period is 1 year. The consequences of missing the limitation period are applied only at the request of the debtor. The limitation period is interrupted by any act of recognition of the debt by the debtor. After the interruption, the limitation period begins to count anew.

Honduran law provides for judicial collection of debts in the ordinary court procedure, in the simplified procedure and in the procedure of issuing a payment order.

The ordinary court procedure 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. The ordinary court procedure is applicable to cases in which the amount of the claim exceeds 50,000 Honduran lempiras, or to cases in which it is impossible to estimate the amount of the claim even approximately. In the trial, the parties must be represented by lawyers.

After accepting the claim, the court delivers a copy of the claim and its appendices to the defendant, and also invites the defendant to respond to the claim within the next 30 days. In the response to the claim, the defendant must state the grounds for his objection to the plaintiff’s claims, citing material objections that he considers appropriate. The defendant must admit or refute the facts cited by the plaintiff. The court may consider the defendant’s silence or evasive answers as a tacit admission of facts that are detrimental to him. The defendant may also admit one or more of the plaintiff’s claims, or part of a single claim.

If, upon expiration of the time limit for responding to the claim, the defendant, who has been duly notified, fails to enter the process, he is declared to have failed to appear. The defendant’s failure to appear within the prescribed time limit does not prevent the process from continuing, and his absence cannot be considered as an admission of facts. The decision to recognize the defendant’s failure to appear will be notified to him at his address, if his whereabouts are known. Otherwise, the notification will be made by means of announcements. The court will not send the defendant any further notifications, except for the notification of the decision that ends the process. A defendant who has failed to appear may enter the process at any time, accepting it in the state in which he is, without the possibility of returning to previously performed actions.

After filing a response to the claim, or after declaring a failure to appear, the judge summons the parties to a preliminary hearing, indicating the date, day and time of its holding. This hearing must take place within 20 days of the summons.

At the preliminary hearing, the judge encourages the parties to reach an agreement on the claim, offers to resolve the conflict or options for settling the dispute between the parties. If the parties do not reach an agreement and do not accept the judge’s proposals, the hearing will continue to consider any procedural defects claimed by the parties that may prevent the process from continuing lawfully and making a final decision.

If the parties agree on all the facts and the trial is reduced to a legal issue only, the preliminary hearing ends after the judge has heard the parties on the issue in dispute. The preliminary hearing also ends when all the evidence to be presented consists only of documents already presented in the trial.

If the evidence does not consist only of documents, the court shall schedule a hearing to accept and examine such evidence, as well as to request it (if the parties are unable to provide it themselves). After the examination of the evidence has been completed and before the end of the hearing on the case, the parties are given the opportunity to make final arguments. After the end of the final arguments, the judge declares the session closed and ends the hearing on the case. From this moment, the ten-day period for issuing a judgment begins.

The simplified judicial procedure is applicable to cases in which the amount of the claim does not exceed 50,000 Honduran lempiras and is implemented by filing a claim, after which the court makes a decision on accepting the claim within 5 days. If the claim is accepted, the judge will indicate in the decision on 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 amount of the claim is not more than 5,000 Honduran lempiras, the participation of a lawyer in such a case is not mandatory. However, if in such a case one of the parties is defended and represented by a professional lawyer, then the other party must be defended equally.

The failure of the defendant to appear does not prevent the consideration of the case. If the defendant appears, the hearing will begin with an attempt at reconciliation, which will be conducted according to the rules established for the preliminary hearing in the ordinary process. If agreement is not reached, the plaintiff will have to confirm his claim, and the defendant will have to object to it. After this, the parties present their evidence and inform the court of their final statements. Then the court ends the hearing and makes a decision within 5 subsequent days.

The payment order procedure is applicable to the collection of a debt that is documented and does not exceed 200,000 Honduran lempiras. To implement this procedure, the creditor must submit a request for a payment order. If the court finds that the request complies with the procedural requirements, it issues an order requiring the debtor to pay the debt within 20 days or to appear in court within the same period and briefly set out in writing the reasons why, in its opinion, he should not pay all or part of the amount claimed. If the debtor does not appear in court, the court will issue an order to commence enforcement proceedings to collect the amount claimed. If the debtor appeals the order within the specified period, the creditor’s claims will be considered in the ordinary or simplified judicial procedure, depending on the amount of the claim.

The decision of the court of first instance may be appealed within 10 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 is completed, the appellate court issues a decision within 10 days. The appellate court decision may be appealed to the Supreme Court of Honduras within 20 days from the date of notification of the contested decision. As a result of the review of the appeal, the Supreme Court issues a decision that comes into legal force from the moment it is announced and is not subject to appeal.

After the court decision comes into legal force, the creditor must obtain an enforcement order and initiate the enforcement procedure. The final court decision may be presented for enforcement within 2 years from the date of entry into legal force. As part of the enforcement of the court decision, 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, dividends and financial instruments; seizing and controlling the company.

If the debtor shows signs of insolvency, the creditor should consider the option of declaring the debtor bankrupt. The legislation provides for a number of characteristic signs of insolvency, among which the following should be highlighted: 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 its premises. At this stage, in the event of insufficient assets of the debtor 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 assets. Among such transactions, the following should be highlighted in particular: gratuitous and onerous transactions, if the benefit received by the debtor is clearly lower than that provided by him; any transactions made by the debtor with the purpose of deceiving the creditor, provided that the debtor’s counterparty knew about such deception. 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 for international debt collection in Honduras, our company is ready to provide its expert assistance to effectively resolve your financial issue. Contact us to get additional information and professional support from specialists of the leading debt collection agency.

# DEBT COLLECTION AGENCY HONDURAS

23.08.2024

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