Debt Collection in Nicaragua

The debt collection process in Nicaragua 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 in order 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 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, 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 of any entrepreneur or merchant regarding the collection of payment for sold goods from persons who are not resellers, the limitation period is 2 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 that the debtor makes in favor of the creditor. After the interruption, the limitation period begins to count anew.

Nicaraguan law provides for judicial collection of debts in the ordinary court process, in summary proceedings and by order for payment.

Each party to the case must be present at all stages of the process with the assistance of a lawyer, and the judicial authority must reject documents not signed by a lawyer, as well as prevent actions that are attempted to be carried out without such assistance. The participation of a lawyer is not mandatory in the simplified process and when filing a request or objection within the framework of the issuance of a payment order, if they are drawn up in accordance with the established form. However, if in these processes one of the parties is represented or accompanied by a lawyer, the other party must also be represented by a lawyer.

Before filing a claim, the parties must contact the offices of the Directorate of Alternative Dispute Resolution or a mediation center authorized and supervised by this Directorate in order to resolve the conflict and avoid the initiation of litigation. If the parties reach an agreement and it is not implemented, the implementation will be carried out in accordance with the procedures for the implementation of extra-judicial acts, after the agreement has been analyzed by the judicial authority for compliance with public order and the legality of its content. If the parties do not reach an agreement or the person summoned does not appear for the procedure, the applicant for mediation may file a claim with the competent civil court, attaching a certificate issued by the Directorate of Alternative Dispute Resolution or the Management Center for Alternative Dispute Resolution, confirming that the procedure was carried out but no agreement was reached. Without following this procedure, the claim will be rejected.

The ordinary court procedure is carried out by filing a claim with the court, after which the court decides to accept the claim, notifies the defendant and prepares for the consideration of the case on the merits. The ordinary court procedure is applicable to cases where the amount of the claim exceeds 200,000 Nicaraguan cordobas. The ordinary procedure also considers cases in which it is impossible to estimate the amount of the claim.

Once the claim is accepted, the court summons the defendant to file an answer within the next thirty days. In the answer to the claim, the defendant must deny or admit the facts presented by the plaintiff. The court will consider the defendant’s silence or evasive answers as an implied denial of facts that may be harmful to him. The defendant may also expressly agree with the claim in the answer or at the preliminary hearing, admitting the grounds for the claim, after which the court will make a decision without the need for proof or any other procedure.

If, after the expiration of the time limit for responding to the claim, the defendant, having been duly notified, fails to appear in the proceedings, he will be declared to have failed to appear through his own fault. The defendant’s failure to participate will not prevent the continuation of the proceedings, and his failure to appear will be considered a denial of the facts.

After the response to the claim or upon expiration of the relevant time limits, the court will appoint an initial hearing for the parties within five days, which must take place no later than twenty days from the date of the appointment. The purpose of the initial hearing is to encourage the parties to reach an agreement, eliminate the claimed procedural deficiencies, precisely define the subject and objections of the parties, as well as the terms of their discussion; confirm the list of proposed evidence and admit the evidence that the parties intend to use at the evidentiary hearing.

If the only admissible evidence is documents that were presented in the proceedings and were not challenged, the evidentiary hearing will not be held. At the end of the initial hearing, the judicial body may issue a decision orally and then draw it up in writing. If there is a need to examine the admitted evidence, the court appoints evidentiary hearings, during which it questions witnesses, requests new evidence, and studies expert opinions.

After the examination of evidence is completed and before the end of the hearing, the parties are given the opportunity to present their closing arguments. After the end of the final arguments, the judge declares the hearing closed and ends the hearing. From this moment, the ten-day period for issuing a court decision begins.

The simplified judicial procedure is applicable to cases in which the amount of the claim does not exceed 200,000 Nicaraguan cordobas and is implemented by filing a claim, after which the court makes a decision on accepting the claim within 5 days. After accepting the claim, the court summons the defendant in the same manner as in a regular process, only within fifteen days.

After filing an objection to the claim or upon expiration of the relevant periods, the court will summon the parties to a hearing within five days, which must take place within ten days from the date of notification. In the event of non-appearance of the parties, the procedure established for the ordinary process will apply. The purposes of the hearing in the simplified process correspond to the purposes of the initial and evidentiary hearings in the ordinary process. After the presentation of evidence, the parties, through their representatives, orally present their closing arguments. After the conclusion of the hearing, the court makes a decision within five days.

The procedure for issuing a payment order is applicable to the collection of a monetary debt that must be liquid, due and executable and does not exceed the amount of 50,000 Nicaraguan cordobas. To implement this procedure, the creditor must file a request for the issuance of 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 demanded. If the debtor fails to appear in court, the court will issue a ruling to commence enforcement proceedings to collect the claimed amount. If the debtor appeals the order within the specified period, the creditor’s claims will be considered in the simplified judicial procedure.

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, the appellate court makes a decision within 20 days. The decision of the appellate court may be appealed to the Supreme Court of Nicaragua within 20 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 obtain an enforcement order and initiate the enforcement procedure. The final court decision can be presented for enforcement within 2 years from the date of entry into legal force. Within the framework 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, dividends and financial instruments; seizing and controlling the company.

If the debtor shows signs of insolvency, the creditor should consider the option of bankruptcy of the debtor. The Commercial Code provides that the debtor is in a state of insolvency provided that he stops making his payments. 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 were made with the purpose of deceiving creditors, regardless of the time of their execution. Among such transactions, it is necessary to highlight in particular: any transactions with a third party who was aware of the debtor’s cessation of payments, even if bankruptcy has not yet been declared; transactions in which the transferred values ​​or obligations concluded by the debtor obviously exceed what he received in return; payments on due and payable debts that were not made in cash or bills. 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 on international debt collection in Nicaragua, 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 NICARAGUA

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