Debt сollection in Panama

The debt collection process in Panama 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 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 payment plan is 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 7 years. For claims related to the recovery of the cost of goods sold to a private consumer, 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 any action of the debtor that indicates recognition of the debt. After the interruption, the limitation period begins to count anew.

Panamanian law provides for judicial debt collection in ordinary legal proceedings.

Any person who must participate in a lawsuit must do so through a legal attorney, legally appointed and authorized by power of attorney.

The courts of first instance are municipal courts, which hear cases with a claim value of between 1,000 and 10,000 Panamanian Balboas, and district courts, which hear cases with a claim value of 10,000 Panamanian Balboas and above.

The ordinary trial is carried out by filing a 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. If the claim complies with the legal requirements, the defendant will be sent a notice warning him to respond to the claim within ten days.

In his answer, the defendant must make a clear and specific statement of the claims and facts stated in the claim, indicating those that are admitted, those that are denied, and those that are unknown to the defendant. In the last two cases, the reasons for the answer must be clearly and unambiguously stated. If this is not done, the relevant fact is presumed to be true.

If the defendant fails to file a response to the claim, the judge will consider this as evidence of the defendant’s guilt for failure to appear, and the trial will continue without the defendant’s participation. The defendant may appear at any stage of the trial, but in any event the proceedings will not be reviewed. The defendant may admit the claims set out in the claim in his response to the claim or at any time before the trial court issues a decision, admitting the validity of the facts on which they are based. In such a case, a decision will be made in accordance with the claims presented. However, the judge may reject the admission and order an examination of the evidence on his own initiative if he sees fraud, collusion or another similar situation.

After receiving the response to the claim, the court will schedule a preliminary hearing, which must take place between twenty and sixty days from the end of the period for responding to the claim. At this meeting, the court attempts to reconcile the parties to the dispute, clarifies the subject of the dispute and the amount of the claims, checks the evidence, and also decides on a number of other procedural measures.

After the subject of the dispute has been established, if it is found that the facts admitted by both parties are excluded from the evidence and the process is reduced to a question of law, the judge, except in cases where additional evidence is required, hears the arguments of the parties’ representatives during the hearing and then makes a decision.

In case of need for additional evidence or establishment of facts in the process, the judge schedules a final hearing. After the implementation of these measures at the final hearing, the court hears the closing arguments of the parties and makes a decision.

The decision of the court of first instance may be appealed within 5 days from the date of notification of the decision. The decision of the municipal court is subject to appeal to the district court. The decision of the district court is subject to appeal to the appellate court. The appeal is considered in a court session with the participation of the interested parties. After the hearing is completed, the appellate court makes a final decision. The decision of the appellate court may be appealed to the Supreme Court of Panama within 5 days from the date of notification of the contested decision. As a result of the consideration of the complaint, 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 procedure for compulsory execution. As part of the compulsory execution 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, then the creditor should consider the option of bankruptcy of the debtor. The debtor has signs of insolvency if he cannot satisfy all his debt obligations as they arise, and this is also the financial state of the debtor, in which his obligations exceed the value of his assets. At this stage, in case 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, it is necessary to highlight in particular: gratuitous transactions with related parties, made by the debtor within four years before the opening of bankruptcy; transactions made by the debtor in order to hide the thing or its full or partial value from the prosecution of creditors; court decisions that the debtor deliberately made against himself and which can be challenged if this infringes on the interests of creditors. 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 you need support on international debt collection in Panama, our company is ready to provide its expert assistance for the effective resolution of your financial issue. Contact us for more information and professional support from specialists of the leading debt collection agency.

# DEBT COLLECTION AGENCY PANAMA

04.09.2024

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