Debt Collection in Paraguay

The debt collection procedure in Paraguay begins with an assessment of the debtor’s solvency, its field of activity, its business history, the existence of documentary evidence of the debt, current court cases and enforcement proceedings, and the possibility of disputing the debt. This assessment determines the strategy to 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 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, 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 10 years. For claims by traders for the recovery of the cost of goods sold, the limitation period is 3 years. The consequences of missing the limitation period apply only at the request of the debtor. The limitation period is interrupted by any unambiguous action, judicial or extrajudicial, which means that the debtor acknowledges the debt. After the interruption, the limitation period begins to count anew.

Paraguayan law provides for judicial collection of debts in the ordinary and small claims process.

The ordinary process is carried out by filing a statement of claim with the court, after which the court examines the claim for compliance with the requirements of the law. If the claim complies with the established form, the judge transmits it to the defendant, summoning and obliging him to respond within eighteen days.

In the answer to the claim, the defendant must admit or deny each of the facts stated in the claim, as well as the authenticity of the documents submitted relating to it, and the receipt of letters, telegrams and documents addressed to him, copies of which have been enclosed. The defendant must also clearly state the facts he cites in support of his defense. His silence, evasive answers or general denial may be considered as an admission of the truth of the relevant and legal facts to which they relate. If the defendant submits an answer with documents, they will be transmitted to the plaintiff, who will have six days to respond.

If the defendant admits the facts stated by the plaintiff, the judge will announce the question of pure law. When the question of pure law is announced, the claim is transferred to the parties in turn for their responses, after which the case is considered closed for the final decision. If the defendant does not admit the facts or material facts have been stated on which the parties have not reached agreement, the court will appoint an evidence stage.

If one of the parties objects within three days, the judge, after hearing the other party, will make an appropriate decision. The decision may be appealed only if the opening of the evidence stage is canceled. If, within three days after the entry into force of the ruling on the opening of the evidence stage, all parties declare that they have no evidence to present or that the evidence consists exclusively of the case materials or documents already attached and not contested, the judge will transfer the case to the parties in order of priority, and the case will be considered closed for the final decision.

If this stage is continued, the court will set a time limit for the presentation of evidence, which may not exceed forty days. Evidence must be presented within the first ten days, with the exception of documentary evidence and answers to questions.

The period for presenting evidence may be closed before the deadline if the parties agree or if all evidence has been presented. Once the deadline for presenting evidence has expired, the court will form separate volumes of evidence for each party to be added to the file. Once this process has been completed, the clerk will hand the file over to the lawyers, one by one and for a period of six days each, so that they may file, if they deem it necessary, written arguments on the value of the evidence. The time limit for filing arguments is individualized. Once the arguments have been filed or the deadline for presenting them has expired, the court will schedule a hearing to consider the evidence and the written arguments of the parties. Once the stage of presenting evidence has been completed, the court will issue a final decision within 60 days.

The small claims procedure applies to claims for debt collection, the amount of which does not exceed 300 minimum wages for various types of activities in the capital of Paraguay. This procedure is carried out similarly to the usual court procedure, only in a shorter time frame (the period for responding to the claim is six days; if the issue is recognized as purely legal, the judge will issue a decision within ten days; the period for issuing a final decision is 15 days).

The decision of the court of first instance may be appealed within 5 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 final decision. The decision of the appellate court may be appealed to the Supreme Court of Paraguay within 5 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 initiate the enforcement procedure. The court decision can be presented for enforcement within 10 years. As part of the enforcement of a court decision, the creditor’s claims may be satisfied by seizing and writing off funds from the debtor’s accounts; seizing the debtor’s movable and immovable property with their subsequent sale; seizing and confiscating securities.

If the debtor has signs of insolvency, the creditor should consider the option of declaring the debtor bankrupt. The state of insolvency is manifested through one or more violations of debt obligations or other external facts that prove the debtor’s inability to fulfill its obligations in a timely manner, regardless of their nature. 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 assets. Among such transactions, the following should be highlighted in particular: gratuitous transactions; payments of debts whose maturity date has not yet arrived; transactions with related parties. These transactions may be canceled if they were made within 6-12 months before the bankruptcy procedure was opened (depending on the type of transaction). In addition, if the debtor does not have assets to pay off creditors’ claims and there are clear signs of fraudulent or negligent behavior, the judge, prosecutor or bankruptcy trustee may initiate criminal proceedings against the debtor’s controlling persons and hold them liable accordingly. 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 on international debt collection in Paraguay, 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 PARAGUAY

19.09.2024

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