Debt Collection in Taiwan

The debt collection process in Taiwan begins with an assessment of the debtor’s solvency, business sector, business history, availability of documentary evidence of the debt, ongoing litigation and enforcement proceedings, and the ability to dispute 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 ongoing litigation or outstanding judgments for debt collection and is actively engaged in business activities, then it is advisable to use the out-of-court debt collection stage.

This stage involves active negotiations with the debtor to reach an agreement on 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 messenger. 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 limitation period for debt collection is 15 years. The limitation period is interrupted by a written acknowledgement of the debt by the debtor or by notice of an upcoming lawsuit. After interruption, the limitation period begins to count anew. If the limitation period is interrupted by notice of an upcoming lawsuit, and if the lawsuit is not filed within six months of such notice, the limitation period is considered not to have been interrupted.

Taiwan law provides for judicial collection of debts through ordinary court procedures, summary procedures, and small claims procedures.

The ordinary court procedure is carried out by filing a statement of claim with the court, after which the court decides whether to accept the claim and sets a date for oral argument. A copy of the claim and notice of summons to oral argument shall be served on the defendant, who, if he deems it necessary, shall file his answer with the court by sending a written copy or a photocopy directly to the plaintiff within ten days of receipt of the claim, but no later than five days before the oral argument hearing.

If the value of the subject matter of the claim is less than NT$500,000, the plaintiff shall apply to the court for mediation before filing the claim. Mediation is considered successful if the parties reach an agreement. A successful mediation has the same legal effect as a settlement agreement in a lawsuit. In the event of an unsuccessful mediation, the plaintiff is issued a certificate of unsuccessful mediation, and if the plaintiff files a claim with the court within ten days, then the claim will be considered filed from the moment the application for mediation is filed.

The court may, before the commencement of oral arguments, take the following measures if it deems it necessary to expedite the completion of oral arguments: order the parties or their legal representatives to appear in person; order the parties to produce documents; call witnesses and experts; conduct an inspection, order an examination or instruct an agency or organization to conduct an investigation; instruct the authorized judge or the appointed judge to collect evidence.

If the defendant fails to appear at the oral arguments hearing, preparatory proceedings are conducted for the party that appears, and after the hearing the minutes are handed to the defendant. In the event that there is no need to schedule another hearing, the authorized judge may terminate the preparatory proceedings.

If the defendant appears at the hearing, the court conducts oral arguments between the parties during which the parties are required to give true and complete testimony regarding the facts presented by them. If all the circumstances of the case are clear to the court during the first oral arguments, the court makes a decision. Otherwise, if the hearings must be continued to examine the arguments of the parties or to request and consider the necessary evidence, the court will set a date for the continuation of the oral arguments.

The simplified procedure applies to cases in which the amount claimed does not exceed NT$500,000. The preparation period for the first oral argument hearing shall be at least five days, except in urgent cases. The summons for the oral argument hearing shall state that the case is being simplified and that the parties shall appear at the hearing with the exhibits to be produced and the witnesses to be examined. A party shall file preparatory documents or responses before the hearing concerning any statements or alleged facts or evidence to which the opposing party cannot respond without preparation, and shall directly deliver the originals or photocopies of such documents or responses to the opposing party. In cases to which the simplified procedure applies, the court shall generally conclude oral argument in one hearing and render a decision. If a party fails to appear at the oral argument hearing, the court may, on its own initiative, render a default judgment.

Small claims proceedings are used to collect debts of up to NT$100,000. Small claims proceedings may be held in the evening, on Sundays or other holidays, unless one of the parties objects. Where the defendant fails to appear for mediation without showing good cause after being given five days’ notice, the court may, upon motion of the plaintiff, order oral arguments to be held immediately and may, of its own motion, render a default judgment. Where the time and expense of collecting evidence are manifestly disproportionate to the claim, the court may, taking into account all the circumstances and without collecting evidence, make a finding of the facts and render a final judgment. 

A decision of the court of first instance may be appealed to the court of second instance within 20 days from the date of service of the contested decision. A decision of the court of second instance may be appealed to the court of third instance within 20 days from the date of service of the contested decision, provided that the amount of the claim exceeds NT$1,000,000. The decision of the court of third instance is not subject to further appeal.

After the judgment has entered into legal force, the creditor should obtain a writ of execution and initiate enforcement proceedings. The judgment may be presented for enforcement within 15 years from the date of entry into legal force of the judgment. As part of the enforcement of the judgment, 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 and then selling them; seizing and confiscating securities.

An alternative to debt collection is to file for bankruptcy of the debtor. There are several legal acts that regulate bankruptcy. The provisions of the Taiwan Company Law provide for judicial restructuring of companies that have potential for recovery but are experiencing financial difficulties. If the debtor is unable to pay its debts, the creditor has the right to initiate the restructuring of the debtor if the amount of the creditor’s claim is equivalent to ten percent or more of the capital calculated based on the total number of issued shares. In the event that the court decides to terminate the reorganization of the company and the conditions for bankruptcy are met, the court may itself issue a bankruptcy order for the company. Under the reorganization proceedings, directors, supervisors, managing officers or other employees of the debtor company shall be liable to imprisonment for not more than one year, criminal detention and/or a fine not exceeding NT$60,000 if they conceal, destroy or damage reports, records or documents relating to the business or financial condition of the debtor company, or conceal, destroy or move the property of the company or dispose of such property in a manner detrimental to creditors. The Consumer Debt Settlement Act regulates insolvency proceedings for individual debtors who do not engage in business activities or whose monthly turnover is less than NT$200,000 for five years. Under the bankruptcy proceedings, if the debtor’s assets are insufficient to fully satisfy the claims of creditors, any gratuitous or compensated actions of the debtor that cause detriment to creditors may be set aside. The right to cancel such actions must be exercised within two years from the date of opening of the bankruptcy procedure. As a result of cancellation of such actions, 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 Taiwan, 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 TAIWAN

02.10.2024

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