Debt Collection in Uruguay

The debt collection procedure in Uruguay begins with a legal, documentary and asset-based assessment of the debtor. Before choosing the recovery route, it is important to verify the debtor’s correct identity, tax registration details, business activity, registrable assets, available commercial information, public registry data, pending court or enforcement proceedings, the quality of the documents proving the debt, and the possible grounds on which the debtor may dispute the claim.

In Uruguay, this assessment may include reviewing tax and registry information available through the General Tax Directorate, the General Registry Directorate and, where relevant, credit-risk information connected with the Central Bank of Uruguay. This stage helps determine whether the case should begin with an out-of-court claim, court proceedings, enforcement proceedings, creditors’ proceedings or recognition of a foreign judgment.

If the debtor continues business activity, has identifiable assets and the debt is supported by a contract, invoice, debt acknowledgment, account statement, court judgment, arbitral award or another useful document, the strategy may begin with an out-of-court stage. If there are early signs of insolvency, asset transfers, business closure, multiple seizures or a substantial dispute over the existence of the debt, the strategy should be built from the beginning around the appropriate judicial, enforcement, insolvency or international recovery mechanism.

The out-of-court stage of debt collection allows the creditor to send a formal claim to the debtor, start negotiations and propose a documented settlement: full payment, a payment schedule, return of property, set-off, assignment of the claim, additional security or written acknowledgment of the debt. The practical value of this stage is that it helps identify the person with decision-making authority, obtain the debtor’s clear position and preserve evidence of delivery, replies, payment promises, partial payments or any other act confirming acknowledgment of the obligation.

Communication with the debtor may be carried out by post, email, phone or electronic messages, but it should be organized as a sequence of claim submission, negotiation and evidence preparation. Documents created at this stage may be important for proving the existence of the debt, the date when it became due, the debtor’s conduct and the possible interruption of the limitation period when the debtor expressly or tacitly acknowledges the obligation.

The average period for attempting an out-of-court settlement may be up to 60 days, unless the parties agree on a payment schedule or the circumstances of the case show that prolonged negotiations reduce the real prospects of recovery. If the debtor remains silent, disputes the debt without sufficient documents, breaches a settlement or shows signs of insolvency, the creditor may proceed to judicial debt recovery or another applicable legal route.

Before initiating court proceedings, the creditor should assess the limitation period. In Uruguay, a personal claim based on an enforceable debt is generally time-barred after 10 years, unless a special limitation period applies to a specific obligation. The period begins to run from the moment when the debt becomes enforceable. The consequences of limitation apply at the debtor’s request, and the period may be interrupted when the debtor expressly or tacitly acknowledges the debt. After interruption, the period begins to run again.

Uruguayan law provides for judicial debt collection mainly through ordinary court proceedings and enforcement proceedings. The choice of procedure depends on the nature of the debt, the existence of a dispute, the evidentiary strength of the documents and the possibility of relying on an enforceable title.

A party must participate in procedural acts with the assistance of a lawyer. The court may reject documents that are not signed by a lawyer and prevent procedural actions carried out without such assistance, except where the law allows otherwise.

In ordinary contentious proceedings, before filing the main claim, it is necessary to request a court hearing to attempt settlement with the future defendant. The hearing is scheduled for a specific date and time, with notice of not less than three days, based on a written request that briefly states the grounds and purpose of the claim to be brought in the main proceedings.

A settlement reached at the hearing, as well as agreements concluded by the parties before the court, has the same force as a final court judgment between the parties and their universal successors. If no settlement is reached, the claimant receives the corresponding certificate, which must then be attached to the main court case.

The ordinary court procedure begins with filing a statement of claim before the competent court. The court checks whether the claim meets the legal requirements and, if it has been filed in the proper form, orders notice to be served on the defendant and grants the defendant thirty days to respond. Once that period has expired or the response has been filed, the court schedules a preliminary hearing.

In the response to the claim, the defendant must clearly state whether the facts alleged by the claimant are admitted and whether the documents attached to the claim are authentic, where their authorship is attributed to the defendant. Documents whose authenticity is not challenged may be treated as authentic. Silence, ambiguous or evasive answers and failure to respond may be treated as admission of the alleged facts, provided that those facts are not contradicted by the evidence in the case file.

The defendant may admit the claim by acknowledging the validity of the creditor’s demand. In that case, the court may issue a judgment without the need for evidence or further procedural steps, unless the matter concerns public order, non-disposable rights or facts that cannot be proven by admission alone.

If the response period expires and the defendant, duly notified at the relevant address, does not appear, the claimant may request a declaration of default. Default allows the court to treat the facts stated by the claimant as proven where they are not contradicted by the evidence in the file.

From the moment the defendant’s default is established, the defendant’s property may be seized if this is necessary to secure the outcome of the proceedings and the claimant requests such a measure.

If the defendant appears at the preliminary hearing, the court carries out the acts typical of that stage: confirmation and clarification of the claim and response, presentation of new facts, an attempt at settlement, admission or determination of evidence, identification of the subject matter of the proceedings and determination of the disputed issues that must be proven.

If the evidence has already been collected, if further evidence is unnecessary, or if the dispute concerns only a question of law, the court may hear the parties’ arguments and issue a judgment. In other cases, the court schedules a supplementary hearing, where the evidence is received and examined, experts and witnesses are heard, the parties present their final statements and the court issues the corresponding decision.

The enforcement proceeding applies when the creditor seeks recovery on the basis of an enforceable title containing a monetary obligation that is determined, due and not subject to a condition. The existence of an invoice, contract or business correspondence must be assessed according to the type of document and its enforcement strength, because the accelerated route depends on whether the document falls within the legally recognized grounds for enforcement.

If the creditor’s claim meets the requirements for enforcement proceedings, the court issues a decision ordering seizure of the debtor’s property and requiring the debtor to pay the claimed amount or file an objection within 10 days. If the debtor does not file an objection, the case moves to the enforcement stage without the need for a full ordinary court procedure. If the debtor files an objection, the court schedules a hearing to examine the defenses raised and then issues the corresponding decision.

The judgment of the court of first instance may be appealed within 15 days from notification. The appeal is examined by the competent appellate court, with the participation of the parties according to the applicable procedural rules. Once the appeal stage is completed, the court issues the corresponding decision.

A second-instance decision may be challenged by cassation before the Supreme Court of Justice in the cases provided by civil procedural law. The cassation appeal must be filed in writing and with reasons within 15 days from notification of the judgment. Cassation is not admissible where the second-instance decision fully and unanimously confirms the first-instance decision, or where the value of the dispute does not exceed the equivalent of 4,000 revaluation units. The Supreme Court of Justice examines the cassation appeal and issues a final decision under the applicable procedural rules.

If the creditor already holds a foreign court judgment ordering the debtor to pay a monetary amount, the strategy in Uruguay differs from filing an initial debt claim. Recognition and enforcement of foreign judgments requires review of the authenticity of the judgment, its finality, the jurisdiction of the court of origin, proper notification of the debtor, compatibility with Uruguayan public order and the absence of an incompatible judgment.

Where a foreign court judgment meets the applicable requirements, it may produce legal effects in Uruguay and serve as a basis for enforcement against the debtor’s assets located in the country. Since 1 October 2024, the 2019 international convention on recognition and enforcement of foreign judgments in civil or commercial matters may also be relevant where Uruguay and the state of origin are both bound by that instrument and the case falls within its scope.

After the court judgment becomes final or enforceable, the creditor should initiate the compulsory enforcement procedure. The right to enforce a personal claim is time-barred after 5 years, calculated according to the rule applicable to the enforceable debt. In the enforcement stage, the creditor’s claims may be satisfied through seizure of the debtor’s bank accounts and funds, seizure and sale of movable and immovable property, measures against the debtor’s claims against third parties, and measures over securities or other property rights. The practical effectiveness of enforcement depends on correctly identifying the debtor’s assets and coordinating the court judgment, enforcement documents and requested asset measures.

If the debtor shows signs of insolvency, the creditor may consider a creditors’ proceeding as part of the recovery strategy. In Uruguay, a judicial declaration of such a proceeding applies to any debtor in a state of insolvency. Relevant signs may include liabilities exceeding assets, two or more seizures arising from enforcement claims or enforcement proceedings for an amount exceeding half of the assets that may be subject to enforcement, one or more obligations overdue for more than three months, non-payment of tax obligations for more than one year, permanent closure of the business, suspension or closure of current accounts ordered by the Central Bank of Uruguay, fraudulent acts to obtain credit or remove assets from creditors’ reach, and concealment or absence of the debtor or its managers.

In creditors’ proceedings, the creditor should assess whether the debtor has carried out acts that harmed creditors or improperly reduced the asset pool. Acts that may be revoked include, among others, gratuitous acts carried out within two years before the judicial declaration, except customary gifts and certain acts with remunerative character; acts in which the consideration received by the debtor was clearly lower than the value of the transferred asset; the creation or expansion of real security over the debtor’s property or rights within six months before the judicial declaration to secure pre-existing obligations that were not yet due, or obligations contracted with the same creditor together with the discharge of previous obligations; payments made within six months before the judicial declaration for claims that were not yet due; and the debtor’s acceptance of contract termination requests within six months before the judicial declaration.

Revocation in creditors’ proceedings may allow improperly transferred assets or rights to be returned to the asset pool, their value to be claimed if they are no longer in the beneficiary’s estate, real security created to the detriment of the asset pool to be cancelled, improper payments to be recovered and the creditor’s position in the proceeding to be improved. In addition, where the creation or aggravation of insolvency is connected with intent or gross negligence of the debtor, or, in the case of legal entities, with the conduct of their formal or actual directors or liquidators, the proceeding may be classified as culpable, with the property-related and personal consequences provided by insolvency law.

If you need support with international debt collection in Uruguay, Grandliga can assist at every stage of the matter: debtor analysis, review of contracts and evidence, preparation of claims, out-of-court negotiations, selection of the appropriate court procedure, ordinary court proceedings, enforcement proceedings, recognition and enforcement of foreign judgments, compulsory enforcement, creditors’ proceedings and assessment of asset-related risks. The recovery strategy should be built around the amount of the debt, the quality of the documents, the debtor’s solvency, the location of assets and the legal route available in Uruguay.

# DEBT COLLECTION AGENCY URUGUAY

20.09.2024

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