Debt Collection in Venezuela

The debt collection process in Venezuela begins with an analysis of the debt, the debtor and the documents proving the obligation. At this stage, it is necessary to verify whether the debtor is an individual or a commercial entity, whether the debtor still operates in Venezuela, whether there are assets, bank accounts, contracts, receivables or other property that may be subject to enforcement, whether there are pending court cases or enforcement proceedings, and whether the debt may be disputed due to lack of evidence, limitation period, partial payment, set-off or prior breach by the creditor. This analysis helps to choose a collection strategy that corresponds to the type of debt, the debtor’s solvency and the available court route.

If the initial analysis shows that the debtor continues to operate, keeps assets or income in Venezuela and there is no immediate need to apply to the court as the first step, an out-of-court stage may be started. Its purpose is to obtain voluntary payment, record the debtor’s position and prepare the file for possible judicial collection.

This stage includes negotiations with the debtor to reach a payment agreement, debt restructuring or another solution acceptable to the creditor. Depending on the circumstances, this may include the return of property, assignment of a claim, written acknowledgement of the debt, payment by instalments or the involvement of a third party that assumes or guarantees performance.

Communication with the debtor begins with a formal notice sent by available means, including post, email, telephone, messages or communication through authorised representatives. At this stage, it is important to maintain formal and documented communication with the debtor, identify persons authorised to make decisions, record the position of the parties in writing and preserve evidence of debt acknowledgement, a payment proposal, refusal to perform or an agreement reached.

The duration of the out-of-court stage depends on the debtor’s conduct, the quality of evidence, the urgency of protecting assets and the real possibility of reaching a payment agreement. If the debtor does not respond, denies the debt without sufficient grounds, attempts to dispose of assets or negotiations are no longer useful for the creditor, recovery continues through court proceedings.

The applicable limitation period depends on the type of claim and the nature of the debt. In Venezuela, claims related to property rights are time-barred after twenty years, and personal claims after ten years, unless a special legal rule provides otherwise. A claim arising from an enforceable court decision is time-barred after twenty years, while the right to use the enforcement route is time-barred after ten years. For certain claims by merchants for the price of goods sold to persons who are not merchants, a short two-year limitation period may apply. The limitation period usually operates as a procedural defence that must be raised by the debtor.

The limitation period may be interrupted if the debtor expressly or tacitly acknowledges the creditor’s right. Therefore, messages, records, emails, payment proposals, partial payments and debt acknowledgement documents have practical value for proving that the debtor admitted the existence of the obligation.

Venezuelan law allows judicial debt collection to be structured through several court routes: ordinary proceedings, when the claim requires a full examination of facts and law; brief or oral proceedings, when the nature of the claim and the value of the case allow a more concentrated procedure; and a payment order procedure, which may be used to recover a determined and due monetary amount or a documented obligation in the cases provided by Venezuelan civil procedure law.

Ordinary proceedings begin with the filing of a claim before the competent court. The claim must identify the court, the creditor, the debtor, the object of the claim, the facts, the legal grounds and the documents from which the claimed debt directly arises. If a foreign creditor acts through a representative, a power of attorney issued outside Venezuela must comply with the applicable formal requirements and, where necessary, be translated into the language of the proceedings. The powers to settle, receive money or dispose of the disputed right must be expressly stated in the power of attorney.

After admitting the claim, the court orders the preparation of the necessary copies of the claim with the order to appear for the defence. These copies are delivered to the court officer for service on the defendant. At the request of the claimant, they may also be delivered to the claimant or the claimant’s representative to arrange service through another court officer or a notary within the judicial district of the court hearing the case or the place where the defendant resides. After service is completed, the claimant or the claimant’s representative submits the documented result of the performed actions to the court clerk.

Within the time limit set for filing the defence, the defendant may raise preliminary objections instead of answering the merits of the claim. These objections may relate, among other matters, to lack of jurisdiction, lack of competence of the court, the existence of another pending case, the need to join the case with another proceeding, lack of capacity or proper representation of the parties, insufficiency of the power of attorney, lack of security, formal defects in the claim, the existence of a condition or term that has not yet occurred, a preliminary legal issue, a matter already finally decided, expiry of the right to bring the claim, or a legal prohibition on admitting the proposed claim.

The handling and effects of preliminary objections depend on the type of objection raised. Issues concerning jurisdiction, court competence, another pending case or joinder of proceedings follow special rules. Defects related to capacity, representation, power of attorney, security or the form of the claim may be corrected within the statutory time limit. Issues connected with a condition or term that has not yet occurred, a preliminary legal issue, a matter already finally decided, expiry of the right to bring the claim or a legal prohibition on admitting the claim have different procedural consequences: the claimant must state whether the objections are accepted or contested, and silence may be treated as acceptance of objections that were not expressly contested. Depending on the result, the proceedings may continue, be suspended, be transferred to the competent court or be terminated.

In the defence, the defendant must clearly state whether the claim is disputed in whole or in part, or whether it is admitted in whole or with limitations, and must set out the reasons, defences and substantive objections considered applicable. If the defendant does not file a defence within the prescribed time limits, the defendant may be treated as having admitted the claimant’s demand to the extent that it is not contrary to law, unless evidence favourable to the defendant is produced. If the time limit for submitting evidence expires and the defendant has not submitted any evidence, the court may decide the case within the statutory period on the basis of that admission.

If the defendant admits all demands set out in the claim, the proceedings are terminated and the court approves the admission, giving it effects equivalent to a final court decision.

On the day after the expiry of the time limit to appear for the defence, if there is no settlement and the defendant has not admitted the claim, the case is opened for evidence without the need for a separate court order, except where the case may be decided without evidence. In ordinary proceedings, the evidentiary period includes fifteen days for proposing evidence and thirty days for taking and examining it. For evidence that must be obtained outside the place of the proceedings, an additional distance period is added, and for certain evidence abroad, an extraordinary period of up to six months may be granted when the legal conditions are met.

After the evidentiary period ends, the parties submit written arguments on the fifteenth following day, except in special cases relating to the composition of the court. The written arguments are added to the case file, and each party may submit observations on the other party’s written arguments within the following eight days. After the written arguments are submitted, after any additional measures ordered by the court are completed, or after the time limit for such measures expires, the court issues its judgment within the following sixty days.

Brief and oral proceedings apply to certain debt collection claims when the nature of the debt, the subject matter in dispute and the value of the case fall within the relevant procedural rules. In Venezuela, the value of the case determines the competence of the court and may influence the applicable court route. For new cases, Resolution No. 2023-0001 of the full bench of the Supreme Court of Justice links competence by value to the official exchange rate of the highest-value currency established by the Central Bank of Venezuela, together with the rules of Venezuelan civil procedure law and applicable special laws.

The payment order procedure applies when the creditor’s claim seeks payment of a determined and due amount of money, delivery of a certain quantity of replaceable goods, or delivery of a specific movable item. The creditor may choose between ordinary proceedings and the payment order procedure, but this route does not apply if the debtor is not in Venezuela and has not appointed a representative on whom the order may be served, or if the appointed representative refuses to act for the debtor.

To use this procedure, the creditor files an application that meets the procedural requirements and attaches written evidence of the claimed right. Written evidence may include public documents, private documents, admissible letters or communications, accepted invoices, bills of exchange, promissory notes, checks and other negotiable instruments. If the court admits the application, it issues a payment order requiring the debtor to pay or file an objection within ten days. If no objection is filed, enforcement may begin.

If the debtor files an objection within the statutory time limit, the claim no longer proceeds as an uncontested payment order and moves to the appropriate contentious route, taking into account the nature of the debt, the value of the case and the applicable procedural rules. In this situation, the quality of documents, the traceability of the debt and the debtor’s previous position become especially important for supporting the creditor’s claim.

The decision of the court of first instance may be appealed within the applicable procedural time limit. As a general rule, the ordinary appeal period is five days, unless a special rule provides a different regime. The second-instance court reviews the appeal within the limits of the case file and the challenged issues.

A final-instance decision may be subject to cassation review when the requirements provided by Venezuelan civil procedure law and the applicable value threshold are met. The cassation appeal is announced before the court that issued the challenged decision within ten days after the relevant procedural time limits expire. Admissibility by value is determined according to the system in force at the time the case is filed, including the official exchange rate of the highest-value currency established by the Central Bank of Venezuela where applicable.

After the court decision becomes final, the creditor may ask the court to order its enforcement. In that order, the court sets a period of not less than three days and not more than ten days for the debtor to comply voluntarily. If the debtor does not comply within that period, compulsory enforcement begins. For limitation purposes, a claim arising from an enforceable court decision is time-barred after twenty years, while the right to use the enforcement route is time-barred after ten years.

As part of the enforcement of a court decision, the creditor may seek satisfaction of the claim by attachment of the debtor’s property within the limits of the law, sale of movable or immovable property, enforcement against monetary amounts, enforcement against assets located in Venezuela and other measures allowed by civil procedure. If the judgment concerns a determined monetary amount, the judge may order attachment of the debtor’s property in an amount sufficient to cover the debt and costs, without exceeding the limits established by procedural law.

If the creditor already has a foreign court decision against the debtor, recovery in Venezuela depends on whether that decision can produce legal effects in the country. Venezuelan private international law recognises foreign court decisions in civil, commercial and private law matters when the decision is final in the state of origin, does not invade Venezuela’s exclusive jurisdiction, comes from a court whose jurisdiction is acceptable under Venezuelan law, respects the defendant’s right of defence and is not incompatible with an earlier Venezuelan decision or an earlier pending case between the same parties concerning the same matter.

To enforce a foreign court decision in Venezuela, the decision must be declared enforceable under the applicable procedure. In international cases, there are three different scenarios: filing a claim directly in Venezuela, enforcing an already final Venezuelan court decision, or first seeking recognition and enforcement of a foreign court decision before proceeding against the debtor’s assets located in the country.

If a commercial debtor shows signs of cessation of payments, insolvency proceedings may become an important mechanism for protecting creditors’ interests. Under Venezuelan commercial law, payment delay status and bankruptcy are not the same concept: payment delay status applies to a merchant whose assets exceed liabilities but who, due to lack of cash caused by unforeseen events or another justified reason, needs to delay or postpone payments. Bankruptcy arises when a merchant who is not in that payment delay status ceases to pay commercial obligations.

At this stage, acts performed after cessation of payments or within the relevant periods become especially important if they may be void or challengeable against the body of creditors. These rules protect the property available for satisfaction of claims and restrict transactions that unjustifiably reduce the debtor’s assets to the detriment of creditors.

Relevant cases include purchases made for resale at a price lower than the current price, assumption of excessive obligations, the use of ruinous means to obtain funds when the debtor should have known that such operations would only delay the declaration of bankruptcy, and payment to one creditor after cessation of payments to the detriment of the others. In addition, certain gratuitous acts, security granted for earlier debts, early payments or payments made in a manner different from that agreed may be ineffective against creditors when the conditions established by commercial law are met.

Reviewing these acts may allow value to be recovered for the estate, prevent improper preferences between creditors and increase the property available to satisfy recognised claims. For the creditor, this issue is especially important when the debtor stopped paying after transferring assets, granting security to related parties or making selective payments that affected equality among creditors.

If you need support with international debt collection in Venezuela, Grandliga can analyse the documents, the limitation period, the debtor’s solvency, the appropriate court route, the possibility of recognising a foreign court decision and enforcement options against assets located in Venezuela.

# DEBT COLLECTION AGENCY VENEZUELA

06.09.2024

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