Articles
Debt Collection
The first stage in any collection process is to issue a final notice to the debtor by registered mail with return receipt requested, whereby debtor is requested to pay the principal amount together with any legal or agreed interest penalties at the current business rate (presently of 9,1 per cent).
Exists in Portugal since 1998 a summary proceeding so-called injunção. Until recently, it could only be used to collect an amount equal or below Euro 3 740,90 arising from civil or commercial contracts. However, the Decree-Law n. 32/2003, of 17 February (that transposes the Directive 200/35/CE (late payments of commercials debts) extended the principle of to commercial debts involving any amount due. This proceeding starts by completing a given form. The Court’s Secretary sends then a demand letter requesting debtor to pay the debt. In case of difficulty of tracing debtor it entitles also creditor to fast-track proceedings. If the debtor does not dispute the request to pay, the Court’s Secretary himself allows the immediate enforcement. The average timeframe required to obtain an execution order is two to three months. But if the request to pay is disputed by the debtor it has to be then submitted to the judge appreciation and it can take about one year or more to be judged.
Where the summary proceeding is not possible or no settlement with debtor can be reached, the last remaining alternative is to file an ordinary action before the first instance court. This can be an onerous and prolong proceeding. The main goal is to obtain a court decision establishing the creditor’s right to be paid. Creditor has to prove that he sold goods or rendered services to the debtor (using supporting documents such as proof of order, written contract, delivering or shipping documents, invoice, demand letters ... or witness). The procedure entails a preliminary hearing in which the judge attempts to reconcile the parties. At the main court hearing the judge examines the submitted evidence and hears the parties’ arguments as well as their witnesses’ testimonies. Afterwards the debtor is notified of the court’s decision. Debtor has, under certain circumstances, the possibility to appeal. If the debtor does not appeal, it is possible to request immediately the enforcement of the decision. The average timeframe required to obtain an execution order is about one year in first instance.
Where the payment is still not received, creditors may request a court order (enforcement proceedings) on the debtor´s property. The enforcement can be requested to achieve on of three possible results: the payment of a certain pecuniary obligation; the delivery of a certain asset or; the rendering of a certain fact.is a mainly a written procedure that depends on documents that attest the claim existence. Portuguese legal system recognizes four types of documents which can be used as enforcement documents: decisions from previous legal proceedings;private or public documents sealed by a notary;private documents which consist in a monetary obligation signed by the debtor recognising debt (acknowledgement of debt could be made by any deed under private or public seal or any written document by which the debtor unequivocally recognises the debt) and ther documents which are recognized by law as documents allowing the enforcement. Foreign documents can be enforced if they have the Apostille of the Hague Convention. Legal Costs The plaintiff is always obliged to pay the initial court costs. If the defendant is condemned in the proceeding he will be charged with the final costs and the plaintiff is reimbursed of the initial costs paid. If there is no winner, both will be charged in the proportion. The loosing party can see his assets enforced if the costs are not paid