According to a COSEC study Having analysed the debt collection process in 50 countries, Portugal is one of the countries where this process is least complex. The law in Portugal establishes that only the creditor, a lawyer or a solicitor, in their professional capacity representing the interests of third parties, can carry out debt collection.
 
In this article, you will learn Everything you need to know about debt collection. Should you still have any questions, please do not hesitate to contact us so we can sort everything out for you!

 

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Debt collection is the process of recovering overdue payments on behalf of lenders.

Debt collection can be defined as the process of recovering payments owed by companies or individuals.

Sometimes, customers don't pay within the agreed timeframe, and end up being in debt. When a debt isn't paid, the debtor incurs late payment interest, in addition to any contractual interest, leading to an increase in the debt.

 

Debt Collection

Debt collection can be defined as the process of paying off debts.

In the first phase, the creditor should contact the debtor to remind them of the debt in a friendly manner, as it may have been an oversight or a temporary financial difficulty.

If the debtor does not respond, do not waste time. It is best for the credit recovery process to proceed with someone specialised in debt collection.

 

Debt Collection

The credit recovery process can be divided into two phases:

• Pre-litigation phase (without court intervention)
• Judicial phase (with court intervention)

 

Extrajudicial Collection

During this phase, debt collection happens amicably and without any legal intervention. This process then involves approaching the debtor, requesting payment, and potentially reaching an agreement. This process is less time-consuming and less expensive than judicial collection.

In this process, the lawyer begins by sending a letter of demand. Following this, the debtor either proceeds with payment, or says nothing, in which case it will be necessary to proceed to court, or they may propose a payment agreement.

 

Debt repayment agreement

As previously mentioned, the debtor has the possibility to reach a debt repayment agreement with the creditor. For an agreement to be reached, both parties must make concessions.

The creditor, in order to start receiving their debt, must agree to receive it in instalments and according to a payment plan. The debtor, in addition to being able to make payments by instalments, can also negotiate a reduction in interest or even have part of the debt forgiven, but this is dependent on negotiation with the creditor.
 

Debt Collection Action

If the out-of-court process is insufficient, intervention by the Courts is necessary. In this case, there are several procedures that can be carried out:

• Injunction – this process allows an executive title to be obtained quickly. Once the injunction is filed, the debtor is notified and must pay or contest within a time limit, usually 15 days. If this does not happen, the creditor can go to court and ask it to order the seizure of the debtor's assets or rights.
• Insolvency – if the debtor is unable to pay their debts, Portuguese law allows the creditor to request their insolvency. This process involves the sale of assets from the debtor's estate.
• Declaratory action – in the most complex cases, it may be necessary to resort to the declaratory process, even though this is more time-consuming and incurs higher costs.

 

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Mas o que é um título executivo?

The executive title is something necessary for bringing an executive action, aimed at the judicial recovery of debts, which must accompany the application. This executive title is nothing more than a document that proves the existence of the creditor's right and the credit being claimed.

Beyond this, this executive title determines the exact limits of the debt, and a sum greater than that stated in the title cannot be charged.

These titles can have different natures, and they could be:

• Court Titles, as a plea confession, conviction order, conviction judgment;
• Business Titles, such as negotiable instruments, documents authenticated by a notary;
• Improper Judicial Titles, as injunction requests in respect of which there is no opposition;
• Private Titles, resulting from certain private documents to which specific force is attributed;
• Administrative Titles, such as fines, refunds, tax collection documents.

 

Minute of letter of demand for payment

To notify of non-payment, so as not to involve the courts at an initial stage, you can write an interpleader letter or hire a Solicitor in Braga or another region of the country for that.

There are several examples of draft letters online, however, the most appropriate course of action is for them to be written by a professional. If your lawyer sends the letter, the process is more credible and the debtor will be aware that the creditor will not hesitate to take legal action if non-payment continues.
 

Letter of demand for payment: what is it?

At its core, a letter of demand for payment is a document sent by the creditor to the debtor, giving them a deadline to pay off the debt.

 

 

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