Debt Collection Agency Brazil
Amicable collections Brazil
General information
Cosmopolite Collections maintain a professional collection process. We contact debtors verbally and in writing with a proactive and objective approach, in order to mitigate risk to our clients. Our team of collection specialists carry out the collection process in-house, adhering to federal and state laws and focusing on the relationships between our clients and their debtors.
1.2. Local agents
Through our local partners, we currently offer a field service for visiting debtors in the main cities of Brazil; however, travel costs must be covered by the client, and we will always keep travel costs as low as possible. In case the debtor wishes to visit our office, we will gladly meet them to discuss possible solutions for your case face to face.
1.3. Interest
Cosmopolite Collections charge debtors interest as determined by the legal interest rate allowed in Brazil, according to the amounts due and applicable for domestic cases. However, for cases abroad, it is very complex to charge interest, because the debtor must submit documentation, including proof of money remittance to the Central Bank, unless the client has official documents such as invoices, debit notes and the likes to support the transaction. In accordance with the prevailing law, the interest allowed is 1% per month plus a payment default fine of 2%. From a cultural point of view, Brazilian debtors are willing to pay interest.
1.4. Debt collection costs
There are no legal restrictions in Brazil on charging debt collection costs; meanwhile, such costs cannot be considered to be abusive. From a cultural point of view, Brazilian debtors are not used to paying debt collection costs.
2. Legal collections
2.1. General information
It is considered a method where legal rights are enforced, including rules of evidence and rules of Civil Procedure. These include filing complaints, answers, serving documents on the opposition, and the laws governing that process. Each state and municipality has its own judicial system where magistrates deal with commercial and other civil cases in the first instance. Decisions from state and municipal courts may be appealed through a federal court.
2.2. Required documents
The mandatory original documents required to start legal action in Brazil are:
-The contract
-Invoices
-A clear statement of account indicating payments and credit notes that have been booked regarding the outstanding invoices
-Purchase orders
-Proof of delivery
-A notarised power of attorney with an apostille.
-The power of attorney, which represents the client, must be written or translated by a public translator to the local language, granted before a notary and legalised by an apostille.
2.3. Legal dunning procedure
It is a formal act designed to prove the default of a particular person who has a formal debt. This procedure is only applicable for monetary and local debts where the debtor can be traced. An official documentation will be delivered that orders the debtor to pay within ten days. The debtor can appeal in the legal phase, which would then transfer the dunning procedure into a regular lawsuit procedure.
2.4. Lawsuit
The regular lawsuit procedure is initiated either directly after the amicable collection efforts have failed or the debtor has disputed the debt. There are three different types of processes: cognitive, executory and provisional, that deal with unpaid debts according to Brazilian law. The proper action depends on all supporting documents being available. The plaintiff begins the civil process by submitting a complaint, referred to as an initial petition. The defendant can answer the initial petition with one of the three different responses: a tradition answer, a counterclaim, or an exception. After the judge has reviewed the initial petition and the answer upon conclusion of the evidentiary stage, the court is brought to a hearing. The initial purpose of the hearing is to make one final attempt to resolve the case between the parties.
2.5. Debt collection costs
Costs of the civil law procedure (lawyers’ fees) are generally charged to the losing party by the judge, who also determines the amount of attorneys’ fees to be awarded to the winning parties (from 10% to 20% of the claim). The court cost varies depending on the state and municipality and is generally calculated from 1% to 2% of the claim amount. Costs of witnesses and/or experts might also arise. So cost estimations will be provided on a case-by-case basis should legal action becomes necessary.
2.6. Expected time frame
The average duration of a legal process depends on the complexity of the case, as well as the availability of the judge and lawyers on all sides, but it can last anywhere from several months up to a few years in execution proceedings.
2.7. Interest and costs in the legal phase
Extrajudicial interest and costs can be claimed as part of the outstanding monies due during the legal proceedings. A legal interest rate of 1% per month is applicable to the due amount, and there is no limit by law on how much it can be charged on legal costs. The judge will fix an amount between 1% and 20% depending on the circumstances of the procedure. In the case of a legal settlement, both parties bear the costs of the proceedings depending on whether they win or lose the action. Costs of Pledge – For cases where the client is abroad, there is an additional cost of 20%, based on the debt amount, to start the legal proceedings.
3. Insolvency proceedings
3.1. General information
The aim of the insolvency proceedings is to pay out all creditors the same percentage of the debt by liquidating the assets of the debtor company or collecting the enforceable incomes of the individual who is declared bankrupt. This type of procedures is determined by the law number 11.101/2005 and not by the common Civil Law. Judicial reorganisation is the main procedure designed to save the indebted entity. The objective of the procedure is to overcome financial difficulties, preserve the company and continue the business.
3.2. Proceedings
Once the debtor or a creditor has filed for the insolvency of the debtor, a preliminary liquidator is appointed to check if sufficient assets are available to cover the costs of the proceedings (court costs and costs of the liquidator). If these costs are deemed to be covered, the insolvency proceedings start and a preliminary liquidator will be appointed. If this procedure is not followed, the court will reject the declaration of bankruptcy due to insufficient assets. The creditors can then lodge their claims and take back any goods delivered under retention of title. The application for bankruptcy must be decreed by a competent court. For goods in stock, the liquidator can choose whether to pay the original price to the creditors or to return the goods. After the proceedings start, lodging claims is possible within a given deadline. The liquidator can either accept a lodged debt or dispute it. If the claim is disputed, the creditor may only file a claim in court to prove the justification of their claim when any further documentation produced fails to convince the liquidator to confirm the debt. The debtor company will pay priority creditors first, usually within two years from the plan’s approval. In accordance with Insolvency Law number 11.101/2005, the established order of preference in receipt of credits that are due to creditors is:
1. Labour claims
2. Credits of real guarantees
3. Tax credits
4. Special privilege credits (these credits will be defined as special according to the law to which it refers)
5. General privilege credits (also defined by the law)
6. Unsecured creditors – the suppliers
7. Pecuniary penalties.
3.3. Required documents
In order to lodge a claim, the following documents are required:
-An original notarised power of attorney with an apostille Invoices
-Contracts or general conditions of sales, should there be any
-Purchase orders, confirmations and delivery notes
-Copies of any other correspondence that may verify the claim.
3.4. Expected time frame and outcome
The deadline to lodge claims is between one and three months related to the specific insolvency proceedings. The whole duration of an insolvency proceeding is between seven and ten years.
Collecting business debts in Brazil can be a challenging process for foreign businesses, especially if they are unfamiliar with Brazilian laws and procedures. There are a few specificities that foreign businesses should be aware of when collecting debts in Brazil:
- The capital city of Brazil is Brasília.
- Brazil is divided into 26 states and 1 federal district.
- The government of Brazil is a federal presidential constitutional republic.
- The official language of Brazil is Portuguese.
- The currency of Brazil is the Brazilian real.
- There are a number of debt collection agencies in Brazil, and the industry has existed in the country for many years.
- The national credit bureau in Brazil is the Credit Protection Service (Serviço de Proteção ao Crédito). Some of the private credit reporting companies in Brazil include Boa Vista SCPC, Serasa Experian, and Equifax.
- Debt collection laws in Brazil are generally the same countrywide, although there may be some local variations.
There are several benefits to using commercial debt collection services in Brazil:
- Expertise in Brazilian debt collection laws and procedures.
- The ability to communicate with debtors in Portuguese.
- A network of local debt collection agents.
- Experience negotiating settlements and payment plans.
- Professional and respectful approach to debt collection.
- Timely and efficient debt recovery process.
- Regular updates and transparent communication.
- A high success rate in recovering debts.
Our debt recovery agency has a very high success rate in Brazil thanks to our multilingual debt collectors located in the country and our 24/7 online debt recovery report website. We have local debt collection managers in the main cities of São Paulo, Rio de Janeiro, and Belo Horizonte.
