Debt collections and defenses in Costa Rica.
Do you have an unpaid loan in Costa Rica? Did you lend money to someone, and they defaulted on their payments? Debt recovery in Costa Rica is a legal service we can help you with at CPG LEGAL. If you acted as a lender, made a loan, and need help with debt collection our legal services in Costa Rica are at your disposal.
If it’s the other way around, and you are in debt and need assistance with a legal defense, can help you? Chances are you will be looking for debt lawyers at some point. We are experts in civil procedures and litigation in Costa Rica.
Is there debtor´s prison in Costa Rica?
No. And there´s no such thing as contempt or court for failure to pay. Article 38 of the Costa Rican Constitution bans debtor´s prison. There is, however, an exception to this rule: breach of alimony and child support payments. If a person owes child support or alimony, they will be arrested and can spend up to six months in prison, until the debt is paid.
What is a personal loan?
Personal loans are monetary obligations that are not guaranteed with a specific asset, such as a house or a car. Rather, personal loans are guaranteed with all of the debtor´s assets. It´s common in Costa Rica to request the the debtor signs an “executive title” to serve as a title to file in case of a payment breach.
What type of payments guarantees are usually recommended when lending money?
Two basic debt guarantees are commonly used in Costa Rica: Real Guarantees and Personal Guarantees. In case of breaches regarding payment, the courts can uphold your guarantee. You can choose two different paths: the individual debt collection or filing for universal loan collections. The universal loan collection is your typical bankruptcy action. It’s “universal”, since all the creditors participate in it, at the same time.
However, in this article, I will focus on individual debt collection. The individual collection is simply the civil legal action, that you file directly against the debtor in court. There are two main types of individual debt collection procedures:
1. The monitory civil action. (Used to collect personal monetary obligations.)
2. The pure execution process. (Used to execute mortgages and liens in Costa Rica.)
If I have a contract, and not a promissory note, can I file an individual debt collection?
No. In this case, since there is a breach of contract, then you must file an ordinary civil process.
Can you explain what "real guarantees" are?
Real guarantees are rights over somebody else´s property rights. (Ius in re aliena.) Examples of real guarantees are mortgages which are filed at the Public Registry, as an encumbrance on somebody else´s real estate property. Pledges, or “prendas” in Spanish, can be placed on mobility assets like vehicles. With the new law of “Mobiliary Guarantees,” it´s perfectly possible to put a guarantee over a “universality,” such as a herd of cows or a future agricultural crop. Then, in case of non-compliance with payment, you can execute the guarantee through a privileged civil process called the “Pure Execution Civil Process.”
The best type of guarantee you can have, is a mortgage on a property, to satisfy and guarantee your loan. If the debtor breaches contract, then all you have to do is hire CPG LEGAL, to initiate the civil execution process.
Why is pre-trial debt collection a good idea?
It all depends on the situation. This type of debt collection can have its fruits, and you can avoid litigation altogether. We can contact your debtor and try to find a solution to the situation. If you are the debtor, we can also contact the creditor to find solutions. Remember that in Costa Rica, there are many alternate methods of conflict resolution. They can be used to solve any dispute. After a few conversations, and since we would be in the pre-trial stages, mediation can be fruitful in reaching a settlement.
What is the monitory civil process?
Why is it called a monitory process?
The monitory process (proceso monitorio) in Costa Rica is a simplified legal procedure designed to expedite the collection of clear and liquid debts, such as those represented by checks, (cheques), promissory notes, bills of exchange, (letras de cambio), and certifications by certified public accountants for credit card debt collections. This process allows creditors to secure payment efficiently without the need for lengthy, traditional litigation. The debt must be certain, due, and payable (liquida y exigible).
Because of its inverted form, a traditional civil process begins with a lawsuit, a response, a hearing to evacuate evidence, and a final resolution that can be appealed. In a monitory process, however, all of this gets inverted. This is because the plaintiff files the lawsuit and attaches the corresponding title to demonstrate the “monetary obligation.” The Judge will immediately emit sentencing, called a “monitory resolution,” giving the debtor several days to pay for the obligation. If he doesn´t, and there is no opposition, the monitory resolution becomes final and opens the way to execute it. All of the debtor´s assets can be prosecuted.
Why are executive titles important for debt collection in a monitory process?
Because if an executive title is used, you can request liens over the debtor´s assets. Liens are called “embargos” in Spanish. So if you have an executive title, your lawyers can request liens over the debtor´s assets. This can be done immediately with your monitory lawsuit. If you don´t have an executive title, you must wait until the monitory resolution becomes final.
As the loan debtor, do I have the possibility to defend myself in this debt recovery action?
Yes, of course! Due process is always observed. Once you get notified of the monetary lawsuit and the monitory resolution, you can file an opposition to it all. The opposition must be adequately founded, or it will be rejected “ad portas.” (Ad portas means “at the doorway.”) Oppositions can be based on legal defenses, also called “exceptions.” Some legal defenses include “the payment exception,” the statute of limitations exception, and even the lack of enforceability exception, to name a few. Your lawyers in Costa Rica must know how to make proper civil defenses in these types of lawsuits. If your defenses are rejected, you can always appeal the decision, per basic due process principles of law.
Dr. Christopher Pirie.