A – What is it: Collection action

What is: Collection action?

Collection action is a legal procedure used by creditors to recover amounts owed by debtors. This practice is common in many situations, especially when a customer fails to pay a debt, whether it is related to a credit card, loan or any other type of financial obligation. Collection action can be initiated by both individuals and legal entities, depending on the context of the debt.

How does the collection action work?

The collection action process usually begins with the debtor being notified of the outstanding debt. This notification may occur by letter, email or phone call. If the debtor does not regularize the situation, the creditor may choose to file a lawsuit, where the judge will be asked to order payment of the amount owed. It is important to note that the collection action may vary depending on the legislation in force in each country or state.

Types of collection action

There are different types of debt collection actions, the most common being the action to collect a specific amount and the monitoring action. The action to collect a specific amount is used when the amount of the debt is known and can be proven by documents, such as contracts or invoices. The monitoring action is a faster and simpler alternative, which aims to obtain an enforceable judicial title without the need for a full process.

Documentation required for collection action

To initiate a collection action, the creditor must gather a series of documents that prove the existence of the debt. This includes contracts, invoices, proof of payment and any other evidence that demonstrates the credit relationship between the parties. The lack of adequate documentation can make it difficult or even impossible for the legal action to be successful.

Deadline for collection action

The deadlines for collection action vary according to the type of debt and the applicable legislation. In general, the deadline for the creditor to file the action can be 5 to 10 years, depending on the nature of the obligation. It is essential that the creditor is aware of these deadlines, as the statute of limitations may occur, making judicial collection impossible.

Consequences of collection action

Collection action can have several consequences for the debtor, including the inclusion of the name in defaulter registries, such as SPC and Serasa. In addition, the debtor may face restrictions on obtaining new credit or financing, which can significantly impact their financial life. On the other hand, the creditor can recover the amount owed and, in some cases, even receive interest and fines for the default.

Alternatives to collection action

Before opting for collection action, it is recommended that the creditor seek more amicable alternatives to resolve the situation. Direct negotiation with the debtor, the use of mediation services or even the hiring of companies specialized in amicable collection may be viable options. These alternatives can avoid the emotional and financial strain that a legal process can cause.

How to avoid collection actions

To avoid collection actions, it is essential that both creditors and debtors maintain clear and transparent communication. Creditors must offer fair and flexible payment terms, while debtors must be aware of their financial obligations and seek to renegotiate debts when necessary. Financial education and planning are essential tools to prevent default.

The role of lawyers in debt collection actions

Lawyers play a crucial role in debt collection proceedings for both creditors and debtors. For creditors, they can assist in preparing the necessary documentation and conducting the legal process. For debtors, lawyers can provide guidance on rights and obligations, as well as help with debt negotiation. Legal advice is essential to ensure that debt collection proceedings are conducted appropriately and within the law.