
Associates Blog

3 Methods for Credit Recovery in the Judicial Sphere
25 de dez de 2024
3 min read
By Lenara Santos, Civil Law Department

Introduction
When a breach of contract leads to the debtor’s failure to fulfill payment obligations, the creditor is entitled to recover the owed credit. This recovery involves using the legal mechanisms available, whether extrajudicial or judicial, to ensure the effective fulfillment of the contract and the payment of the outstanding amounts.
Before initiating judicial credit recovery procedures, it is advisable to attempt extrajudicial negotiation, such as renegotiating the debt or providing the debtor with an extended deadline to settle the credit.
If extrajudicial negotiation fails, the creditor may turn to the judiciary to recover the credit through appropriate legal actions. This article discusses three primary judicial remedies: Debt Collection Action, Enforcement Action, and Monitory Action. Regardless of the chosen strategy, it is crucial to assess the debtor’s financial situation and examine all documents and contracts related to the credit.
1. Debt Collection Action
The Debt Collection Action is provided for in Article 785 of the Brazilian Code of Civil Procedure (CPC). This is a lawsuit processed under ordinary procedure, allowing for extensive evidence production and defense opportunities. It is utilized when there is limited documentary evidence of the debt or when circumstances prevent the filing of quicker actions, such as Enforcement or Monitory Actions, as discussed below.
The purpose of this action is to confirm the validity of an unpaid debt, aiming to create a judicial enforcement title—a necessary document to initiate the enforcement of an obligation, such as payment of the outstanding debt.
In these cases, the debt is not yet formally established, existing only as an expectation of a right. This often results in longer proceedings compared to Enforcement or Monitory Actions, primarily due to the need to prove the existence of the claimed debt. This factor must be considered when outlining the creditor’s recovery strategy.
2. Enforcement Action
The Enforcement Action is regulated by Article 783 and subsequent provisions of the CPC. This action requires the existence of an enforceable title that is certain, liquid, and due, whether judicial or extrajudicial.
It is faster than the Debt Collection Action because it does not involve disputing the existence of the debt, focusing instead on enforcement.
To file this action, the creditor must meet the requirements outlined in Article 798 of the CPC. If the court determines that the presented documents meet the necessary criteria, it will order:
1. Payment of the debt by the debtor within three (3) days; or
2. The debtor to file objections to the enforcement within fifteen (15) days.
If the debt is not paid and no objections are filed, the creditor may choose the method for locating assets for seizure, using judicial tools like SISBAJUD, RENANJUD, and INFOJUD, respecting legal limits and priorities. Extrajudicial searches for assets, such as those in real estate registries or state commercial boards, are also crucial.
3. Monitory Action
The Monitory Action, provided for in Articles 700 to 702 of the CPC, follows a more expedited procedure compared to the Debt Collection Action. This action requires written proof of the debt that is not an enforceable title, meaning it is not listed among the extrajudicial enforceable titles in Article 784 of the CPC, nor derived from a judicial decision.
For example, evidence of the debt could include an email acknowledging the debt, a contract without witness signatures, or other documents proving its existence but insufficient for direct enforcement.
Its purpose is to provide the creditor with quicker access to forced execution, enabling a faster resolution.
According to Article 700, items I, II, and III of the CPC, the initial petition for a Monitory Action must include written proof, a description of the facts leading to the debt, the amount owed, a detailed calculation, and the updated debt value.
If the court determines the creditor’s right is evident, it will issue an order for payment or execution, granting the debtor fifteen (15) business days to comply or present objections. If the debt is not paid and no objections are filed, the procedure will follow the same course as the Enforcement Action described above.
Conclusion
All the actions discussed aim to provide security to the creditor in cases of contractual breaches by the debtor. Depending on the documentary evidence available, the process may be faster or slower. For instance, the Debt Collection Action, following ordinary procedure, allows for more extensive evidence production when concrete proof of the debt is lacking.
Conversely, Enforcement and Monitory Actions, backed by solid evidence of the debt, follow expedited procedures. The primary difference between these actions lies in the type of evidence required: while Enforcement Actions demand an enforceable title, Monitory Actions require written proof that does not constitute an enforceable title.
Understanding these distinctions is essential for creditors to choose the most appropriate strategy for credit recovery.