Debt Collection in Peru

 If you are doing business in Peru or planning to do it, here you have some information and advice that could help you to decide the most secure way to do it.

If your client tells you that issuing a letter of credit in Peru is very expensive, you have to believe him because this fact holds true. Other alternatives, however, require that you are aware of its consequences. One of the usual and inexpensive alternatives is to issue a Promissory Note, to be signed in Peru the most suitable are : Letra de Cambio and Pagaré.

When you use this alternative, you have to take care of the following:

1. Local Jurisdiction.- 

Some companies require their Peruvian client to sign a contract that establishes jurisdiction of foreign courts. That does not offer a good solution since, in that sense, you probably cannot execute the Promissory Note in Peru. Besides, you will have to seize or get a lien on assets that exist and remain in Peru.

2. Promissory Notes. –

In Peru, PN carry legal force only if the issuer follows Peruvian law, so it is not a good idea to issue it according to a foreign country’s regulation. Besides, in order to avoid misunderstanding, it is also better to issue it in Spanish.

3. Guarantor.-

It is better to require your client to provide a guarantor who should also sign the Promissory Note. If the guarantor or your client is not a company, be sure to get their wife’s signature too, since the law requires that, if you seize some asset or goods which the couple owns jointly.

4. Procedure.- 

 Some Promissory Notes, when payment time is over, require presentation before a Notary public, and others do not (according to a new law). Therefore, keep in mind to issue it without this requirement since you can lose one of its most important legal effects of the Promissory Note if you do not present it on time.

5. Debtor location.–

When you sue someone in Peru, you have to look first where the Defendant is located since only the judge of that location holds the authority to process him. Lima is the capital city and if your client’s address is located here, then you will not have problems to find all necessary conditions to collect your debt ( fast communication; law firms, clerical people; agents; bilingual personnel etc) as you have in major cities; however, the Defendant is located outside Lima, then you could face some problems to deal with finding the best resources.

Therefore, the best way to deal with this problem is to agree that judges and Courts located in Lima should resolve all legal problems.  .

6. Attorney’s fee.-

Normally, lawyers or law firms handle a collection debt before filing a lawsuit, if you do not have an agent or representative in Peru. Lawyers set fees as a percentage of the total debt you aim to recover. If you file a lawsuit, the same rate applies, but sometimes parties agree on a fixed fee if the case requires some special time to evaluate it or to give its opinion.

7. Lawsuit timing.-

A lawsuit in Peru normally lasts more than what the law stipulates. A process can last, on average, 12 months. It will depend on whether the case is quite clear or not, if the Defendant has some argument against the plaintiff, or finally, according to the judge’s workload. Sometimes an extra-trial arrangement offers a better alternative. 

8. Court costs

Any lawsuit has certain judicial fees and costs to bear. A lawsuit, in general speaking, is not expensive. However, when you want to seize some asset by a judge’s order, you have to pay a special tariff according to its value. For instance, a seizure that amounts to U.S. $ 280,000 or more requires paying a tariff of U.S. $ 1,000.00.