Debt Collection in Brazil: How it works and what are the most effective methods for Creditors

The Brazilian legal system offers a range of extrajudicial and judicial tools that allow creditors to take structured and strategic action to obtain payment.

Below, we present a practical overview of how debt collection works in Brazil, the main stages involved, and the tools that can be used to identify and freeze the debtor’s assets.

In Brazil, it is common to divide debt collection into two stages: extrajudicial and judicial. The first is based on direct negotiation with the debtor; the second, on the use of legal collection and enforcement tools.

How does extrajudicial collection work?

Extrajudicial collection is the first step and can often be the most efficient. The creditor, preferably assisted by their lawyer, contacts the debtor, sending a formal letter requesting payment by a certain date, warning that in the event of non-payment, they have been instructed to proceed with legal action to recover the debt.

This approach has several advantages: it is faster, less costly, and, if the debtor agrees to pay, it can preserve the commercial relationship between the parties. In business-to-business (B2B) relationships, it is advisable that contracts include specific conditions for cases of non-compliance from the outset, such as default interest, penalties, and the right to reimbursement of legal fees. This provides greater legal certainty and reduces the risk of litigation.

When should debt collection be pursued through legal action?

If extrajudicial action is unsuccessful, it is possible to take legal action against the debtor. The type of action depends on the documents that the creditor has in relation to the debt:

• Ordinary action: used when there are no documents constituting written evidence or an extrajudicial enforcement order, making it necessary to ascertain the existence of the debt.
• Monitoria action: based on documents that prove the debt and constitute written evidence without enforceability (such as invoices, commercial emails, etc.).
• Execution of extrajudicial executory instrument: applicable when the creditor has an enforceable document, i.e., an extrajudicial executory instrument (such as an acknowledgment of debt, a check, a contract signed by two witnesses, etc
• Enforcement of judgment: used when there is already a court judgment recognizing the claim.

The judicial route gives the creditor access to state coercive measures, such as account freezing, asset seizure, and asset restrictions, greatly increasing the chances of recovery.

Electronic tools for locating and freezing assets

One of the great advances in the Brazilian system is the integration of electronic tools that allow the debtor’s assets to be located and frozen quickly and accurately.

Among the main ones are:

• SisbaJud: a system that allows amounts in bank accounts to be frozen, with a “teimosinha” function that automatically repeats the freezing orders for 30 days until an available balance is found.
• Renajud: used to locate and restrict vehicles.
• Infojud and Serasajud: provide tax and financial information on the debtor.
• CNIB (Central Nacional de Indisponibilidade de Bens): used to register the unavailability of real estate and prevent fraud.

These tools make the debt collection process more effective, allowing creditors to act quickly and accurately.

When is it possible to recover debts from shareholders’ assets?

If the debtor company misuses its structure to conceal its assets, the creditor may request that the legal personality be disregarded (“Incidente de Desconsideração da Personalidade Jurídica” – IDPJ) (here is a more in-depth look).

This mechanism allows the recovery of debts to be extended to shareholders or directors when there are indications of asset confusion (mixing of personal and company assets) or abuse of purpose (use of the company to defraud creditors).

The request is submitted through separate legal proceedings and, once accepted, authorizes the seizure of the shareholders’ private assets to guarantee the payment of the debt.

Conclusion

Recovering a debt in Brazil is possible and, with the right strategy, can be highly effective. The legal system offers powerful tools, both for negotiation and for judicial enforcement, and technology has made the process increasingly agile and transparent.

For creditors, seeking specialized legal advice is essential to choose the best course of action, gather the appropriate evidence, and take the correct measures at each stage.