How to Ensure a Defaulting Client Pays Their Debt

Client default is a common problem for entrepreneurs and service providers. Knowing how to properly collect a debt and ensure you are legally protected can make all the difference for the success of your business.

What to Do When a Client Doesn't Pay?

When a client is late or simply stops paying, the first step is to try an amicable solution. Here are some initial actions:

Send formal reminders: Emails and messages reinforcing the commitment made.

Negotiate an alternative: Installment payments or renegotiating the debt can be a viable solution.

Extrajudicial notice: A formal notice demonstrating the intent to collect can produce results before judicial measures are needed.

If these attempts fail, the next step is to file a debt enforcement action (execução da dívida, a judicial collection procedure).

How Does the Enforcement Process Work?

If you hold an enforceable instrument (título executivo, a document that Brazilian law recognizes as directly enforceable in court, such as a signed contract, check, promissory note, or invoice/duplicata), you can file an Enforcement Action (Ação de Execução) directly with the courts. This means the debtor will be summoned to pay the debt within 3 days or have their assets seized (penhora).

If the debt is not settled, the judge may order:

Freezing of funds via Bacenjud (the judicial system used to block bank accounts electronically);

Seizure (penhora) of assets such as vehicles and real estate;

Listing of the debtor's name in default/credit-restriction registries.

How to Protect Yourself? Essential Documents...

To avoid headaches and facilitate collection, it is essential to keep good document organization. The main documents are:

A signed contract with all conditions detailed;

Invoices proving the transaction;

Emails and messages confirming the agreement;

Proof of partial payment, if any.

The more documentation you have, the easier it will be to prove the debt and carry out the collection.

Therefore, debt enforcement is a creditor's right and can be a fast process when the documentation is well organized. It is always advisable to have legal counsel to act strategically and increase the chances of receiving what is owed.