Debt Collection and Commercial Litigation in Chile: How to Recover What Your Company Is Owed

Many companies write off money that, with the right legal strategy and by acting in time, they could still recover. An unpaid invoice, a breached contract, or a customer who has gone silent do not always mean a definitive loss: in most cases there are legal avenues to demand payment, and the difference between collecting and writing off a debt often comes down to choosing the right mechanism and not letting the deadlines pass. This guide explains the options a company in Chile has to collect what it is owed—from pre-judicial efforts to litigation, arbitration, and the measures available to secure payment.

1. What options does a company have to collect what it is owed?

Faced with an unpaid debt, a company does not have a single path but several, and the right choice depends on whether the debt is documented, on its amount, and on the debtor's conduct. In general terms, the avenues are:

• Pre-judicial collection: direct efforts before going to court.

• Executive proceeding (juicio ejecutivo): the fast track when a document evidences the debt.

• Ordinary proceeding (juicio ordinario): when the obligation must first be declared or disputed.

• Arbitration: when the contract provided for it.

To these are added cross-cutting tools, such as measures to secure the debtor's assets during collection. It is worth keeping in mind that debt collection is one type of commercial dispute; when the problem is of another nature—for example, among the company's owners—the avenues are different, as we explain in Disputes Between Business Partners in Chile: Causes, Legal Options, and How to Resolve Them.

2. Pre-judicial collection: the first step

Before litigating, it almost always makes sense to attempt direct collection. Pre-judicial collection includes efforts such as formal demand letters, payment demands, and the negotiation of settlements or restructurings. Handled well, it has concrete advantages: it is faster and cheaper than a lawsuit, it allows the commercial relationship to be preserved when that is worthwhile, and it is often enough for a debtor who was simply delaying payment to regularize the situation.

A demand letter drafted by a lawyer also serves a second purpose: it creates a record of the demand and lays the groundwork for eventual court action. It is not a mere formality, but the orderly start of the collection strategy.

3. The executive proceeding: the fast track when there is a title

The executive proceeding (juicio ejecutivo) is the procedure designed to collect quickly when the debt is evidenced by an enforceable title (título ejecutivo)—that is, a document that the law recognizes as having sufficient force to demand payment without first debating whether the debt exists. Enforceable titles include, among others:

• Checks, bills of exchange, and promissory notes, when they meet the requirements that give them executive force: the protest (protesto), notarial certification of the signature, or judicial notice of the protest without the debtor alleging the document is false (Article 434 No. 4 of the Code of Civil Procedure).

• The invoice, under Law No. 19,983, when it has not been challenged within the eight-day period and meets the other legal requirements.

• The public deed (escritura pública).

• Final judgments.

Its great advantage is that it allows the debtor's assets to be attached (embargo) from the outset, which exerts real pressure toward payment. That is why keeping obligations well documented—with instruments that constitute an enforceable title—is one of the best preventive decisions a company can make, long before a problem arises.

4. When there is no enforceable title: preparatory steps and the ordinary proceeding

Not every debt is evidenced by an enforceable title. In those cases there are two paths:

• Preparatory steps for the executive route (Article 435 of the Code of Civil Procedure): prior procedures that make it possible to create an enforceable title when one does not yet exist, mainly the acknowledgment of signature and the confession of debt. Through them, an obligation that was not enforceable can become so.

• Ordinary proceeding (juicio ordinario): when the existence or amount of the debt must be disputed and proven, or when damages are claimed for breach. It is a longer procedure, because first a judgment is obtained declaring the obligation and then collection proceeds.

Choosing between one route and the other is not a mere formality: it defines the timelines, the costs, and the odds of recovery. It is precisely where an early legal assessment makes the difference.

5. Breach of contract: specific performance, termination, and damages

Many collection matters arise from a breached contract. In response, the Civil Code offers the performing party a menu of alternatives: to demand specific performance (cumplimiento forzado) of the obligation, to seek termination (resolución) of the contract, and in both cases to claim compensation for the damages (indemnización de perjuicios) suffered. The most convenient option depends on what serves the company best: having the contract performed, or unwinding it and being compensated.

The strength of this action depends largely on how the contract was drafted: clear clauses on obligations, timelines, warranties, penalties, and termination make later collection far easier. It is the flip side of what we explain in the contracts section of our corporate legal services guide: a good contract not only prevents disputes, it also determines the force with which its performance can be demanded.

6. Arbitration: when the contract provides for it

Many commercial contracts—especially between companies of a certain size or with international counterparties—provide that disputes will be resolved through arbitration rather than before the ordinary courts. In that case, the collection or dispute is submitted to an arbitrator, often administered by a specialized center such as the Arbitration and Mediation Center (CAM) of the Santiago Chamber of Commerce.

Arbitration tends to offer greater specialization, confidentiality, and, in certain cases, greater speed, in exchange for a higher cost. Checking whether the contract contains an arbitration clause is one of the first steps when assessing a collection matter, because it determines before whom the claim must be brought. When the relationship has no such agreement, the route is judicial; in both scenarios, our dispute resolution practice assesses which offers the better odds.

7. Pre-judicial precautionary measures: securing assets before they disappear

Winning a lawsuit is of little use if, by the time of collection, the debtor no longer has any assets. To prevent this, the law allows pre-judicial precautionary measures (medidas prejudiciales precautorias) to be requested, such as the retention of assets or funds and the prohibition on entering into acts and contracts over specific assets. Their purpose is to secure the outcome of the collection, preventing the debtor from disposing of their estate while the case proceeds.

Acting quickly here is decisive. A company that detects signs its debtor is in difficulty and reacts in time has far better chances of recovery than one that waits until it has the judgment in hand.

8. The insolvent debtor: what happens if the company that owes you is going under

When the debtor not only fails to pay but is in financial distress, the picture changes. If the debtor enters an insolvency proceeding—reorganization or liquidation—the creditor must verify its claim (verificar el crédito) within that proceeding in order to participate in the distribution—within 15 days of the Reorganization Resolution, or 30 days of the Liquidation Resolution—and individual collection actions become subject to the insolvency rules.

Here, speed and the right advice are even more important, because the order in which claims are recognized and paid can determine how much is recovered. We handle this matter through our bankruptcy practice, which assesses the best strategy to protect the claim against an insolvent debtor.

9. Statute of limitations: why time works against you

Collection actions do not last forever. Once certain periods pass, the debt becomes time-barred (prescribe) and can no longer be enforced in court. As a general rule, the executive action is time-barred after 3 years and the ordinary action after 5 years, counted from when the obligation became due (Article 2515 of the Civil Code). Some instruments have even shorter periods: the action to collect on bills of exchange and promissory notes is time-barred after 1 year from maturity (Article 98 of Law No. 18,092), and the executive action on an invoice is likewise time-barred after 1 year from its maturity (Article 10 of Law No. 19,983).

The practical consequence is simple: every month that passes without pursuing collection reduces the options and can cause the right to be lost entirely. Reviewing the periods applicable to each debt should be among the first steps, not the last.

Summary: the critical points

To maximize the chances of recovering a commercial debt, keep the following in mind:

1. Attempt pre-judicial collection before litigating, creating a formal record of the demand.

2. Check whether an enforceable title exists, which enables the fast track and attachment.

3. Prepare the title or file the ordinary proceeding when the debt is not enforceable or must be disputed.

4. Assess breach-of-contract actions: performance, termination, or damages.

5. Check whether the contract requires arbitration, because it defines before whom the claim is brought.

6. Request precautionary measures to secure the debtor's assets in time.

7. Act quickly against an insolvent debtor, verifying the claim in the insolvency proceeding.

8. Track the limitation periods from day one.

Frequently asked questions about debt collection and commercial litigation in Chile

How can a company collect a debt in Chile? There are several avenues: pre-judicial collection (demand letters and negotiation), the executive proceeding when the debt is evidenced by an enforceable title, the ordinary proceeding when it must be disputed, and arbitration when the contract provided for it. The right avenue depends on whether the debt is documented, on its amount, and on the debtor's conduct.

What is an executive proceeding? It is a procedure designed to collect quickly when the debt is evidenced by an enforceable title, such as a check, a promissory note, a bill of exchange, an unchallenged invoice, or a public deed. Its advantage is that it allows the debtor's assets to be attached from the outset, without first debating whether the debt exists.

What is an enforceable title? It is a document that the law recognizes as having sufficient force to demand payment through the executive route. Enforceable titles include, among others, checks, bills of exchange, and promissory notes that meet certain requirements (protest, notarial certification of the signature, or judicial notice of the protest), invoices under Law No. 19,983, public deeds, and final judgments.

Can an unpaid invoice be collected? Yes. An invoice can carry executive merit under Law No. 19,983 when it has not been challenged within the eight-day legal period and meets the other requirements, which allows it to be collected through the executive route. That is why it is important to issue and manage invoices correctly from the start of the commercial relationship.

Is it better to go to arbitration or to the courts? It depends, first of all, on what the contract says: if it contains an arbitration clause, the dispute must be resolved through arbitration. Arbitration tends to offer greater specialization and confidentiality at a higher cost; the judicial route does not carry that additional cost but may be less specialized. The assessment must be made case by case.

What happens if the company that owes me is going under? If the debtor enters an insolvency proceeding—reorganization or liquidation—the creditor must verify its claim within that proceeding in order to participate in the distribution, and individual collection actions become subject to the insolvency rules. Acting quickly and with proper advice is key to protecting whatever can be recovered.

Is there a deadline to collect a debt? Yes. As a general rule, the executive action is time-barred after 3 years and the ordinary action after 5 years, counted from when the obligation became due (Article 2515 of the Civil Code). Some instruments have shorter periods: bills of exchange and promissory notes are time-barred after 1 year from maturity, and invoices likewise after 1 year. Letting time pass can reduce the options or cause the right to collect to be lost, so it is best to review the periods as early as possible.

At Varela Abogados, we advise companies on debt recovery and commercial litigation—from pre-judicial collection to the executive proceeding, arbitration, and breach-of-contract actions—through our dispute resolution and corporate law practices. If your company needs to collect what it is owed or is facing a commercial dispute, contact us for a consultation.

The information contained in this article is for general informational purposes only. It does not constitute legal advice and is not a substitute for consulting an attorney regarding your particular situation. For specific guidance on your case, we invite you to contact our team directly.