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Debt Collection in China

Debt Collection in China

Updated on Tuesday 23rd April 2019

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The collection of debt in China can only be performed by a licensed Chinese law firm or by licensed specialists in the field. This type of action falls into the category of legal services and it can only be performed by accredited professionals. Foreign investors who need assistance with collecting debts or securing any due payments can address to our lawyers in China which can offer debt collection services. It is important to know that the debt collection in China can only be performed through legal entities registered in the Chinese territory.  
 

What is the meaning of debt?

 
Debt is the sum of money which is borrowed by a person or a company and not paid in time as mentioned by a legal contract in this sense. If your business is interested in debt recovery, our attorneys in China are at your disposal with legal assistance.
 

When is it the case of debt in China?

 
The relationship between business partners and/or clients can deteriorate over time if the debts are not paid in due time. Such a situation can be an effect of various reasons, but most of the debts are caused by unpaid contractual provisions - one of the parties can’t or refuses to pay in accordance with the terms of the contract signed by the other party. Unjust enrichment or poor management of a business, as well as management without a mandate, can also be probable causes for debts in China
 
 

How the debt recovery takes place?

 
 
The debt recovery procedure starts by addressing a letter to the debtor. The debtor or the indebted company is informed about the existing debts towards the claimant and, if the debtor is responsive, our law firm in China can start the negotiation process with him in order to obtain the payment in the shortest amount of time possible. Our Chinese attorneys will also perform a deep background check on the debtor in order to establish the business relationship that developed between the two parties and analyze the current debts. If, however, the debtor does not respond to the letter, then our lawyers will begin the necessary legal procedure to bring the claim to court.
 

What types of debts can be met in China?

 
Rental payments, mortgages, loans, unpaid bills, or consumer credits are among the debts subject to recovery in China. If you face this kind of challenge and if you need to recover the debts of your company, we invite you to address your inquiries to our Chinese team of lawyers. We mention that the debt collection in China respects the international rules and regulations linked to this matter.
 
 

The amicable recovery method in China

 
The situation described above, where the parties can meet and negotiate over the payment of debt, is considered to be the amicable procedure. In this matter, the following  stages need to be considered as part of the amicable recovery method:
 
  • an amicable strategy in which the debtor gets a payment notification (via de email or post office);
  • the debt collection agents will then contact the company subject to the debt;
  • the debtor and the creditor will be in touch during the entire debt collection procedure;
  • the recovery of debts is made in respect to the applicable legislation in China.
 
 
If this phase is unsuccessful, our attorneys in China can provide the company’s management with other solutions, such as litigation or arbitration. The latter is a preferred method, based on consultation and a previously signed arbitration agreement, rather than taking the decision to commence a lawsuit. At the same time, the procedure is applied for the benefit of both parties, due to the limited time in which the decision is taken. 
 
Investors who consider that arbitration may not generate the results they are hoping for can take the case to a Chinese court, which can provide a legal framework imposed by the parties involved.  It is customarily for the debtors to negotiate a resolution of the case, rather than entering a lawsuit, a procedure which can be completed in more than a year and which can also involve high costs. 
 
We invite you to watch a comprehensive video about the debt collection methods in China:
 
 
Debt collection in China is handled in the Chinese courts in accordance with the value of the claim; claims below RMB 50 million are heard in one of the basic courts in China, while claims above this sum are judged at the Intermediate Courts
 
Our law firm in China will help you close any accounts after the recovery process is complete. For additional information on the debt collection procedures applicable here, please contact our attorneys in China