The activity of funds acquiring judicial portfolios of distressed assets requires heightened attention to the risk of statute-of-limitations defenses in the cases that comprise these portfolios.
Proper assessment of the procedural stage and the history of each claim is fundamental to avoiding acquiring credits already compromised by the loss of the right to collect, which can directly impact the profitability and legal security of the operation.
Below are the main points of attention regarding the statute of limitations, considering recent legislative changes and prevailing court practices.
1. Direct Statute of Limitations: Hidden Risk in the Absence of Valid Service of Process. Direct statute of limitations occurs when the limitation period for the substantive right expires without valid service of process on the debtor. Simply filing the lawsuit is not sufficient to interrupt the limitation period; it is essential that service of process is actually completed within the legal timeframe.
Otherwise, even if the enforcement action was filed on time, the absence of valid service may lead to the dismissal of the case, with the creditor being ordered to pay court costs and attorneys’ fees. This scenario is particularly relevant for funds acquiring portfolios at an early stage or with difficulties in locating debtors, as the risk of direct statute of limitations may be hidden in cases that appear regular at first glance.
2. Intercurrent Statute of Limitations: Procedural Paralysis and the New Legal Framework. Intercurrent statute of limitations arises after valid service of process on the debtor, when the case remains inactive for a period longer than the limitation period for the substantive right, usually due to the creditor’s inaction, such as failing to identify attachable assets or not taking useful steps to move the case forward.
With the changes introduced by Law 14,195/2021, the starting point for the intercurrent statute of limitations is now the date of the first unsuccessful attempt to locate the debtor or attach assets, rather than mere creditor inaction. This means that even if the creditor is diligent, the inability to locate assets may trigger the intercurrent statute of limitations, making the risk more objective and less dependent on the creditor’s conduct.
3. Applicability of the New Regime and Jurisprudential Divergences. The applicability of the new legal regime requires special attention. For cases initiated after the enactment of Law 14,195/2021, the calculation of the intercurrent limitation period fully follows the new rules, while for earlier cases, the new starting point only applies if the limitation period had not yet begun before the law came into force.
In cases where the period was already running, the previous regime remains in effect, requiring proof of creditor inaction. Additionally, case law still shows divergences regarding the creditor’s liability for costs and attorneys’ fees, especially when the statute of limitations is recognized due to inaction or when a defense of unenforceability is accepted, which can generate unexpected costs for the acquiring fund.
4. Due Diligence and Pricing: The Importance of Detailed Procedural Analysis. In this context, it is essential for funds acquiring judicial portfolios to conduct thorough due diligence, evaluating not only the nominal value of the credits but also the procedural history, the stage of enforcement, and the existence of attempts at service of process or asset attachment.
Correctly identifying the risk of direct or intercurrent statute of limitations is crucial for proper asset pricing and for defining collection strategies, thus avoiding negative surprises and ensuring greater legal security for the operations.
Understanding the nuances of the statute of limitations in legal proceedings is a determining factor for the success and sustainability of distressed asset acquisition operations in the Brazilian market. Attention to these details not only protects the investment but also contributes to building more solid and resilient portfolios in the face of the challenges of civil litigation.
