Extrajudicial vs legal recovery in Mexico: a decision tree, not a threat script
Legal recovery is a priced option. Most late balances should stay in structured extrajudicial work with notarial follow-up. Here is how to gate litigation.
Direct answer: Escalate to legal when expected recovery after cost and time exceeds the extrajudicial alternative. If you cannot write that inequality, you are running on folklore.
Extrajudicial is a product
It needs a playbook: offer grid, cooling-off, documentation, payment plan monitoring, and a stop rule. “Call until they pay” is not extrajudicial work; it is unstructured intensity.
Authorised write-downs belong here. So do restructures that a credit committee already priced.
Legal is a queue with WIP
Mexican commercial litigation consumes months and professional fees. WIP without a cash forecast is a hidden NPL. Partner firms should report status, next hearing, and expected cash date, the same way a factory reports WIP.
A simple gate
Place into legal only if:
- Identity and balance are documentary-clean
- Contactability is exhausted or the debtor is a skip with assets
- Legal NPV > remaining extrajudicial expected value
- Product is not a CONDUSEF-sensitive retail unsecured with tiny tickets (those often never clear the fee hurdle)
Collections at Financetech is built with this gate. Register to pressure-test your current legal stock.
Questions operators actually ask
Does mentioning a lawsuit increase recovery?
Unverified threats increase complaints and can violate conduct rules. A truthful, dated path (“file referred on date X if no plan”) is different from theatre.
What does notarial follow-up add?
It creates a stronger documentary trail for settlements and some enforcement paths. It is not magic; it is process discipline.
Who should own the legal gate?
A named collections-legal committee with a minimum NPV and a maximum vintage, reviewed monthly — not individual agents.
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