How Does a "Notice of Engagement" (Junin Tsuchi) from a Japanese Lawyer Impact Creditors and Debt Collection Activities?

Japanese Attorney at Law - Bengoshi L.L.

02 Jun 2025 • 8 min read

When an individual or a company in Japan becomes overwhelmed by debt and seeks legal assistance, one of the very first formal steps taken by their appointed lawyer (or judicial scrivener) is the dispatch of a "Notice of Engagement." Known in Japanese as a junin tsuchi (受任通知), this document is far more than a simple introduction; it carries significant legal weight and has immediate, transformative effects on the dynamics between the debtor, their creditors, and the overall debt collection landscape. This article explores the nature, legal basis, content, and profound impact of this critical notice in the Japanese debt restructuring process.

What is a "Notice of Engagement" (Junin Tsuchi)?

A Notice of Engagement is a formal written communication sent by a lawyer (bengoshi - 弁護士) or a judicial scrivener (shihō shoshi - 司法書士) to a debtor's creditors. Its primary purpose is to officially inform these creditors that the legal professional has been formally engaged by the debtor to handle their debt problems and will henceforth act as their legal representative in all related matters.

Typically, this notice is dispatched promptly after the lawyer and debtor have entered into a formal retainer agreement (inin keiyaku - 委任契約). It is generally sent to all known creditors of the debtor.

Legal Basis and Immediate Impact on Debt Collection

The most significant and immediate impact of a junin tsuchi stems from Japan's Money Lending Business Act (貸金業法 - Kashikingyō Hō).

Cessation of Direct Collection Activities by Money Lenders:
Article 21, Paragraph 1, Item 9 of the Money Lending Business Act specifically prohibits registered money lenders from engaging in certain debt collection practices against a debtor once they have received a Notice of Engagement from a lawyer or other designated legal professional acting on behalf of the debtor. This means that, without a "justifiable reason" (正当な理由 - seitō na riyū), such lenders cannot:

Visit the debtor's home or workplace for collection purposes.
Make direct telephone calls or send direct correspondence to the debtor demanding payment.
Engage in any other actions that could be construed as direct collection efforts against the debtor personally.

The rationale behind this provision is twofold:

Debtor Protection: It shields the debtor from potentially aggressive or harassing collection tactics, providing them with crucial breathing space.
Facilitation of Orderly Restructuring: It centralizes communication through the legal representative, allowing for a more organized and efficient approach to resolving the debt situation.

Violations of this provision can lead to severe administrative sanctions for the money lender, including business suspension orders or even revocation of their operating license, as well as potential criminal penalties. The term "justifiable reason" for contacting the debtor directly despite a junin tsuchi is interpreted narrowly, typically limited to situations where, for instance, court proceedings necessitate direct service of documents on the debtor.

Scope of Application:
It's important to note that Article 21 of the Money Lending Business Act primarily applies to entities registered as "money lenders" under that Act. This includes consumer finance companies and some credit card companies (for their cash advance services). While major banks and credit unions are not directly regulated as "money lenders" under this specific Act for all their lending activities, in practice, most financial institutions will also cease direct collection efforts and correspond through the lawyer upon receiving a junin tsuchi. This is partly due to broader industry practices and a recognition of the lawyer's role.

However, for non-financial creditors, such as trade creditors (for accounts payable) or individual lenders, the direct statutory prohibition under the Money Lending Business Act does not apply. Nevertheless, the junin tsuchi still serves the practical purpose of informing them of the lawyer's involvement and establishing the lawyer as the sole point of contact for negotiations.

No Automatic Stay on Legal Proceedings:
The Notice of Engagement, by itself, does not automatically halt legal proceedings that may have already been initiated by a creditor (e.g., a lawsuit for payment or enforcement of a judgment like an attachment of assets). To stop such actions, the debtor would typically need to initiate a formal court-supervised debt restructuring procedure (like bankruptcy or civil rehabilitation), which can trigger an automatic stay or allow for a court order to suspend such proceedings.

Key Contents of a Standard Notice of Engagement

While the exact wording may vary, a professionally drafted junin tsuchi will generally include the following critical elements:

Clear Statement of Engagement: An unambiguous declaration that the lawyer (or judicial scrivener) has been retained by the debtor and is now acting as their legal representative for debt restructuring matters.
Debtor Identification: Sufficient information to identify the debtor, including their full name, address, and date of birth. If the debtor has used different addresses or names in transactions, these might also be included to ensure correct identification by all creditors.
Request for Centralized Communication: A request that all future communications, inquiries, and demands regarding the debtor's obligations be directed exclusively to the lawyer's office.
Demand for Disclosure of Transaction History (取引履歴の開示請求 - Torihiki Rireki no Kaiji Seikyū): This is a cornerstone of the notice. To accurately determine the legally correct amount of debt, particularly in cases where "grey zone interest" might have been charged, the lawyer will demand a full and complete history of all transactions between the creditor and the debtor from the inception of their relationship. This request is backed by Article 19-2 of the Money Lending Business Act, which obligates lenders to disclose such information. This history is essential for performing the hikinaoshi keisan (recalculation of debt based on statutory interest rates).
Creditor Investigation Form (債権調査票 - Saiken Chōsa-hyō): Often, the notice is accompanied by a "Creditor Investigation Form". Creditors are asked to complete this form with details such as the current outstanding balance (principal and interest/damages separately), the existence of any guarantors or collateral, and whether any legal actions or seizures are pending or in effect.
Notification of (Temporary) Cessation of Payments (弁済停止の通知 - Bensai Teishi no Tsūchi): The notice typically informs creditors that, pending a full assessment of the debtor's financial situation and the formulation of a restructuring plan, the debtor will temporarily suspend all repayments. This is a crucial step to prevent preferential payments to certain creditors.
Reservation Regarding Acknowledgement of Debt and Statute of Limitations (債務承認・時効に関する留保 - Saimu Shōnin / Jikō ni kansuru Ryūho): A vital clause is included stating that the dispatch of the Notice of Engagement does not constitute an acknowledgement of the debt (which could interrupt the statute of limitations - shōmetsu jikō - 消滅時効) nor does it waive any defenses the debtor might have, including the defense of the statute of limitations. For debts where the limitation period (typically 5 years for commercial claims or 10 years for non-commercial claims from the last payment or acknowledgement) might have expired, this reservation is critical to avoid inadvertently reviving an unenforceable debt. For instance, the Supreme Court of Japan has clarified that for overpayment claims, the statute of limitations generally begins to run from the "point when the series of transactions concluded" (e.g., final repayment and closure of a basic loan agreement) (see judgment of January 22, 2009, Minshu Vol. 63, No. 1, p. 247).
Return of Credit Cards: It is common practice for lawyers to request the debtor to surrender all credit and loan cards. The notice may inform creditors that these cards will be returned, often after being physically cut to prevent further use, sometimes enclosed with the notice itself.

Practical Implications and Strategic Considerations for Lawyers

The issuance of a junin tsuchi is not a mere formality; it's a strategic first move with several practical considerations:

Prompt Dispatch: Speed is of the essence. Sending the notice quickly after engagement provides immediate relief to the debtor from collection pressures and signals to creditors that the matter is being professionally handled. It can also serve to forestall individual creditors from taking precipitous actions like asset seizures, although it doesn't legally prevent them outside of formal stays.
Accuracy of Creditor Information: The lawyer must ensure the creditor list is as accurate and complete as possible. A notice sent to an incorrect address or an outdated entity name will be ineffective for that particular creditor, who may continue collection efforts unaware of the lawyer's involvement.
Addressing Specific Creditor Types:
- Banks with Active Deposit Accounts: As highlighted in many legal guides, if a debtor has a loan from a bank where they also maintain deposit accounts, there's a significant risk that the bank will freeze the accounts and exercise its right of set-off upon receiving the junin tsuchi. Lawyers must advise debtors to withdraw necessary funds (within legal limits) and change salary deposit or utility payment arrangements before the notice is sent to such banks.
- Guaranteed Debts (保証債務 - Hoshō Saimu): If the client is a guarantor for another's debt, and the principal debtor is still making payments as agreed, sending a junin tsuchi in a Nin'i Seiri case for the guarantor might not always be immediately necessary or strategic, as it could unnecessarily alert the creditor or the principal debtor. However, if the client is pursuing bankruptcy, all creditors, including those for guaranteed debts, must be notified.
- Landlords and Essential Service Providers: While not "lenders" in the traditional sense, if rent or utility payments are in arrears, strategies for handling these, in conjunction with the junin tsuchi to other creditors, need careful consideration to ensure housing and essential services are maintained.
Initial Negotiation Stance and Disclosure of Restructuring Plans: The notice may or may not disclose the specific type of debt restructuring procedure being contemplated (e.g., bankruptcy, civil rehabilitation). Often, at this very early stage, the full financial picture is not yet clear, as the hikinaoshi keisan (recalculation of debt) is pending. Therefore, many lawyers will initially state that the precise plan is under review. This avoids premature commitment to a specific path before all facts are known. However, some creditors may persistently inquire about the intended course of action.
Method of Dispatch: While a simple postal mail might suffice for some communications, for a document as critical as the junin tsuchi, especially when statutes of limitation for overpayment claims or other issues are a concern, lawyers often use methods that provide proof of sending and receipt. This might include registered mail, "content-certified mail" (内容証明郵便 - naiyō shōmei yūbin) which is a formal system in Japan providing official verification of the letter's content and delivery, or even FAX followed by mail, with records of transmission kept. This ensures there is no dispute about whether and when the creditor was notified.

Impact on Creditors

For creditors, receiving a junin tsuchi triggers a number of changes and considerations:

Cessation of Direct Contact (for regulated lenders): As stated, money lenders must halt direct collection communications with the debtor. All dialogue must now pass through the lawyer.
Information Provision: Creditors are expected to cooperate by providing the requested transaction histories and completing any enclosed debt investigation forms. Refusal or undue delay can lead to legal action by the debtor's lawyer to compel disclosure (e.g., a motion to produce documents in a subsequent lawsuit). The Money Lending Business Act (Article 19-2) mandates the provision of transaction records.
Reassessment of Claim and Recovery Prospects: The notice serves as a formal indication of the debtor's financial distress and their intent to restructure their debts. Creditors will need to reassess the likelihood of full recovery and begin considering their own strategy, whether it's negotiating a settlement, preparing for participation in formal court proceedings, or writing off the debt.
Freezing of Interest (in practice for negotiations): While legally interest may continue to accrue, in the context of Nin'i Seiri negotiations, lawyers will typically negotiate for repayments based on the principal amount (after hikinaoshi keisan) and often seek a waiver of future interest.
Suspension of Internal Collection Processes: Creditors will usually suspend their internal collection processes and assign the file to a department or individual specializing in handling legally represented debtors or workout situations.

The Notice of Engagement as a Prelude to Further Steps

The junin tsuchi is the opening act in a longer play. Following its dispatch and the receipt of transaction histories:

The lawyer will perform the hikinaoshi keisan to ascertain the correct debt amounts and identify any overpayment claims.
Based on this analysis and the debtor's overall financial situation, a concrete debt restructuring strategy will be formulated (e.g., negotiated restructuring, bankruptcy, individual civil rehabilitation).
Negotiations with creditors will commence, or applications for court-supervised procedures will be prepared and filed.
If overpayment claims (kabarai-kin) are identified, separate demands for their return will be made, potentially leading to negotiations or litigation specifically for these claims.

The creditors' responses to the junin tsuchi and their cooperativeness in providing information can also inform the lawyer's subsequent strategy.

Conclusion

The Notice of Engagement (junin tsuchi) in Japan is a foundational document in the debt restructuring process, carrying significant legal implications under the Money Lending Business Act and profound practical consequences for both debtors and creditors. It immediately transforms the collection environment by shielding the debtor from direct lender pressure and channeling all communications through a legal professional. Furthermore, it initiates the crucial information-gathering phase necessary for an accurate assessment of the debt and the formulation of an effective resolution strategy. For businesses and legal professionals dealing with Japanese counterparts in financial distress, understanding the role and impact of the junin tsuchi is essential for navigating the initial stages of debt resolution in Japan and for anticipating the steps that will likely follow.