Proper Debt Collection Practice in Spain
The timely payment of all debts is essential for the continuity of business and many people’s livelihoods. If payment does not come, creditors are forced to go through a very restrictive legal process in order to collect the debt. Manuel Hernandez, managing director of Vilches Abogados answers our questions on the practice of debt recovery in Spain. He also provides insights into proper conduct.
Could You provide an overview of Spain’s legal framework for debt recovery?
Yes. In Spain, anyone can collect a debit for a service they have performed, regardless of whether it is a natural person, a legal entity or a public or private entity.
The creditor can ask for payment before going to court. It is a friendly claim that can be made before going to court. This is a good move for the creditor because it shows that the claim was tried orally. The judgment will be in their favor.
What are the most important laws and regulations that govern debt collection?
Delinquency is a form of delinquency that can be protected by law. The articles of the Civil Code protect those who are delinquent. In this regard, two articles stand out:
According to Article 1101, anyone who “commits fraud, negligence or fails in his obligation” is responsible for compensating the damage caused.
Article 1096, in addition to the above, states: “if the thing that is being delivered is specific, the creditor can require the debtor make the delivery”.
Both laws give you the right to ask for what you are owed verbally.
The first step in collecting the debt is to acknowledge the debt. You must establish that the debt exists. You must provide all documentation that proves your request is valid and solid. I’m talking about emails, contracts or any other documents that prove the debt.
In this case, you can make your claim in conciliation. Both parties will meet to try and reach an agreement. If the debtor refuses to pay, even though you have evidence against him, then the best option is to go to court.
If there are no facts, it is a different matter. It can become complicated. You must negotiate out of court to get the debtor to agree to the cancellation. This is harder when both parties are not on good terms.
What are the limitations and restrictions that debt collectors need to be aware of when it comes to debt collection?
It is important to understand that you cannot claim debts for the rest of your life. After a certain time, the right to sue is gone if no action is taken. I believe this is the biggest restriction for the debt collectors.
This term applies to personal contracts such as the rental of real estate, or a loan made between two individuals. It was not always the case. In 2015, the Law 49/9015 changed the 15-year limit to a five-year term. The claim procedure must have started during those five years. The term ends once this occurs. It is difficult to meet the term, so that debt goes unclaimed.
Each type of contract can have a time limit that is agreed upon by both parties. For example, mortgage loans have a 20-year claim period.
What rights and protections does Spanish law grant to debtors in the debt collection process
The debtor is protected by law once the legal proceedings have begun. This means that the possibility of seizing assets to pay off what is owed has been paralyzed. You also have the right not to have your debt grow. The interest does not increase the debt once the claim has been filed. This is very important if the legal process is delayed.
Information about this subject is not allowed to be shared without the consent of the debtor.
What is the difference between debts owed by consumers and those owed by businesses?
The differences are not too great. The steps are exactly the same. In this case, you must present the invoices with the clear due date. It is clear that the business has violated one of the conditions for accepting the services. Delivering the payment by a certain date.
If you do not receive any news, send a burofax to request payment. This is the best method to prove your case in court, as it includes the sender’s name, the recipient’s address, and the date. If the company still does not comply at this point, you can take legal action.
What are the legal remedies available to creditors who try to collect a loan?
Once they have the proof that a debt is owed, creditors have every legal remedy available to them. After a conciliation, they have the right of submitting a legal claim. This is always beneficial to both parties.
What are the typical negotiation and settlement strategies used in debt collection?
The first tip is more like a suggestion.
It is important to have a written agreement signed by all parties before any services are provided. You may think there will be no problems because the matter is between family members or friends. So, you have a quick conversation and move on. It’s a mistake that will have long-term consequences.
It is also important to be flexible when negotiating, to consider the other party’s situation and to attempt to reach an understanding, whether it is through a different way of collecting or a change in the terms.
It is best to negotiate with an understanding of what the worst case scenario could be. You should also know how much you are willing to give up.
About Manuel Hernandez
Manuel Hernandez is the managing director of Vilches Abogados in Madrid, a prestigious firm of lawyers. Vilches Abogados has eight offices in Madrid, and employs 21 lawyers. This makes it the leading law firm in Spain’s capital.
Manuel Hernandez Vilches
Managing Partner
Vilches Abogados
C. Poeta Joan Maragall is 56 years old.
28046 Madrid, Spain
Tel: +34 915 75 90 82
blog.hernandez-vilches.com