Debt collection in Spain is a very complicated issue, especially if the debtor company goes bankrupt. Success therefore depends on acting fast to initiate an enforcement procedure on the debtor if an adequate solution is not found.
Moreover, is not an easy task when both parties are located in different countries and debtors often use the distance in their favour in order to delay payment and make it more difficult to claim.
Debt collection in Spain
This type of situation has become more frequent with the proliferation of international trade transactions and the increase in foreign investments in Spain, and has given rise to a considerable volume of unpaid debt that can only be claimed by professionals who can provide advice to clients in their own language. It is also necessary to consider the various circumstances that help to ease the situation for common claims, such as translation and legalization of foreign documents, the legitimacy of the creditor, the time that has elapsed since the start of the debt, and the question of jurisdiction.
Our law firm provides services for judicial and extrajudicial debt claims for national and foreign clients, dealing with the obvious limitations that occur with foreign creditors in our country (linguistic, cultural and legal) to make the whole process of recovering the debt much easier for you.
We contact the debtor in writing to claim payment and provide proof, and initiate any necessary negotiations with a view to reaching an amicable solution. If this cannot be established, we take legal action in representation of the creditor to claim the amount following a full evaluation of the documentation available in order to do this.
Legal advisors will evaluate the case before going to court and notify you of costs in advance without any obligation. We offer a specialized service of debt collection in Spain.
Debt Collection in Spain Procedure
In relation to the where the debtor is resident, the contract closing place, and the contract clauses, our lawyers will check that the local court jurisdiction is legitimate enough to effect the debt claim. Once we confirm the viability of the claim, we ask you to send a copy of all the documents we require, which includes: a Power of Attorney, your company -by-laws, the contract, the invoices, and a proof of delivery among others for review.
Debtor balance check
According to information provided by the client, and depending on if the debtor is or owns a company, we do a routine check with the Registry of Companies to find out if the last balances have been submitted, to confirm that the debtor is still working and that he is solvent. If he’s a physical person, our routine check will be with the Land registry for his property control.
Once we have collected all the necessary information, we send it to the client for his decision about suing the debtor. Filing, and / or winning a lawsuit in Spain does not guarantee a debt refund, since it depends solely on the debtor’s solvency, so if there are no longer assets, the only way forward would be to proceed with a legal criminal action against him, especially sometimes in a situation where he would hide his assets from the creditors ( but this is possible only if we have evidence to confirm this allegation).
The next step, would be to ask the client to translate and legalize the required documents.
Suing the debtor (“Petición Inicial Juicio Monitorio”)
If there is an invoice associated with the debt, the Spanish civil legal action process allows us to file a very simple lawsuit stating the amount owed and debtor information. Once filed and it is in court, while it is being processed there is a period of expectation for any form of response from the debtor about the lawsuit or if he ignores it by keeping silent. If he denies the existence of the debt in his response, then a mandate will be passed for there to be a trial and all the parties involved would be required to make an appearance. If however he keeps silent, or acknowledges the debt, then a trial will not be necessary anymore. An enforcement procedure could then commence legally.
In the event that he makes a statement denying the existence of the debt, for any reason, the court will give us a deadline to submit a counter claim explaining all the facts and attaching all proofs with the necessary documents.
It is not permitted to attach at a later stage any documents to the already filed lawsuit that we had failed to attach at the beginning unless of course for a legitimate reason; for example a new document that did not exist before.
Debt Collection in Spain: Trial
Before the trial, and depending on the debt amount, the judge will invite all the parties for a “pre trial” appearance in order to reach any agreement if it’s possible, with appointed witnesses, or to amend procedure flaws among other issues.
During the trial, the judge allows both attorneys to ask questions to the witnesses, as well as the debtor and creditor, if he’s a physical person. After questioning, both attorneys will each take the floor and present their conclusions based on deductions made from the evidences and testimonies they had.
After the trial sentence is issued to both parties, (and depending on the amount again) both reserve the right to appeal to a higher Provincial Court (Audiencia Provincial). It is not obligatory for them to put up an appearance, unless an evidence denied during the main trial, is admitted by the Provincial Court for the second hearing. When a verdict is passed by this court, depending on the amount of money involved, it is possible that the parties be allowed one more final chance of appeal in the Supreme Court (Tribunal Supremo).
Enforcement (Provisional o definitiva)
Enforcement in Spain is a separate process from the main/initial one, so it begins with another brief lawsuit making reference to the main verdict, and asking the judge to enforce the operative part of it. At the same moment, the creditor could also petition during this brief lawsuit for assets investigation and measures for seizure to be undertaken.
- After the first court decision and if the judge confirms the debt, the creditor will have two choices:Wait and check if the other party decides to appeal or not. And if not, after twenty days the judgment will be definitive and ready to be enforced.
- If the debtor submits an appeal, the creditor can wait until the last appeal is rejected and once the judgment is definitive, apply for the enforcement, or start a “provisional enforcement”. This sort of enforcement allows the creditor to seize his assets the way it would in a normal one, while the appeal is being processed, even if the judgment is not definitive yet. However, this choice involves a risk, because if any of the debtor’s appeals is accepted, then the creditor has to refund anything he got from the enforcement, with a legal interest rate in Spain, plus two points.
Deadlines for resolving
The deadlines in Spanish courts depends on several circumstances like how big the town is, and especially how busy the court officials are, so it is impossible to predict when a case will be resolved, or how rapidly; and when the debtors property will be seized. In addition, once the procedure has started, every single court decision could be appealed, so there are more variants that could prolong the whole process.
However, we can say that in big cities the court works faster than in small towns, because they’re supposed to have many courts, as well as more human and material resources to process the lawsuits, investigate the assets of the debtor, and do seizure requests through a computer application.
If you need help with debt collection in Spain you should consider contacting with us.
Frequently Asked Questions
- Is there a time limit for debts in Spain?
The time limit depends on the region of Spain, as well as the type of debt; the common time limit in Spain is 15 years, and in Catalonia for example, it is three years. This time limit starts from the time of purchase, service or business transaction carried out by the creditor, but it can be interrupted with a payment requirement, a court claim, or a deed of acknowledgment of debt signed by the debtor.
Once the creditor has interrupted expiration, a new time period is established for the creditor. Once this has expired, the creditor loses his right to claim the debtor for the money. However, once the enforcement procedure has started, the debtor’s rights don’t expire.
- A debt statement deed simplifies an eventual enforcement procedure
A debt statement deed is a document signed by the debtor at a Notary office, where the debtor recognizes the debt as well as the creditor’s rights, to negotiate payment instalments.
However, this deed can be even more useful for the creditor, even if the debtor doesn’t pay the instalments, because it allows the creditor to start an enforcement procedure against him, avoiding any trial, statement or previous appearance in court. The debtor would only have the right to submit an opposition statement, but it won’t delay the enforcement procedure.
- The enforcement procedure gives the creditor access to information regarding the debtor’s assets
Once the enforcement procedure has been initiated by the creditor and confirmed by the court, the attorney is legitimated to apply for the debtor assets investigation.
This investigation is made through an electronic application connected to different authorities including, the Tax Office, the Land Registry and the Social Security, using the debtor’s NIE, DNI or VAT number, to obtain a brief report regarding all the debtor’s assets, income or properties.
Once the court has the result of the investigation, it is sent to the attorney who can request that any goods be seized, provided their value covers the debt.
- If the whole debt is recovered in the court, the debtor is obliged to pay the litigation costs
Every litigation process has to include a decision regarding the court costs. Spanish civil law states that the party that loses the trial has the obligation to pay the costs to the other party. However, in the event that one of the parties wins only part of the claim, then no one pays the costs to the other party.
Exceptionally the decision doesn’t include any cost statements in Labour & Family law cases.
Cost statements include expense related to any lawyer, attorney (“procurador”), expert reports including the bills from architects, engineers, doctors, and translators.
- If the creditor is owed outstanding debt involving bills, and the debtor doesn’t answer a brief “pre-claim” no trial is necessary and the enforcement process can commence
Spanish civil litigation law sets a very specific regulation for debts regarding physical bills: The creditor is legitimated to submit a very brief claim against the creditor. This claim would be notified to the debtor who has the choice to recognize the facts, or make an opposition statement in defence. If the debtor recognized the facts or does not submit any other statement within ten days, then the creditor’s attorney will be able to initiate an enforcement procedure avoiding a trial, which simplifies the process considerably.
However, if the debtor submits an opposition statement in defence, then the court will start the common process for a trial.
- Proof of debt is required (bills, delivery notes), and must be translated to Spanish by a sworn translator
The most important consideration to be taken into account is that proof of debt must be duly translated, as Spanish law does not admit any foreign document without its corresponding sworn translation, and public documents require legalization including the Hague Apostille or the Spanish Consulate stamp if the country of origin is not part of the Hague Apostille treaty.
The most important documents required for litigation of a debt claim are basically the creditor’s invoices, the goods/services delivery notes, the contract, any payment requirement, and any answer from the debtor recognizing the debt.
Additionally, if the creditor is a company, legitimization must be provided by the director in the company’s certificate of incorporation, and Power of Attorney granted to the Lawyer and Attorney. The Power of Attorney can be signed at any Spanish Notary, Spanish Consulate, or a foreigner notary including the Hague Apostille.