It's normal to have a debt at some point in our lives, whether with a company or another person , or even to be the one owed money. While this is very common, not many people know that a debt can eventually expire, meaning it ceases to exist. That's precisely what we want to talk about in this post.
Are debts forever?
People who take on debt often think their indebtedness will last until they pay off the entire amount borrowed, plus interest. However, in Spain, debts are not eternal. Debts expire, and this happens in different ways, for example:
- First of all, a debt obviously prescribes when the amount of money owed is fully paid off.
- What is known as “debt prescription ", which occurs when after a certain time has passed, the debt is simply canceled, even if the debtor still does not pay off everything he owes.
- Likewise, a compensation can be presented that the taxpayer who has the debt to the Tax Agency, compensates the debt with the money that should be received as the return of personal income tax.
- Although it is a rare debt prescription, condemnation is also another way that debts prescribe. This situation occurs when the creditor "forgives" the debt.
What is the term in which debts are prescribed in Spain?
It all depends on the type of debt incurred. Currently, the Spanish Civil Code establishes a maximum statute of limitations of up to five years for a debt to expire, but this only applies to debts that do not have an expressly established statute of limitations. Therefore, there are different time limits for different types of debt.
- If it is a mortgage loan, the prescription of the debt is established up to 20 years. In the case of a mortgage action, a person who has not specified a special term for the prescription of the debt, the term is 15 years.
- On case of debts with Social Security and with the TreasuryThese prescribe for a period of 4 years.
- If it is about debts for non-mortgage related loans and that have been granted by the banks, the interests that apply prescribe after 5 years. In the case of the main debt, this also lapses after 5 years. However, if the debt was acquired between November 7, 2000 and November 7, 2005, the statute of limitations is 15 years.
- As regards the debts derived from alimony, payment of services, rental of housing, its prescription is 5 years.
What can the creditor do before the prescription of debts?
When a creditor faces a situation where a debtor simply refuses to pay what is owed, they can resort to legal or extrajudicial means to claim payment. In this regard, current legislation establishes that a creditor can suspend the statute of limitations on the debt to prevent it from becoming extinguished and losing their money.
The different ways in which a creditor can interrupt the prescription of a debt are:
- By sending a burofax
- Through a lawsuit
- With a debt recognition process
- Forgoing the loan and consequently receiving payment of the debt
It's important to understand that when a creditor takes any action to collect a debt, they are essentially halting the statute of limitations. This means that the time period required for the debt to expire starts anew. This, of course, only happens once the debtor is notified that the debt is being claimed.
For example, when a tenant fails to pay rent , the landlord can file a claim for payment through legal or extrajudicial means at any time before the five-year statute of limitations expires. This five-year period for debt extinguishment then begins anew.
Extrajudicial claim
If you want to stop the statute of limitations from expiring on a debt, it's essential to prove that the creditor has contacted the debtor. When this happens, the best course of action is to send a certified letter (burofax) with proof of delivery, demanding payment. Furthermore, to prevent the debtor from arguing that the communication was improperly executed, it's best to have it drafted by an expert in the field, in this case, a lawyer specializing in debt collection.
Typically, this is a written notice informing the debtor that they still owe money to their creditor. To strengthen the document, supporting documentation for the debt can be attached, although this is not mandatory. The notice also specifies a deadline for settling the debt and outlines the payment method. This notice does not necessarily need to address the interruption of the statute of limitations.
Judicial claim
Legal action to recover a debt requires resorting to civil proceedings , and in these cases, the most appropriate procedure is the summary judgment process. This process involves filing a claim, along with the supporting documentation that substantiates the debt. Once all of this is established, the judge orders the debtor to pay the outstanding amount or to file an objection within a period not exceeding 20 days.
In the event that the debtor does not settle his debt after the order for payment process has been carried out or even has not appeared at it, then the order for payment process is terminated and that is when the creditor can request the execution. Now, if the amounts that are being claimed in the order for payment process exceed € 2.000 and the debtor objects, then in the declaratory process derived from this situation, the intervention of both a lawyer and a solicitor will be required.
The judge will then review the claims of both parties and determine whether or not a debt exists. If the judge rules in favor of the creditor, they will set a deadline for the debtor to fully settle the debt . If, despite this, the debtor refuses or is unable to pay, the final recourse is the enforcement of the judgment, which involves seizing the debtor's assets to cover the outstanding amount.
What about the prescription of debt on a credit card?
Currently, the statute of limitations for credit card debt is 5 years, which begins counting from the date the obligation becomes due. It's worth noting that previously, the statute of limitations was 15 years, but thanks to the amendment to Article 1964.2 of the Civil Code, it is now only 5 years.
Most of the time, when you have a credit card debt , the claim is made through a summary judgment procedure. In this case, since the credit card debt is time-barred, it is necessary to argue this circumstance as grounds for opposition to the summary judgment procedure.
This change in the statute of limitations for credit card debt means that all debts arising from a credit card and incurred after November 7, 2015, have a statute of limitations of 5 years from the date on which their fulfillment can be demanded.
On the other hand, all credit card debts after November 7, 2005 and before November 7, 2015, will be prescribed on November 6, 2020. In the case of credit card debts before November 7, 2005 of November 15, will have the term that mediates from the moment in which compliance could be required, in addition to XNUMX years.
Do debts with banks and Social Security prescribe?
If you want to know when debts with banks expire, the first thing you should do is check what type of loan you have. Currently, the statute of limitations for debts with banks is 15 years, counted from the date of the last notification to the debtor.
In the case of Social Security, current legislation establishes that the debt expires after 4 years, but only in the following situations:
- Actions to impose sanctions as a consequence of failing to comply with the Social Security regulations
- Actions to demand the settlement of the debt for Social Security contributions
- Rights of the Social Security Administration for the determination of all those debts with Social Security and that they are quotas.