This year has been very complicated for many families with mortgaged properties. The coronavirus has made dation in payment the solution to mortgage defaults.
What is it?
Dation in payment emerges as a solution when we cannot meet mortgage payments. Thanks to it, we can extinguish the existing obligation between creditor and debtor. How? Both parties agree that the debtor will transfer the mortgaged property to the creditor. Under what concept does the creditor receive them? En concepto de pago, quedando, por lo tanto, extinguida la obligación inicial por la que quedó obligado el deudor frente al acreedor.
For many, dation in payment is the clearest solution to avoid mortgage foreclosure. It frees us from a clear and enforceable debt.
Advantages?
- The debt we have with the banking entity would be terminated at the moment we hand over the mortgaged property.
- Economic savings: A mortgage foreclosure is very expensive.
- Dation in payment allows you to negotiate, for example, staying in the property in exchange for social rent.
How to get it?
It is not easy. We can only resort to it in certain cases, as a law firm like Martinez & Caballero Abogados must negotiate this possibility with the bank to hand over the property in lieu of payment of a debt. However, the bank is not obligated to accept the dation in payment and may require us to comply with certain requirements.
Once we have been freed from this debt, and regarding the granting of future new loans, it is possible that the bank will make it difficult for us, as we represent a risk profile for the future fulfillment of our payment obligations.
Anna Nicolàs Torán
Lawyer, Civil Law Department.
Martínez Caballero Abogados
