Foreign investors in Spain may find themselves in financial difficulties and deal with debt collection. In this case, they need to know the procedure that must be followed in order to recover their financial assets. In this sense, it is advisable to receive legal assistance from our team of debt collection lawyers in Spain in order to recover the respective debt, following the procedure that is available for the specific situation in which the natural person/company is.
The main steps for debt collection in Spain
In the case of debtors failing to pay overdue amounts of money, the first step for debt recovery in Spain is sending a claim for payment that includes the direct request, the bill for the service/product for which the person expects the payment, the invoice, the term for payment, etc.
The claim must respect the Spanish regulations related to debt collection which also include the refusal to pay. In this situation, a lawsuit can be initiated against the debtor and our team of Spanish lawyers can offer in-depth information on the legal steps that have to be taken in this particular case.
Once the debtor is in possession of the claim, negotiations over the terms and installment payments may begin. The debtor’s proposals can be denied if he/she tries to obtain a longer deadline payment and the installments are to be paid only in small amounts.
After you send the claim and you don’t receive any answer or the request is not accepted, you may refer to a Spanish law firm to continue the legal procedure. The debt collection lawyers in Spain can attempt to collect the due amount by trial or by convincing the debtor to make the payment in the terms and conditions to which both parties agree.
The legislation in Spain protects the rights of the debtor, so you have to be sure that you respect the local laws. When doing business in Spain, it is necessary to know that commercial credit (which refer to late payments, beyond the established deadline) is a common event. It is also necessary to know that a commercial contract between two legal entities generally stipulates a payment deadline of 30 days, but the agreed deadline can increase up to 60 days.
Types of debt collection in Spain
There are two possibilities for debt collection in Spain: the out-of-court or extrajudicial procedure or the court procedure. The first procedure can be applied if the parties agree on the payment methods and amounts. If an agreement can’t be reached, the lawyer will start the judicial procedure.
As a general rule, parties that are involved in debt recovery in Spain should know that the process can last approximately 8-12 months, which represents a short period of time according to the Spanish law standards. It is also important to know that, starting with 2015, a claim for the payment of a debt can be completed through a public notary in Spain and, in the situation in which the debtor fails to provide an answer, in a period of 20 days since the notification was sent, the court procedures can begin.
The amicable procedure for collecting debts in Spain
During the amicable procedure of the debt recovery process, the lawyers will notify by phone and in writing the debtor that he/she must pay any outstanding amount. If he/she fails to pay or does not agree, court proceedings can be initiated, which is generally the case in Spain.
Parties that want to engage in the amicable procedure in Spain should know that the assistance of a debt collection lawyer in Spain can also be used and the legal specialist can handle the negotiations between those involved in a debt collection case.
In this situation, with the assistance of our law firm in Spain, those that need to collect a debt from another party can request the lawyer to draft the formal letter of demand and assist in the negotiations procedures. The lawyer can also draft a settlement between the parties, stating the terms agreed (amount to be paid, the deadline for the payment, agreed installments and other necessary matters).
Court procedure for debt recovery in Spain
Debt recovery in Spain can be brought to a Spanish court in the situation in which the amicable procedure failed to provide a positive solution. Debt collection can be employed when a company has a debt to another business partner, but it may also be related to employment relations. As a general rule, the court procedure will refer to the following:
- in the first stage, the court will issue a compelling order for the debt to be paid;
- in the second stage, the judge will establish a court session for the case to be heard within a maximum period of six weeks;
- the court proceedings can start for any sum of money above EUR 2,000;
- for amounts over the sum of EUR 6,000, court proceedings can last up to two years (this is the threshold established for employment-related debt collection);
- in the last stage, the creditor can request the bankruptcy of the debtor.
How can our Spanish lawyers help in debt collection?
Debt collection in Spain, as well as in other jurisdictions, represents a complex procedure that can be influenced by numerous factors. The legal procedure is comprised of a set of steps from a legal point of view. If the party interested in recovering a debt will choose the court proceedings, there are a set of matters that must be concluded with the assistance of a Spanish law firm, as follows:
- in the case of a debt collection case in which the debtor is a foreign resident, the lawyers will verify the legal nature of the contracts signed between the parties;
- the lawyers will also conclude, based on the legislation of both countries and the terms of the contract, if the local courts can handle the respective case;
- in the case of debt collection related to businesses, the company that wants to recover debt should provide a set of documents;
- such documents refer to the power of attorney, the company’s statutory documents, the contract signed with the debtor, the invoices related to the respective contract and others.
Further on, the lawyers will verify the current financial situation of the debtor, in the case in which it represents a legal entity. When doing so, the lawyers will verify the company’s financial data registered with the Commercial Registry in the country in which is it a tax resident. However, the financial situation of a natural person can also be verified, by requesting information on the properties the person owns (a procedure concluded with the Land Registry).
Prior to suing the debtor, our team of debt collection lawyers in Spain will send the gathered data based on the applicable legislation to the respective party, announcing the decision of the other party to bring the case in the court. The lawsuit can be started based on the documents that show evidence on the nature of the debt and on its value (generally, such documents refer to invoices).
The documents are filed with the Spanish court and then, the debtor is requested to provide an answer. In the case in which the debtor refuses to give a response regarding the lawsuit, an enforcement procedure will be started. When the debtor did provide an answer, but he or she denied the existence of the debt, our team of lawyers in Spain will send an extensive presentation on all the documents that provide evidence on the claim.
The documents can be sent to the debtor only when the Spanish court states a deadline for the submission of the documents to the respective party. As a general rule, it is necessary to know that the legislation regarding debt collection in Spain stipulates that documents that can be used must be collected during the first stages of the trial. However, further documents can be added to the lawsuit file in special conditions.
The trial in itself represents the moment when the judge hears the case and where both parties are present, represented by their lawyers. The trial is also comprised of witnesses and both the creditor and the debtor are allowed to bring their own witnesses. During the trial, the attorneys are allowed to ask questions to any of the parties present at the hearing and, at the end of the trial, they will be required to present their findings and conclusions.
The judge will then issue a sentence, which can be appealed by the parties. The appeal of the case will be handled through the Provincial Court. It is necessary to know that the parties can appeal the case again if they do not agree on the terms of the decision, and in this situation, the Supreme Court will appeal the case. However, this is the highest institution where appeals can be made and generally, the enforcement procedure will begin.
The enforcement of the debt collection case represents one of the final stages of the procedure and our team of Spanish lawyers can assist with legal advice on the main options that can be used in this situation. It is also important to mention that the debtor can be requested to pay the costs associated with the litigation case.
If you need more details on debt collection in Spain and the related procedure, you may contact our law firm in Spain. Our Spanish attorneys will inform you on the steps of the process and the documents you need for debt collection (such as invoices and other documents that can prove that there is a commercial relationship between the creditor and debtor). It is also necessary to know that, in the situation of commercial claims registered prior to October 2015, the parties can bring the case in front of a court in a period of 15 years.