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How does debt recognition work and when am I interested in doing it?

The recognition of debt allows the creditor to obtain a certificate that proves the existence, amount and conditions of enforceability of a debt. It is a private contract, although it is usually raised to a public deed to make it more effective. 

The advantage of debt recognition is that it streamlines the claim process. So it is often used to document payment agreements in a negotiation or restructuring.

In addition to not being explicitly recognized in our Legal System, the figure is not very well known. Which means that many creditors do not know to what extent they may be interested in resorting to these instruments.

Although, as with any debt claim, the best thing to do before starting proceedings is to consult with an attorney experienced in the recovery of bad debts, we will explain the basic features of this figure and the situations in which it may or may not be beneficial.

What is a debt acknowledgment?

The recognition of debt is a unilateral legal act, emanating from the debtor, by means of which it recognizes the existence and conditions of a debt. It is a document in which a person consigns:

1.- The existence of a debt. 

2.- Its amount, payment conditions and other circumstances.

3.- The will to assume and satisfy your debt.

Once signed, the document will bind the signer. So that the creditor may claim the debt under the conditions reflected in the recognition. And this by virtue of article 1,255 of the Civil Code, which allows agreeing as many agreements, clauses and conditions as deemed appropriate as long as they do not violate the law, morality or public order.

In other words, the recognition of debt is not expressly regulated in our Legal System, but it is allowed thanks to contractual freedom. In fact, he is not an unknown figure for our jurisprudence.

Why grant a debt acknowledgment?

As we have explained in other articles, civil claims usually have two stages. In the first place, a declaratory process is held, through which the existence, amount and enforceability of the debt is determined. If the debtor does not pay voluntarily, a second process will be held, this time of an executive type, in order to act against his patrimony. 

However, the recognition of debt covers all the objectives of the declarative procedure. That is, the debtor has already recognized that there is a debt, what are its enforceability conditions and what is its amount. Thus, by signing and raising these instruments to a public deed, the declaratory phase of a debt claim process can be avoided. 

Relevant legal issues

We must emphasize that, being a unilateral act, the recognition of debt does not display obligations for the creditor. Therefore, if he does not agree with the amount entered or his payment conditions, he does not have to accept them. 

In this sense, the debtor should request the creditor's signature of agreement. This will prevent future claims. In the case of the creditor, it is advisable for them to reliably communicate their disagreement to the debtor, to prevent them from claiming tacit agreement in the future.

Another debate surrounding the effectiveness of debt recognition is whether it should state the cause of the obligation that it documents. But this issue has already been settled by the Supreme Court, which in application of art. 1,277 of the Civil Code determined that: 

< Although the cause is not expressed in the contract, it is presumed that it exists and that it is lawful as long as the debtor does not prove otherwise >>.

For instance, the STS No. 138/2010.

When is it interesting to go to the recognition of debt? 

Now that we have precisely defined what a debt recognition is, what its effects are and the legal issues that we can face, we can analyze in detail when it is interesting and when not to resort to this mechanism.

In general, it will not be appropriate to resort to debt recognition when our debtor is completely and structurally insolvent. Faced with this situation, there is usually no choice but to go to the bankruptcy.

Of course, requesting a debt recognition will not be negative if we keep abreast of the bankruptcy process. And it is that, if our debtor has more creditors, at some point the procedure will have to be opened and we will have to intervene to protect our collection rights.

Similarly, if the insolvency is structural, it will be difficult for the debtor to regain his solvency. And through the bankruptcy of creditors, provided that the debtor is a legal entity, we could achieve a derivation of the debt to its administrators. Issue that would increase our collection expectations.

Outside of this situation, debt recognition can be useful to guarantee out-of-court solutions. For example, it can complement a payment plan or an out-of-court settlement, saving us the disadvantages of the judicial process and granting us an executive document in the case of non-payment.

In summary, debt recognition is always a good option to facilitate our claims.

Do you need to document a debt acknowledgment?

As we have already explained, the recognition of debt is an atypical contract. We call atypical contracts those not expressly regulated by law, which implies a certain freedom of form. Therefore, for these commitments to be enforceable, it is enough that they meet the general conditions of effectiveness of any contract.

However, our recommendation is that the business be conducted under the auspices of a lawyer specialized in debt claims. Not only because the absence of formal defects in the document will be guaranteed, but because their experience will help to explore other recovery options, perhaps more effective than debt recognition.

Contact us, and our debt specialist lawyers will study your specific case. We Have:

Law firm in Barcelona
Law firm in Tarragona
Law firm in Reus
Law firm in Tarrega