Debt Collection Agency Spain
Amicable Debt Collections Spain
1. General information
Cosmopolite Collections maintain a professional collection process, focusing on preserving the relationships between our clients and their debtors at all times.
Our team of collection specialists carry out the collection process inhouse, contacting debtors both by phone and in writing. When there is a dispute, we aim to reach an amicable solution between the creditor and the debtor.
All contractual documents are analysed (e.g. signed contracts, orders, confirmations, invoices and delivery notes, as well as standard terms previously agreed upon).
The investigations are completed with the assistance and agreement of our legal team.
1.2. Local agents
In case Cosmopolite Collections have not been able to locate the debtor or our actions in the amicable phase have not given satisfactory results, provided that we do not have proof that the debtor has ceased their activity or if the client requests it, we can transfer the file to one of our agents, who will make a face-to-face visit and verify these aspects.
The agent will also submit a payment request to the debtor on behalf of Cosmopolite Collections.
The agent will issue a final report. This service is provided throughout the whole country and a fee will be charged to the client with their prior approval.
Cosmopolite Collections always charge accrued interest to the debtor or any other amount that has been agreed on by contract between the parties.
In 2018, the official accrued interest rate is 8%. From a cultural point of view, Spanish debtors are not used to paying late payment interest at the amicable phase, and the actual amount of the interest payment is considered a matter of negotiation. Nevertheless, we always try to negotiate the payment of interest in the amicable phase.
1.4. Debt Collection Costs Spain
In Spain, debt collection costs are chargeable to debtors, representing the creditors’ claims for late payment damage based on the Spanish Civil Code and Commercial Code.
If a creditor has a special contractual agreement, this can be taken into account as long as the debtor has agreed to the terms. From a cultural point of view, Spanish debtors are not used to paying debt collection costs, though often the actual amount of these costs can be considered a matter of negotiation.
Cosmopolite Collections always include these costs in the claims and we try to recover the costs in the amicable phase.
1.5. Prescription in Spain
The law 42/2015 Civil Procedures’ modification changes the period of prescription, establishing a general prescription period of five years for debts generated after 7th October 2015.
For debts prior to that date, the general prescription period is 15 years, starting from the day after the invoices are due.
This is according to article 943 of the Spanish Commercial Code in combination with article 1964 of the Spanish Civil Code.
Transportation claims prescribe within one year in land transport and in maritime transport, starting from the dates of the payment obligation.
The prescription period is suspended when:
- The creditor claims payment judicially
- The creditor makes an extrajudicial claim by fax or notary requirement
- The debtor performs an act of acknowledgement of the debt.
This is subject to Spanish Civil Law, article 1973. The prescription has to be claimed by the debtor in the legal proceedings and cannot be declared officially by the court.
1.6. Accepted and most common payment methods
The most common payment method is bank transfers either to our own or the client’s bank account.
Cosmopolite Collections also accept cheques, but in this case, we try to ensure that they are issued directly to the client. We do not offer the direct booking off from the debtor’s accounts.
1.7. Types of companies
The most common types of companies in Spain are:
- Sociedad Limitada, or SL: The minimum corporate capital for this kind of companies is EUR 3,000.
- Sociedad Anónima, or SA: In this case, the minimum corporate capital is EUR 60,000.
In both types, the shareholders’ assets are not affected by the company’s debts, and it is necessary to prove in the presence of a judge that the administrators are following bad practices.
A third more popular type of businesses is Community of Goods: In this type, the co-owners’ assets are affected by the company’s debts if the company do not have enough assets to pay all their debts.
1.8. Sources of information
In Spain, Cosmopolite Collections have access to Cosmopolite Crédito y Caución (ACYC) database – the credit insurance company of the group – and to our business information partner, IBERINFORM.
They include financial reports and risk evaluations of Spanish and Portuguese companies.
Using information from these reports, together with our own information, we can get an accurate impression of the debtor’s financial situation and advise on the next step of the process.
The information contained in these reports comes from the official accounts (P&L) that companies have to present annually.
If we need a more detailed report containing legal information, a study of the business trajectory, or the likes, a cost per report will be charged to the client with their prior approval.
2. Retention of title
This is not a common title in Spain. Having a contract of this type is not binding between parties.
Unless the contract has been signed by a notary, it is not an executive title, so Cosmopolite Collections have to follow the normal legal proceedings.
This means starting a declarative procedure where the judge will have to recognise our right to cover the debt or remove the merchandise.
If the merchandise has been seized, it will be necessary to start a special legal proceeding called Tercería de Dominio, in which we will have to prove our right of divesting ownership and possession to a third party.
3. Safeguarding measures
We will always try to obtain a document signed by the debtor in order to get the debt recognised.
A notary’s signature is not mandatory. In the case of obtaining the signature from the debtor, it can be used in any future legal claim as proof.
The debtor is able to offer another form of security, such as mortgages, assignments of debts or assets against debts, as well.
Assignments of debts or assets can be done via contract, while mortgages have to be registered by a notary.
4. Legal Debt Collections Spain
4.1. General information
The modern Spanish legal system is composed of public law, which regulates the relations between a citizen and the state or two bodies of the state, and civil law, which regulates the relations between two people or companies.
Entering into legal proceedings is possible without prior warning to the debtor. Anyway, it will be advisable to exhaust the amicable options before starting legal action, considering its expensive cost, especially when there is a dispute.
In cases where the debtor is traceable but Cosmopolite Collections’ amicable actions are unsuccessful, our lawyers’ network will advance with pre-legal action, paying a visit to the debtor to make use of all collection chances.
If the lawyer´s actions are favourable, a fee will be chargeable to the client according to the final collected amount.
If the actions taken by the lawyer are unsuccessful, we will assess if further legal action is viable or not.
4.2. Legal system
In Spain, the jurisdiction is divided by the matter and nature of the case.
For cases regarding outstanding monies, the section in charge is the civil one. In the first instance, presided by one judge, Cosmopolite Collections will obtain a final decision that could be appealed in the second instance (in this case, it is a collegiate body composed of three judges) in the presence of the regional court, called Tribunal Superior de Justicia.
In all cases, we have to take into account that the address considered for fixing the competence will be the debtor’s address unless the parties agree on another one.
The third instance ‘Recurso de Casación’ in Spain is based on pretty restricted reasons, and any claims that do not meet the criteria will be rejected. It is also necessary to pay a legal tax that depends on the proceeding type.
4.3. Required documents
In order to apply the legal dunning procedure, we need the copies versions of the contract, invoices and a clear statement of account indicating payments and credit notes, which have been paid against the outstanding invoices.
In the case of a regular lawsuit procedure, original versions of the complete contractual documentation should be available, starting with the contract, orders, order confirmations, delivery notes and invoices.
Every stage of the trading relationship between the debtor and the creditor should be provable by documentation. In case of dispute, all notes of conversations between the creditor and the debtor should be kept and provided to our lawyers.
In case of any verbal negotiations, we would request that the dates and notes of any visits and negotiation reports should be kept, along with the names of the witnesses.
It is also necessary to obtain a power of attorney on behalf of Cosmopolite Collections and our lawyers and attorneys, including The Hague Convention apostille if our client is not from Spain.
4.4. Legal dunning procedure Spain
This procedure, named ‘Monitorio’ in Spain, is only applicable for monetary debts (less than EUR 250,000) and only when the debt is due and payable, and not disputed. The responsible court is the first instance local court.
The court only declares the creditor’s right and urges the debtor to pay the principal amount and the interest.
If the debtor does not agree, they can present an opposition and an ordinary proceeding will have to start (either ‘Ordinario’ or ‘Verbal’, depending on the amount).
This is also performed in the first instance, since the first judge only has to declare that the ‘Monitorio’ proceeding is not possible.
In the event that the debtor pays the debt, the procedure will end. In the event that the debtor does not pay the debt, an enforcement procedure will start. In any case, the plaintiff will have the final decision to start the ‘Ordinario’ proceeding, where a decision will be taken about the debt.
The regular lawsuit (‘Ordinario’ procedure or ‘Verbal’ procedure) is initiated either directly after the amicable collection has failed, or the solvency of the debtor is satisfactory or in cases where there is a prior dispute between the parties.
Both the plaintiff and the defendant will submit allegations based on evidence that will be assessed and discussed during the hearing. Evidence may include documentation, witnesses and experts.
After the verbal hearing, the judge sets a date to publish the final judgment, and both parties will be informed about the outcome in writing by the responsible court.
An appeal against the judgment is possible in a term of 20 days since the notification of that resolution. It will trigger a verdict by the court of second instance (local court to district court, district court to higher regional court).
In case of third instance, the review will be restricted to a check on whether or not the statutes were applied correctly.
Any amendment of facts or proof is not possible, unless the evidence was not known in the first instance hearing.
4.7. Debt Collection Costs Spain
There are different types of costs to consider:
- Fixed costs like court and solicitor fees. These are official rates.
- Lawyers’ fees. In this case, we have to consider a minimum fee related to the proceeding’s type and a maximum fee referring to the collected amount.
Extra costs like witnesses and experts’ reports, translations and others.
A cost estimation can be provided on a case-by-case basis should legal action becomes necessary.
Efforts are taken to keep costs low, at least when the debtor simply does not react, thereby accepting the claim.
4.8. Legal taxes
The taxes have to be paid at the same time that we take legal action; if they are not, the lawsuit will not be accepted by the court.
The cost of the tax will be fixed, depending on the judicial procedure.
The most common procedure for our claims is the ‘Monitorio’ proceeding, which costs EUR 100, and the ‘Ordinary’ proceeding, with a cost of EUR 300 and we have to consider the cost of enforcement – EUR 200.
These taxes are not rechargeable to the debtor and cannot be reimbursed in any case, except if both parties reach an agreement during the legal process, in that case, 60% of the tax paid will be returned.
Other additional local charges might be charged.
4.9. Expected time frame
The average duration of a legal process depends on the kind of procedures and if the case is in the first instance or second. The ‘Monitorio’ proceeding takes about three months. The ‘Ordinario’ proceeding can take more than a year to obtain the court’s judgment.
4.10. Interest and costs in the legal phase
It is not possible to start a legal proceeding only for the interest or costs, but these will always be included in any final collected amount.
When the debtor is condemned to pay the principal monies, the legal interest fees are normally included in the judgment.
The Spanish Civil Code allows judges to condemn the losing party to bear the costs of the legal proceedings and include them in all claims, but this often depends on the judge’s determination of whether or not the debtor has acted in bad faith.
In the case of a legal settlement, the parties bear the costs of the corresponding proceedings in proportion to their prevailing or failing.
5.1. Enforcement in debt
Once a judgment is issued by the court and the parties did not appeal in the legal period, this becomes definitive.
The condemned defendant will have to serve the judgment within 20 days following its publication.
5.2. Provisional enforcement
Spanish law allows the provisional enforcement of the judgment when the condemned defendant presents an appellation and this is admitted.
To put it into effect, it has to be requested by writ to the same court of first instance that has issued the judgment and can be enforced once the final judgment is pronounced.
The warrant is used to obtain a statutory declaration from the debtor.
5.3. Enforcement of a definitive judgment
Should the condemned defendant do not pay within the 20- day period following the publication of the judgment, the executing party can submit an execution claim to the court, designating the debtor’s assets known by them, without further requirements of payment.
Otherwise, the executing party can ask the court to locate them or indicate the banks, public organisations or companies that could help locate the assets.
Once the assets have been located, they will be auctioned and the due amount will be delivered, returning the balance to the condemned party.
The cost of this phase will be paid by the condemned party after the assets have been liquidated. Until then, the applicant has to bear its costs.
5.4. Expected time frame
The time frame for enforcement is difficult to estimate, as it depends on the course of the case, the court, the locations of the assets, possible banks, and of course, possible buyers. It usually takes longer than the principal proceeding.
6. Insolvency proceedings
6.1. General information
Insolvency proceedings, also named ‘concurso de acreedores’, can be classified as ‘ordinarios’ and ‘abreviados’.
The aim of the insolvency proceedings is to create a restructuration of the debtor company in order to pay out all their creditors with the same percentage of the debt value by liquidating the assets of the debtor company or collecting the enforceable income of the individual who is declared bankruptcy.
These are a kind of collective enforcement by all creditors to a single debtor. With the start of the preliminary proceedings, all individual enforcement is suspended. Only when the insolvency is solved will all the individual enforcement be reactivated.
Depending of the volume of the debtor company, the insolvency can be denominated as ‘Abreviado’ or ‘Ordinario’: ‘Procedimiento Abreviado’ This insolvency proceeding can be managed by an insolvency mediator.
This type of proceedings is more flexible and briefer than the usual ones; it is applicable for smaller insolvencies (with less than 50 creditors and less than EUR 5 million in liabilities). Its principal characteristics are that the payment plan cannot be longer than three years and the reduction cannot be higher than 25%.
All the insolvencies that do not respect the previous requirements will have to be managed via court.
Depending on who will present the insolvency to the court, the insolvency will be nominated as:
Issued by the debtor when the company is in the bankruptcy situation
Issued by a creditor once the debtor interrupts the payments. In both cases, the judge will study the documents and confirm the insolvency situation. Once the insolvency situation is confirmed by the court (after possible demands in contrary are checked), trustees of bankruptcy will be appointed.
They will act as administrators of the debtor company during the procedure.
They should be composed of:
- One lawyer or a law firm
- One economic expert
- One of the biggest creditors (usually a bank).
The insolvency will be published in the Official State Gazette. The date of the publication is very important because the creditors will have one month (‘ordinarios’ proceedings) or 15 days (‘abreviados’ proceedings) to lodge their credit claims.
Once the term for lodging credits is finished, the trustees of bankruptcy will prepare a financial report with a list of all the credits and a balance sheet including active and passive claims to the debtor company. If any creditor thinks that their rights are not recognised in full, they can present an incident before the trustees.
Only when all incidents are solved and the trustees prepare the definitive report, including the result of the incidents, will the procedure continue.
If the debtor company has enough assets for a payment plan, they will present an agreement to the creditors that normally includes a discount and a payment plan for the balance sheet. The creditors can accept or reject the plan, and present their decision to the court.
If a debtor gets more than 50% agreement from all creditors, the agreement will be accepted by the court, which will affect all creditors (not only those who signed it). However, if the debtor does not have enough assets or does not get 50% of favourable votes, the company will be liquidated and the creditors will recover their debts depending on the total amount recognised and the qualification of their credits.
Pre-insolvency in Spain
This is a special insolvency proceeding created to accelerate the process and to give more freedom to the debtor in order to agree to a special restructuration with their creditors.
In this case, the debtor will communicate to the court the situation of insolvency and will propose a payment plan to all the creditors.
If this is accepted, it will be homologated by the court. If the debtor’s proposal, after three months since the communication to the court, does not gain three fifths of the creditors’ acceptance, or the payment plan is not complied with the creditors, the debtor will have to start the ordinary insolvency proceeding within the next month.
During the whole process, the debtor company will not be considered as insolvent, so all the legal procedures and actions will be open and active.
6.3. Required documents
In order to lodge a claim, Cosmopolite Collections need:
-Copies of invoices
-An updated statement of account.
6.4. Expected time frame and outcome
The deadline to lodge claims is 15–30 days, depending on the type of procedures, and starts from the publication of the insolvency in the Spanish Official Gazette.
The revision of the claims lodged can take three to six months but it depends on the incidents presented; and the trustees have to check all of them before issuing a final report with the list of credits.
The whole duration of insolvency proceedings depends on the payment plan agreed or the time needed to liquidate the company.
It should be between five and ten years. In Spain, a case is open until all payments have been received by the client or we verify that we have no option of recovery.
7. Arbitration and Mediation
Should the parties have agreed previously, there are two available options to solve a dispute: arbitration and mediation or conciliation.
Agreeing to a private arbitral tribunal has three advantages compared to a regular legal proceeding. It is quicker, as the arbitral tribunals are less busy, and there is no appeal. It is also more cost-efficient and the hearing and process are confidential.
However, agreeing to arbitration also means exclusion of the jurisdiction of the ordinary courts. Arbitration in Spain is based on the rules of the Arbitration Law 60/2003 and Law reform 11/2011.
The arbitral administration and procedure can be commissioned to public law corporations, non-profit entities and associations and other arbitral institutions.
The second way of solving a dispute is by mediation or conciliation proceedings, which focus on finding the root cause of the dispute in order to find constructive agreements and solutions and create a win-win situation for both the creditor and the debtor.
Mediation or conciliations are done by professional organisations like the Chambers of Industry and Commerce or by professional mediators. The resulting agreement is not a judgment, and parties can ignore the mediator’s advice if they wish.