What is dation in payment?

The dation in payment consists of delivering a thing in payment of a debt. For this to occur, as a general rule, it is necessary that the creditor agree to receive the thing in payment.

When we speak of dation in payment, we are usually referring to the mortgage market and the cases in which the mortgage debtor cannot assume, for whatever reason, the payment of the mortgage loan installments.

In these cases, in Anglo-Saxon countries, such as the United States, the rule is that the debtor complies with delivering the house or property to the bank that granted him the credit. However, in Spanish law, the above does not exist, but the debtor is responsible for the debt with all his present and future assets. For this reason, there have been cases in which, even after the mortgage, the mortgage debtor, in addition to losing his house, must continue to pay the bank the difference between the amount of the sale of the house and the amount of the outstanding loan.

The possibility of dation in payment, de facto, has always existed. However, it is not a right of the debtor, but in the cases in which it was agreed, there was a consent of the financial institution.

At present, an attempt has been made to promote dation in payment, based on the second chance law. For this, it is established in various requirements, which make the dation in payment complicated and rather extraordinary.

When the dation in payment occurs, the debtor you are totally free of your debt. For its part, the bank does not need to go to foreclosure to take over the property.

Requirements for dation in payment

The requirements are numerous, for which we are going to mention some of the most important:

  • In the first place, the property that is the object of payment in payment must be the mortgage debtor's habitual residence.
  • In addition, its price must not exceed certain average prices established according to the number of inhabitants.
  • It is necessary that the mortgage debtor has not been declared guilty bankrupt, nor that he has a final conviction for crimes against property, documentary falsification, or against the socioeconomic order, public finances, social security and workers' rights. All this, in the ten years prior to the contest being declared.
  • They require that at least one settlement of payment has been attempted.
  • The mortgage debtor must appear whenever required

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