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Nowhere in Europe have the effects of the worldwide recession, sovereign debt crisis and newly imposed economic landscape been felt as harsh as in Spain. With nearly 5 million unemployed and an unsold housing stock of 600,000 plus properties, it is not going to get better any time soon!

It is therefore hardly surprising that the courts are seeing an increase in legal proceedings for unpaid debts, mortgage repossessions and insolvencies.

Below we set out the debt recovery procedure in Spain for those of you who may be owed money by a company or an individual with assets located there.

Debt recovery procedure – Power of attorney

 Unlike the UK, if you wish to issue legal proceedings in Spain, you will need to appoint a lawyer and a court agent and sign a power of attorney in their favour. A power of attorney authorises a lawyer to act on your behalf and attend court in proceedings against the debtor. Once you have the power of attorney in place then debt recovery proceedings can be issued.

Asset check

 In order to avoid hollow victories, it is advisable to carry out a credit check on the company or individual who owes you money. This is a simple but essential process of any debt recovery proceedings and would involve ascertaining whether or not the debtor has assets that could be seized or charged once the sentence for debt recovery is obtained. Our usual checks would include searches at the Land Registry and Companies House as this information is available publicly. Once proceedings are issued, private financial information such as salary details and bank accounts can be obtained by the Judge. If the assets are heavily charged or there are no assets, serious thought is required before launching into proceedings.

The claim

 Depending on the amount of the claim, there are three types of legal procedures. These being a) verbal, b) monitorio or c) ordinary proceedings. The first two are quicker legal proceedings, and are primarily for debts of less than 6,000 euros and up to 250,000 euros respectively.

  1. Verbal proceedings are issued for straight forward debt matters of less than 6,000 euros. When the claim is served on the defendant the court sets a date for a verbal hearing when all evidence must be presented to the Judge. The sentence can be issued within a month.
  2. Monitorio proceedings are voluntary and undisputed proceedings for amounts of up to 250,000 euros. If these proceedings are disputed by the debtor then the procedure becomes an ordinary procedure. If undisputed, then the judge will issue his sentence and the debtor can choose to pay or have the sentence enforced against him.
  3. Ordinary proceedings are issued for amounts in excess of 6,000 euros. Once these are issued and served on the debtor by the court, the debtor has 20 working days to prepare their defence and counterclaim and return this to the court. The court will then serve the defence and counterclaim on the party owed the money and they will have 20 working days to prepare a defence to the counterclaim. Once the defence and counterclaim and defence to the counterclaim have been served, the court will set a date for a preliminary hearing where the parties will have the opportunity to ratify any out of court agreement reached. If no agreement is reached, the proceedings continue and the parties propose the evidence to be heard at trial along with the witnesses to attend, after which the court will set a date for the trial.

Procurator – Court agent

 For the monitorio and ordinary procedures it will be necessary to appoint a court agent. The court agent will deliver documents from your lawyer to the court and receive documents from the court and send these to your lawyer. They are a separate group of qualified professionals to lawyers and usually your lawyer will notify you of their costs.

Sentence and enforcement

 After the trial the Judge will prepare his sentence. This is rarely received on the day of the trial. Once you have a successful sentence, if the debtor refuses to settle your debt, then you will have to enforce the judgment against the debtor by issuing enforcement proceedings. This is a separate procedure to the claim and can involve either seizing bank accounts or obtaining charges on properties or assets.

Alex Radford, Associate Solicitor, Irwin Mitchell Abogados, Spain