Mortgage Debtors Can Now Appeal Against Foreclosure if Ground Clause Involved

9/09/2014 – Cinco Dias

The new bankruptcy law approved by the Government last week includes a modification in the Code of Civil Procedure stating that a mortgage debtor can object to a decision which is non-beneficial to them if it was based on a contract including an abusive clause.

According to the Spanish Minister of Economics, Luis de Guindos, the regulation will equalize the rights of lenders and debtors as until now only creditors could do that.

The new law acts to prevent massive bankruptcy of Spanish companies. It gives them possibility to expand the rights with those find in the general convent of dissenting lenders.

Moreover, the amendment will affect the creditors considered somehow privileged, grouped in four categories: laboral, public (Treasury, Social Security, Spanish regions and city halls), financial and others.

The privileged creditors will maintain their right to choose either to adhere to the convenant or come to a particular agreement depending on the majority vote (min. 60%).

Measures applied to protect both insolvent clients and their lenders encompass 5- to 10-year moratoriums, over 50% debt forgiveness, conversion of the loans into shares or participative loans for 10 years, transformation of the debt into another financial instrument and conveying property or rights of the payment, regulated by certain conditions.

As how De Guindos explains it, the amendments have been done in order to stop companies crushing and, at the same time, to allow the lenders to collect their dues.

Moreover, the Government reckons it is easier to protect a firm from bankruptcy than to create a new one.

With the previous law in force, last year 95% of the companies in jeopardy ended up liquidated and this figure posts much higher than in other European countries.


Original article: Cinco Días

Translation: AURA REE