What happens if a debtor has no assets?

Question

José Manuel Alburquerque · Accepted Answer

The debt does not disappear, but as long as the debtor has nothing that can be attached, it cannot be recovered. If you have a judgment, apply for enforcement within the five years even if the debtor has no known assets, because once applied for it does not lapse and can be revived when assets come to light, for example if the debtor finds work or receives an inheritance. Before writing the debt off, it is advisable to have the court investigate the debtor's assets and to check whether anyone else has to answer for the debt, such as a guarantor. If the debtor has disposed of their assets to avoid paying, you can ask the judge to set those transactions aside. What the court can do If you do not know of any assets belonging to the debtor, the court can help you find them in the enforcement proceedings in the following ways: Requiring the debtor to declare their assets, with a warning that they may be penalised if they do not do so or if they conceal them. If the debtor does not respond, the court can impose periodic fines. Checking electronically the information held on the debtor by the tax authorities, the “Seguridad Social” (the Spanish social security system), the registries or the “Dirección General de Tráfico” (DGT), Spain's traffic authority. Requesting information from the banks, bodies and people you name, explaining why they may have it. Whatever comes to light is attached, including what the debtor receives later on, such as the attachable part of a new salary, a tax refund or their share of an inheritance. If nothing is found, the enforcement is not closed for good. The court usually shelves it provisionally and you can ask for it to continue when you learn of an asset or for the search to be repeated after a while, because the debtor's situation may change. The law allows enforcement to continue until the judgment has been complied with, even if it has been at a standstill. Other ways to get paid Before writing the debt off, it is worth looking into these possibilities: Others who are bound to pay, such as guarantors, co-debtors or an insurer. To enforce against them, they must be named in the judgment as ordered to pay or you must have another enforceable instrument that allows it. Otherwise, they will have to be sued separately, after trying to reach an agreement as the law generally requires. Sales or gifts the debtor has made to avoid paying, for example to a relative. You can ask the judge to set them aside as against you, which is known as rescission for fraud on creditors (“rescisión por fraude de acreedores”). There is generally a four-year time limit for this, so it is best not to wait. What others owe the debtor, such as the rent from a flat they let out or money a customer owes them, which can also be attached. If the debtor is a company, the liability of its directors, who in some cases answer for the company's debts, for example if they did not take steps to have it dissolved when its losses required this. What you should decide Pursuing enforcement when there are no assets has a cost that is not always recovered, above all the fees of the lawyer and the court agent (“procurador”). The prudent course is usually to apply for it within the time limit even if it ends up shelved. After that, it is advisable to check from time to time whether the debtor's situation has changed. If the debtor goes into insolvency proceedings (“concurso de acreedores”), enforcement is generally suspended and you will have to lodge your claim in those proceedings. If the debtor is an individual who benefits from the so-called second chance procedure (“segunda oportunidad”), they may be released from the debt, although some debts are not written off, such as compensation arising from a criminal offence.