What happens if the auction does not cover the debt?

You still owe the difference. The proceeds of the auction are applied to the debt in the order laid down by law and, for the shortfall, the creditor can continue the enforcement against your other assets and income and against any guarantors liable for the debt. If what was auctioned was your mortgaged principal residence, the law allows you to be released by paying 65 % of the outstanding amount within five years or 80 % within ten. It also reduces the debt if the creditor later sells the home at a profit. If you cannot pay, the second chance procedure (“segunda oportunidad”) allows what remains to be written off in some cases.

José Manuel Alburquerque

Alburquerque Abogados

Litigation

How the balance is calculated

The proceeds of the auction, or the value at which the asset is awarded to the creditor, are applied to the debt in this order:

  • Ordinary interest, the interest agreed for lending the money.
  • The principal.
  • Late-payment interest.
  • The costs.

The court issues a certificate of the price obtained and of the amount still outstanding, broken down into principal, interest and costs. For example, if 160.000 euros is owed in total and the principal residence that was put up for auction at 200.000 is awarded to the bank for 140.000 euros, 20.000 euros remain to be paid.

For the shortfall, the enforcement continues under the ordinary rules. The creditor can attach the debtor's bank accounts, the part of the debtor's salary that can be attached and the debtor's other assets. It can also claim from any guarantors liable for the debt.

The mortgaged principal residence

If what was auctioned in mortgage enforcement proceedings was the debtor's principal residence, enforcement for the shortfall does not stop, but the law provides these special rules:

  • The debtor is released if, within five years of the approval of the sale, they pay 65 % of what was then outstanding, plus only interest at the statutory interest rate (“interés legal del dinero”) until payment.
  • If they do not manage it within five years, they are still released if they pay 80 % within ten.
  • If the creditor, anyone to whom it assigned its rights or a company in its group sells the home within the following ten years, the outstanding debt is reduced by half the profit made on that sale, after deducting the expenses the creditor can prove.

If those conditions are not met, the creditor can claim everything it is owed. These rules apply where a principal residence is enforced against under its own mortgage, not where it is auctioned for another debt.

If you cannot pay the rest

If the remaining debt is more than you can pay, the second chance law allows an individual, in insolvency proceedings and subject to certain requirements, to be released from the debts they cannot pay, including what remains of a mortgage that has already been enforced. Guarantors, however, are not released as a result. It is advisable to look into this with a lawyer before the attachments pile up.

This answer is provided for educational purposes and offers initial guidance on the question raised. Every matter has its own circumstances and nuances that require individual assessment. For that reason, before taking decisions with significant consequences, it is advisable to consult a professional and not to rely solely on this information. Personalised advice makes it possible to apply these explanations to the specific case and to assess the options available with greater certainty.