Whose assets are attached first, the debtor's or the guarantor's?

Question

José Manuel Alburquerque · Accepted Answer

It depends on what the guarantor signed. If they are an ordinary guarantor, the law allows them to require the creditor to seek payment first from the debtor's assets, provided they ask for this as soon as payment is claimed from them and point out assets of the debtor that are sufficient. But in bank loans they almost always sign as joint and several guarantors and waive that right, so there is no order at all and the bank can claim payment from the debtor, the guarantor or both at once and attach (seize) their assets. There is an exception for mortgages on the debtor's principal residence. A guarantor who is in a very difficult financial situation, on the terms laid down by law, can ask for the debtor's assets to be exhausted first even if they had waived that right. If the guarantee is an ordinary one When the guarantor has neither bound themselves jointly and severally nor waived anything, the law does not allow them to be made to pay until all the debtor's assets have first been enforced against. This is known as the benefit of discussion (“beneficio de excusión”). But it does not work automatically: The guarantor must ask for it as soon as payment is claimed from them. If they let that moment pass, they may lose it. They must point out assets of the debtor located in Spain that are sufficient to cover the debt, such as a flat or a bank account. If the creditor, after the attempt to reach an agreement that the law generally requires, sues both of them at once, the court can order both to pay. But when the judgment is enforced, the debtor's assets will be pursued first. Nor does the benefit of discussion apply, even if the guarantee is an ordinary one, if the debtor is in insolvency proceedings or cannot be sued in Spain. The creditor can then go directly against the guarantor. What is usual in bank loans Loan agreements and deeds almost always state that the guarantor is liable “solidariamente” (jointly and severally) with the debtor and waives the benefits of “excusión, orden y división” (discussion, order and division). This means there is no order between them. The bank can claim the entire debt from the debtor, the guarantor or both at once and attach their assets. If the guarantee was signed before a notary, as is normal with these loans, the bank can apply directly for enforcement against the guarantor, without prior court proceedings on the debt. In practice, the bank tends to start with the debtor and, if there is a mortgage, with the mortgaged property, because that is the simplest course. But it is not obliged to. If the auction of the property does not cover the debt, it can go on claiming the shortfall from the debtor and the guarantor. The principal residence exception The rules protecting mortgage debtors without resources, the ones that govern the so-called “Código de Buenas Prácticas” (Code of Good Banking Practice), provide for one case in which the guarantor can indeed ask for the debtor to be pursued first. This applies when the loan is secured by a mortgage on the debtor's principal residence and the guarantor is within what those rules call the exclusion threshold (“umbral de exclusión”), a situation of very low income and great difficulty in paying that the rules themselves define with specific requirements. In that case the guarantor can ask the bank to exhaust the debtor's assets first, even if they waived the benefit of discussion in the contract. This also applies to someone who owes nothing but put up their own property as security for someone else's debt. If you think this applies to you, ask the bank for it in writing as soon as it claims payment from you, with documents proving your situation.