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Dation in payment

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The dation in payment is also known by the name of datio in solutum , and basically refers to the performance of a benefit other than the one due , which is accepted by the creditor in full effect of mandatory extinction . In the payment dation it is not necessary that the value of what is delivered is equal to that of what is owed; what is decisive is the acceptance by the creditor of the substitute provision . This form of payment can also be applied to the case in which, concurring several creditors before the same debtor withindependent credits , it gives them its assets for payment. Then a dation is given in payment of all the debts that are pending. The goods delivered by the debtor then become the property of the creditors to the extent, form and with the extinguishing effects that are thus stipulated.

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What is dation in payment?

Dation in payment is the action of delivering a certain asset in exchange for being able to cancel a debt that is pending payment. Is an act in which the debtor makes title of payment one benefit to the creditor, who accepts.

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  • What is dation in payment?
  • Requirements
  • Effects of the dation in payment
  • Dation in payment by countries
  • Example

What is dation in payment?

The dation in payment of a property that is guaranteeing a mortgage loan consists of an agreement of wills that exists between the creditor financial institution and the debtor who owns a certain property, and that due to the inability of the debtor to meet the payment of the Mortgage loan, delivers the property that has been mortgaged to the financial institution , which accepts it, considering the debt canceled . It is to cancel the mortgage loan, not with cash, but with the real estate itself that served as collateral.

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Requirements

The requirements that must be met to be able to adhere to the dation in payment are the following:

  • Not have been found guilty in the contest .
  • Not having a conviction in final judgment for crimes against property , the socio-economic order, for falsification of documents, against the Public Treasury, Social Security, or for a crime against the rights of workers.
  • Having tried an out- of- court settlement of payments, to try to pay with those to whom the debt is owed.
  • Appear whenever needed.
  • Not having obtained a bankruptcy during the previous ten years.
  • Accept that the debt resolution is made public for five years.
  • Not having rejected a job that was commensurate with their abilities, during the previous four years.

Effects of the dation in payment

The fact of having to deliver a good part of the taxpayer’s inventories as payment of an obligation implies the suspension of the asset , therefore, the respective VAT must be generated . If a profit is generated in the payment of an asset , this is then configured as a type of occasional profit .

If the value for which the asset is delivered is greater than the liability that is canceled, naturally the excess constitutes income and the creditor must pay the excess . This makes domestic economies look more complicated, especially if there is unemployment. When there is a lack of economic income and having lost the home, there is a debt with the Treasury for capital gains and from which no income is received.

Dation in payment by countries

Ecuador

In Ecuador, the Organic Law establishes the dation in payment for mortgage loans that do not exceed USD 150,000. In this way, if a citizen gets into debt to build or buy a single home for family use and fails to pay the debt within the established deadlines ; it will be dispossessed of the mortgaged asset and with that the debt is extinguished.

When it tops the goods delivered as security for the citizen who could not pay the debt, creditors can not pursue the personal assets of the debtor or his successors even claiming outstanding debts for court costs and attorneys ‘ fees and other expenses. The dation in payment is also applicable in the purchase of vehicles for personal or family use as long as the credit does not exceed 100 unified basic salaries.

Spain

Although in Spain it is almost nil, the Mortgage Law allows the possibility of agreeing in the deed of constitution of the voluntary mortgage that the guaranteed obligation is only effective on the mortgaged assets . The liability of the debtor and the action of the creditor are limited to the amount of the mortgaged assets , and cannot affect the assets of the debtor’s equity . Dation in payment is not seen as a way to eliminate obligations.

USA

In this country the dation in payment is known as Nonrecourse debt and consists of the delivery of the floor to settle the debt with the bank. It is very common and the loans are 100% good , that is, the full payment. It is used only in residential mortgage loans .

Example

An example of dation in payment is:

The real estate sector which works with a payment system by owners who cannot be responsible for the payments established by their mortgage and finally pay off their debt with the delivery of the property in question.

Instead of facing the payments with money , they are released from the commitment with the bank through the transfer of the property .

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