Litigious credit redemption: article 1535 of the Civil Code
What litigious credit redemption under article 1535 of the Spanish Civil Code is: when a claim is litigious, what the debtor pays, the nine day window and the exceptions.
What is litigious credit redemption?
It is a right of the debtor. If the creditor sells a claim that is in litigation, the debtor can take it over, and so extinguish it, by paying the buyer what it cost them, not what the claim says. Article 1535 of the Spanish Civil Code puts it in three sentences: when a litigious claim is sold, the debtor may extinguish it by reimbursing the assignee the price paid, the costs incurred and interest on the price from the day it was paid.
For anyone buying debt at a discount this is the key question: if the debtor can use it, the discount you negotiated may end up being theirs.
The short version of the term, next to credit assignment and the rest of the debt buying vocabulary.
When is a claim litigious?
The article itself sets it: a claim is litigious from the moment the defence to the related claim is filed. Before that it is not, and a claim with no lawsuit is not either. That line is what you check in every deal, with the court file in front of you.
What does the debtor pay, and by when?
| Item | What the article says |
|---|---|
| Price | the price the assignee paid for the claim |
| Costs | the costs incurred by the assignee |
| Interest | interest on the price from the day it was paid |
| Deadline | nine days from when the assignee demands payment |
You buy for 40,000 euros a 100,000 euro claim already in litigation with the defence filed. When you demand payment, the debtor has nine days to extinguish it by paying you 40,000 euros, plus the costs incurred and interest on that 40,000 from when you paid it. The other 60,000 of discount is not yours to collect.
When does it not apply?
Article 1536 excludes three cases. There is no redemption when the claim is assigned or sold to a co-heir or co-owner of the right, to a creditor in payment of their own claim, or to the possessor of a property subject to the litigious right being assigned.
When does it affect buying debt?
When you buy a specific claim already in litigation with the defence filed, the risk is in the letter of the article. If there is no lawsuit, article 1535 does not apply. Between the two there are cases the article does not expressly settle, such as a claim in enforcement proceedings or one sold inside a portfolio for a global price: how they fit the definition of litigious is for the courts, and it is the first question for your lawyer before you set a price.
- Procedural statusWhether there is a lawsuit and whether the defence has been filed: from then on the claim is litigious (article 1535).
- ExceptionsWhether your case fits one in article 1536: co-heir or co-owner, creditor paid with the claim, or possessor of the property.
- Assignment priceWhich price will appear as paid, because that is what the debtor would reimburse.
- Procedural successionHow you will step into the lawsuit in place of the seller (article 17 LEC) or into the enforcement as successor of the creditor (article 540 LEC).
- Redemption scenarioWhether the deal still makes sense if the debtor pays back price, costs and interest.
Assignment, against the debtor and against third parties
Two rules from the same chapter of the Civil Code go together. A debtor who pays the original creditor before learning of the assignment is released (article 1527), which is why the assignment is notified. And the assignment only takes effect against third parties from the date it must be held as certain and, for real estate, from its registration (article 1526).
Redemption is one of the risks of buying a claim at a discount. The debt buying guide covers the rest: access, analysis and closing.
Buying debt carries risk, and redemption is only one of them. This guide is for information only, reflects the wording of the Spanish Civil Code and Civil Procedure Act at the update date and does not replace professional advice on a specific deal.
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Frequently asked questions
- What does article 1535 of the Spanish Civil Code say?
- That when a litigious claim is sold, the debtor may extinguish it by reimbursing the buyer the price paid, the costs incurred and interest on the price from payment; that a claim is litigious from the moment the defence is filed; and that the debtor has nine days from when the buyer demands payment.
- What is the deadline for litigious credit redemption?
- Nine days from when the assignee demands payment from the debtor (article 1535 of the Civil Code).
- When is litigious credit redemption excluded?
- When the claim is assigned to a co-heir or co-owner of the right, to a creditor in payment of their claim, or to the possessor of a property subject to the litigious right (article 1536 of the Civil Code).
- Does redemption apply to claims bought in a portfolio?
- Article 1535 does not mention portfolios. Whether a claim bought inside a portfolio is litigious, and what price is attributed to it, are questions the courts decide case by case, so study them with a lawyer before buying.