What is Dation in Payment?
The term dation derives from datio,a Latin word. The concept is used in the field of law to refer to the act and the consequence of giving: deliver, grant, donate.
The notion of dation in payment, in this sense, refers to transmitting the domain of something to a creditor for the purpose of offsetting a debt. This is the delivery of a good to settle an unpaid obligation.
Through a payment, the debtor performs a different benefit from the due. This means that you do not pay the debt directly, but you give one thing as payment to cancel the obligation. For the transaction to be successful, the creditor must accept what is offered to him.
Let’s say a person buys a house through a mortgage and then can’t pay the corresponding fees. The payment, in this context, implies an agreement between the debtor and the creditor bank that allows the debtor to surrender the property in exchange for the cancellation of the debt. In this way, the debtor is free of the dues and the creditor no longer has the need to initiate a process for foreclosure.
Payment can be carried out in different ways according to the law. In some countries, this statement applies when a mortgage debtor is not in a position to pay its debt as agreed and therefore delivers the mortgaged property for the termination of the obligation.
Like all issues directly related to laws, it is important to refer to certain countries to set out real examples, as generalizations can lead to confusion. If we focus on the situation in Ecuador, for example, according to an organic law that passed the National Assembly in 2012, while Rafael Correa Delgado was in charge of the presidency, the payment in the field of mortgages cannot exceed $150,000, which is equivalent to the sum of five hundred basic salaries.
Here we face a first requirement, or a condition, so that not only the form that charges the give is important, but we must understand that not all situations of non-payment can be resolved by using this resource.
As explained in a previous paragraph, thanks to the payment a person can get rid of a bank debt that he could not pay by the means set out in the contract, without this involving his civil freedom or his economy being put at risk. Needless to say, being dispossessed of a home without recovering the fees paid can be a big waste of money, although it is always better than going to trial and risk losing other belongings or freedom itself.
In Spain, on the other hand, the payment is not very common; however, it is possible, as expressed in the Mortgage Law, to make a pact in the deed of the mortgage so that the obligation is made only on mortgaged property. In a case like this, the mortgage loan may not cross the limits of the contract and if the debtor is unable to meet his obligation the creditor shall not be entitled to demand the surrender of his other assets as compensation.
If both parties so wish, the payment is possible if an agreement is made between the creditor (which can be a lender) and the debtor, before the time the mortgage loan is formalized.