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Defense to Debtors and Seizure of Assets

Wolfenson Abogados provides its clients with expert legal advice in the event of delinquency in their debts or financial insolvency.

We advise our clients at times when they have become unable to support their economic obligations with respect to companies and/or individuals. The advice of the study entails a strategic defense plan, which includes from the verification of a possible prescription of the debt, to the negotiation with the creditors of our clients; as well as the preparation of your judicial defense regarding a possible seizure of assets through third parties of domain or possession. Likewise, we advise our clients regarding the alternatives and benefits granted by the Insolvency and Re-entrepreneurship Law, using the tools provided by Law 20,720 and the Superintendence of Insolvency and Re-entrepreneurship to seek a new beginning for their personal, family or corporate economy.

We provide comprehensive and personalized advice, focused on providing effective solutions for our clients.

Here is a legal guide to provide you with legal guidance on defending against foreclosures in Chile:

What is asset seizure?

He garnishment in Chile It is a judicial action that consists of retaining one or more assets of the debtor (prior order of the competent court), in order to pay the creditor. In other words, the garnishment corresponds to that diligence where a court receiver enter the domicile of defendant and proceeds to take note of the attachable assets that are in it, after said diligence it is withdrawn from the place with the list of sufficient written assets. It is important to point out that, as a general rule, there is no withdrawal of assets during the embargo but remain in defendant's possession and with the civil and criminal liability not to dispose of them (donate or sell them) during the trial.

Why does the judicial embargo occur?

The embargo is caused by non-payment of debts who owns a natural or legal person. Usually, companies tend to initiate judicial collection after 90 days since the debts have not been settled but this is not always the case, there are debts that are not judicially collected for several years, in respect of which the prescription which must always be alleged by one of our lawyers. 

This embargo court proceeding is only used as a last instance, so the plaintiff (generally a financial institution) must first comply with a due process in which the debtor is informed of the status of his debt and preventive measures can be taken such as the credit renegotiation or a change in payment terms.

In case of being notified of a lawsuit It is best to contact a Wolfenson Abogados specialist lawyer for the purpose of having the adequate legal accompaniment and the possibility of opting for effective solutions, either through a payment agreement expressed in an instrument of transaction or settlement, wave judicial defense in executive proceedings or embargo.

How is a foreclosure proceeding carried out in Chile?

The Wolfenson Civil Lawyers explain that, el embargo process or procedure in Chile is produced by interposing a claim before an ordinary civil court to start a executive judgment, where it will be tried place a lien on the debtor's assets in the event that the effective payment of the debt or payment agreement is not made after the legal requirements of the recipient. 

once declared the claim is admissible, will be entrusted to a court receiver commissioned by the creditor (presumably bank) to notify the demand to the debtor

Subsequently, the plaintiff may investigate and identify assets subject to seizure that the debtor detains in his power to retain, execute and liquidate them judicially (attack in the case of personal property, and public auction in the case of real estate) in the event of non-payment. It must be taken into account that the seizable assets can range from real estate, furniture (including vehicles, money or bank funds, household items), remuneration, among others. 

In order to adequately deal with these highly complex procedures, it is essential to have the expert legal advice from Wolfenson Lawyers that have adequate training and experience to handle this type of procedure, in order to safeguard the personal and business assets

When does the seizure of assets by the recipient occur?

This generally occurs, although it varies depending on the case in question, after 30 days of notification of the demand to the debtor's residence. For this reason, it is essential to contact one of our lawyers experts to provide you with adequate and personalized legal advice to your situation.

Can I oppose the seizure of assets?

If possible oppose the embargo. You may be denied entry to the court receiver, which is sometimes recommended in order to generate time for the preparation of a adequate defense. After said refusal, the judge will order that the receiver go back to perform the act of embargo but now accompanied by the public force (police). On this occasion it is no longer possible to oppose (physically but not legally) the embargo.


What assets can be liens?

In general, can be seized all the debtor's assets, real estate or immovable property, movable property such as automobiles, living room furniture, technological items, computers, among others. The law establishes a list of goods that cannot be seized, these are the following:

1) Art. 1618 of Civil Code:

They are not attachable:

  • 1. Two thirds of the salary of thes employees in public service, provided that they do not exceed ninety hundredths of an escudo; if they exceed, two-thirds of this sum, nor half of the excess, will not be seizable.

  • 2. The same rule applies to the montepíos, to all the remunerative state pensions, and to the forced alimony;

  • 3. The bed of the debtor, that of his spouse, those of the children who live with him and at his expense, and the necessary clothing for the shelter of all these people;

  • 4. Books relating to the debtor profession up to the value of twenty hundredths of escudo and at the debtor's own choice;

  • 5. The machines and instruments that the debtor uses to teach somescience or artup to said value and subject to the same election;

  • 6. The uniforms and equipment of the military, according to their weapon and rank;

  • 7. The debtor's utensils craftsman or field worker, necessary for their individual work;

  • 8. Articles of food and fuel that exist in the possession of the debtor, up to the concurrence of what is necessary for the consumption of the family during a month;

  • 9. Ownership of objects that the debtor owns fiduciary;

  • 10. The rights whose exercise is entirely personal, such as those of use and habitation;

  • 11. The donated or bequeathed real estate with the expression of non-attachable, provided that its value at the time of delivery by court approved appraisal; but they may be seized for the additional value that they later acquire.

2)Article 445 of the Code of Civil Procedure:

"They are not seizable:

  • 1. Salaries, bonuses and grace pensions, retirement, retirement and montepío that pay the State and Municipalities.

However, in the case of debts that come from alimony judicially decreed, up to fifty percent of the benefits received by the obligor may be seized in accordance with the preceding paragraph;

  • 2. The remuneration of employees and workers in the manner determined by articles 40 and 153 of the Work code;

  • 3. The forced alimony;

  • 4. The periodic rents that the debtor collects from a foundation or that he owes to the liberality of a third party, in the part that these incomes are absolutely necessary to sustain the life of the debtor, his spouse and the children who live with him and at his expense;

  • 5. The funds that enjoy this benefit, in accordance with the Organic Law of the State Bank of Chile and in the conditions that she determines;

  • 6. The insurance policies on life and the sums that, in compliance with the agreement therein, the insurer pays.

But, in the latter case, the value of the premiums paid by the person who took out the policy will be seizable;

  • 7. The amounts paid to the public works entrepreneurs during the execution of the works. This provision will have no effect with respect to what is owed to the craftsmen or workers for their unpaid wages and of the credits of the suppliers due to the materials or other articles supplied for the construction of said works;

  • 8. Thewell rootthat the debtor occupies with his family, as long as he does not have a tax appraisal greater than fifty monthly tax units or that it is an emergency home, and its extensions, referred to in article 5 of the decree Law No. 2,552, from 1979; the bedroom, dining room and kitchen furniture for family use and the necessary clothing for the coat of the debtor, his spouse and the children who live at his expense.

Theunattachable established in the preceding paragraph will not apply to real estate regarding the lawsuits in which the Treasury is a party, the Provident Funds and other bodies governed by the law of the Ministry of Housing and Urban Planning;

  • 9. Books relating to the debtor profession up to the value of fifty monthly tax units and at the debtor's own choice;

  • 10. The machines and instruments that the debtor uses to teach some science or art, up to said value and subject to the same choice;

  • 11. The uniforms and equipment of the military, according to their weapon and rank;

  • 12. The essential objects for the personal exercise of art or craft of artists, craftsmen and factory workers; and the tools, work animals and cultivation material necessary to the farmer or field worker for the agricultural exploitation, up to the sum of fifty monthly tax units and at the choice of the same debtor;

  • 13. The home utensils and kitchen items, and food and fuel items in the debtor's possession, up to what is necessary for the family's consumption for one month;

  • 14. Ownership of objects that the debtor owns fiduciary;

  • 15. The rights whose exercise is entirely personal, such as those of use and habitation;

  • 16. The donated or bequeathed real estate with the expression of not attachable, provided that its value has been recorded at the time of delivery by judicially approved appraisal; but they may be seized for the additional value that they later acquire;

  • 17. Goods intended for a service that cannot be paralyzed without prejudice to the transit or public hygiene, such as railways, drinking water companies or city drainage, etc.; but the net income they produce may be seized, observing in this case the provisions of the previous article; and

  • 18. Other assets that special laws prohibit seizing.

Is the salary garnishable?

The salary of a person is seizable, however only with respect to those that exceed 56 UF. Any amount that exceeds that may be seized by the debtor.

Do all debts allow creditors to request the seizure of assets?

Yes, all debts allow seizure of assets in case of non-payment of these. Notwithstanding this, the embargo will proceed only with respect to assets whose value is comparable to the debts that are owed. That is, in the event of a debt of three hundred thousand pesos, it will not be possible seize a property since the value of the property is well above the debt and the movable property that are within it could satisfy the debt. However, in the case of a higher debt, ten million pesos for example, it could be seized the property since it would no longer be so clear that the sale of the movable property could satisfy the debt. will always require the Legal advice from a Wolfenson attorney to discard the garnishment that are not proportionally related to the existing debts.

Is it possible to stop a judicial embargo?

There are several alternatives to delay and even stop a judicial lien, for this you must have the legal advice of a qualified lawyer. In general, there are four alternatives for stop embargo:

1.- Paying the debt: It is possible to pay the debt at any time and even before the auction of the assets.

2.- Renegotiating with the creditor:That is, reaching a payment agreement and generating a new debt in the future.

3.- Exceptions to the origin of the claim: Corresponds to defenses by a lawyer to dilate the processing of the trial. Discouraging its continuation.

4.- Interposition of Third Party: Which are actions aimed at establishing that the seized assets are part of the assets of a person other than the debtor, resulting in the impossibility of seizing said assets. exist four types of third parties, of domain, possession, payment and priority.

What types of third parties exist?

  • Third party domain :Intervention of a third party, claiming right Of domain (to own the thing) on the seized property (must be proven in court).

  • Third party of possession: Intervention of a third party, claiming right of possession Over the seized property (it is the most common).

  • Third party payment: Intervention of a third party, claiming right to concur in the payment with the executor in the absence of other assets of the debtor (having to prove his preference and the lack of other assets of the debtor where to collect his credit).

  • Third priority: Intervention of a third party, claiming right to be paid preferentially to the performer.

What types of third parties can avoid a judicial embargo?

The embargo can be avoided by two kinds of third parties, theThird party ownership and third party possession. 

The domain third party, It is one where a third party claims that the owner of said assets is not the debtor but the former. To test it, you generally use any means apt to attest, such as domain certificates regarding real estate or automobiles, receipts or purchase invoices, among others. 

The third party of possession,is one where a third partyclaims in courtbe the real one owner of said property, that third party is possible to be proven through two witnesses that testify that certain assets are in possession of a third party and not of the debtor. 

What happens if the assets do not satisfy the debt?

During the trial, the embargo could be extended to more goods in case of not satisfy the debtHowever, once all the debtor's assets have been auctioned off, the embargo will cease. Eventually, at acquire new goods the debtor, his creditors could attempt a new embargo but Wolfenson identifies that it is generally uncommon in the legal practice.

How long does it take or can an embargo be extended in Chile?

As illustrated by the Wolfenson Specialist Lawyers, it should be taken into consideration that this type of process are usually extended in time, and require a number of procedures and procedures that could lengthen the procedure fromsix months to four years on average, depending on various factors such as the opposition of the debtor, the problems of notification, the agreements or settlements that are established between the parties, the agility of the Court, Court of Appeals, either Supreme Court in case of existing appeals and resources, among others. After the seizure and execution of assets in Chile, the debt will be liquidated, that is, a specific and exact sum of money will be taken, to verify if the seized assets allow the total amount of the debt to be paid. If so, it will proceed to execute for later spin check in favor of the creditor. For the case in which the seized assets are not sufficient to meet the debt, he Court or Court you can proceed with a extension of the embargo (incorporation of new embargoable assets), or where appropriate, the plaintiff could evaluate opting for un forced liquidation procedure or bankruptcy if it is a legal person and it is convenient for the interests of the actor.

Wolfenson lawyers legal advice to its clients in processes of defense against embargoes and judicial collection of debts. 

Links of interest about the Legal Advice before the Embargo in Chile:

1.- Civil Code 

2.-Code of Civil Procedure

3.- Santiago Real Estate Registrar

Wolfenson Lawyers. Chilean Law Firm.

If you need more information and legal advice on the legal defense before the asset seizure procedure, we invite you to get in touch with our lawyers in Santiago. We are located at Av. El Golf 40, 12th floor, in the Las Condes commune, Santiago de Chile.

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