From debt to auction: the full path

By the time you see an auction published, months (sometimes years) of proceedings have already happened. Understanding that path is useful for two very practical reasons: knowing which documents exist in the case file, and anticipating why an auction can fall through at the last minute.

Step 1 · Someone stops paying

The trigger is always a default. If the debt was backed by a hipoteca (mortgage over real estate) or a prenda (a lien over movable property, typically a vehicle), the creditor has a short route: once registered, those documents are enforcement titles in themselves.

Registered ordinary and certificate mortgages, as well as registered liens, constitute enforcement titles with waiver of formalities, in order to enforce the privilege over the encumbered asset.

Step 2 · The claim and the registry filing

The creditor sues the debtor and also the owner who consented to the lien, if they are different people. As soon as the case is admitted, the court orders the claim to be recorded against the property in the Registry. That filing is a public flag: anyone who looks the property up from then on can see it is in litigation.

Step 3 · The debtor's defence (and why it rarely stops anything)

In mortgage and lien enforcement proceedings, opposition is admitted only on the grounds of lack of enforceability, payment and statute of limitations. It must be filed within five days. The auction is not suspended, but it will not be approved until the opposition has been rejected.

Step 4 · The base is set

The base is the minimum starting price. It comes, in this order:

1. From what the parties agreed in the mortgage deed. This is the most common case.
2. Failing that, from a court appraisal or the registered value, when the asset has a tax value updated within the last two years. The creditor chooses.

One important detail: if the asset carries several liens, the base is always the one set for the senior matured security. In other words, the debt that sits first in line governs, not the biggest one.

Step 5 · The court orders the auction

In a single ruling the court sets everything you will later read in the notice: which asset, the bases, and the date and time of all three auction rounds. Yes: all three are scheduled from the start, even if the asset sells in the first.

That ruling also decides something that changes the entire deal: whether the asset is sold free of liens or subject to prior liens. We come back to this in lesson 5, because it is what separates a good buy from an expensive problem.

Step 6 · The notice is published

The auction shall be announced by a notice published twice, on consecutive days, in the Boletín Judicial, stating the base, the time, the place and the days of the auction rounds.

The Boletín Judicial is the Judiciary's official gazette and comes out every business day. It is the original source for every judicial auction in the country. El Postor reads those publications and organises them so you don't have to go through them one by one, but the published version always prevails.

Step 7 · The mandatory wait

The auction may only take place once five business days have elapsed from the day following the first publication of the notice and after all interested parties have been served.

Those five business days are, in practice, your window to do the homework: the registry check, the drive-by, the calls to the municipality. It is not much time, which is why it pays to watch auctions as they are published rather than the night before.