What is dation?

What Does dation Mean

The term dación 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 : to deliver, to grant, to donate.

The notion of dation in payment , in this sense, refers to transmitting the domain of something to a creditor with the aim of compensating a debt . This dation consists of the delivery of an asset to settle an obligation that was pending payment.
Through a dation in payment, the debtor carries out a different service from the one due. This means that it does not pay the debt directly, but rather gives something as payment to cancel the obligation . For the operation to be successful, the creditor must accept what is offered.

Suppose that a person acquires a house through a mortgage and then cannot pay the corresponding installments. The dation in payment, in this framework, supposes an agreement between the debtor and the creditor bank that allows the debtor to deliver the property in exchange for the cancellation of the debt. In this way, the debtor is free of the installments and the creditor no longer has the need to initiate a process for foreclosure.
The dation in payment can be developed in different ways according to the legislation . In some countries , this dation is applied when a mortgage debtor is not in a position to pay his debt as agreed and, therefore, delivers the mortgaged asset for the extinction of the obligation.
Like all matters that are directly related to the law, it is important to refer to certain countries to present real examples, since generalizations can lead to confusion. If we focus on the situation in Ecuador , for example, according to an organic law approved by the National Assembly in 2012, while Rafael Correa Delgado was in charge of the presidency, the dation in payment in the field of mortgages cannot exceed $ 150,000, which is equal to the sum of five hundred basic salaries.
Here we are faced with a first requirement , or a condition, so that not only the form of the payment is important, but we must understand that not all non-payment situations can be resolved through the use of this resource.
As explained in a previous paragraph, thanks to the dation in payment a person can get rid of a bank debt that he could not pay by the means established in the contract , without this implying that his civil liberty or his economy is put at risk . It goes without saying that being dispossessed of a home without recovering the fees paid can represent a great loss of money, although it is always better than going to court and running the risk of losing other belongings or your own freedom.

In Spain , on the other hand, dation in payment is not very common; however, it is possible, as expressed in the Mortgage Law , to make an agreement in the mortgage deed so that the obligation is made only on the mortgaged assets. In a case like this, the mortgage loan will not be able to cross the limits of the contract and if the debtor cannot meet his obligation, the creditor will not have the right to demand the delivery of his other assets as compensation.
If both parties so wish, the payment dation is possible if an agreement is made between the creditor party (which can be a credit institution) and the debtor, before the moment in which the mortgage loan is formalized.

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