Legally an embargo or a tax lien, is a court or public administration declaration which affects certain property or rights which have an economic value or content, to enforce a pecuniary obligation which has already been declared (executive embargo) or one that is pending sentence in the future (preventative embargo or freezing). In other words if you don’t pay your bills you can be taken to court and the court can decide that you have to pay by way of a financial obligation with your possessions whether it be money in the bank or property that you own. The court has the power to order the seizure of your present or future property to settle your debts and can liquidate your non-monetary assets in public auctions. A portion of your assets may not be seized by law if it is considered that it is needed for basic living costs. When dealing with the seizure of a company it can be ordered that the assets are seized instead, depending on the circumstances.
According to the article 592 of Civil Law, the order for the embargo of property is as follows for businesses: If the creditor and debtor have not agreed otherwise, court will freeze the assets of the debtor using the easiest and cheapest way to liquidise the assets. If this is either impossible or difficult to apply then assets will be seized in the following order:
- Cash money or current accounts of any kind.
- Loans, stocks, shares and royalties which can be disposed of immediately or in the short term.
- Precious metals, precious stones, fine jewellery, gold and antiques
- Money income, whatever their origin and reason of its accrual.
- Income and revenues of any kind.
- Personal property or livestock, shares, securities or securities not admitted to official listing and shares.
- Real Estate.
- Salaries, wages, pensions and income from professional activities and autonomous companies.
- Credits, rights and securities in the medium and long term.
According to the article 605. Property that cannot be seized:
- Assets that have been declared inalienable or not transferable.
- Ancillary rights, which are not transferable regardless of principal.
- Goods that are not, by themselves, part of the capital assets.
- Property that has been declared unattachable or unable to be seized by any legal provision.
According to the article 606. Other personal property that cannot be seized.
- Furniture, household goods and the necessary clothing of the debtor and his family. In general, goods such as food, fuel and anything deemed by the court to be essential for the debtor and those dependent on him to provide reasonable dignity for their livelihood.
- The books and tools necessary for practicing the profession, trade or occupation of the debtor, when its value is not proportional to the amount of the claim.
- Religious artefacts dedicated to the worship of legally registered religions.
- Amounts legally declared unattachable or not seizable.
- The goods and amounts declared unattachable by treaties ratified by Spain.
According to the article 607. Embargo of salaries and pensions.
- Wages, salaries, pensions, compensation or its equivalent, cannot be embargoed if it does not exceed the amount specified for the minimum wage.
- Wages, salaries or pensions that are higher than the minimum wage are seized according to the following schedule:
a). For the first additional amount over the minimum wage up to double the minimum wage 30% can be seized.
b). For the additional amount to the equivalent of three times the minimum wage, 50%.
c). For the additional amount to the equivalent of four times the minimum wage, 60%.
d). For the additional amount to the equivalent of five times the minimum wage, 75%.
e). For any amount exceeding the previous amount, 90%.
- If the debtor has more than one form of income they can be accrued to settle the debt. Wages, salaries and pensions or the equivalent and income of any kind of the spouse can be seized when the economic regime of the couple is joint assets (not the separation of assets), this will have to be proved to the court.
- As far as the family of the debtor is concerned, the court may apply a discount of between 10 to 15% on the amounts given in points a) to d) above.
- The embargo can be regulated if the wages, pensions or salaries are subject to permanent or temporary discounts because of tax laws or Social Security.
The above apply to income from independent professional activities and businesses.
Nowadays people are accustomed to having debts and owing large amounts of money as it has been relatively easy to get personal loans or mortgages, but there is relatively little information regarding borrowing capacity and the possibility of embargoes.
When you have a debt with an individual person or a private firm, the matter will go to court and court will decide the action to be taken and what assets can be taken to pay back the debt. However if you have the debt with the government for non payment of fines or taxes then the public administration offices have the right to proceed without going to the court as long as they abide by the law, and this can mean that you are informed of the embargo once it is already in place.
If you think that by ignoring fines they will just disappear, then you are mistaken. If you have a fine from the traffic police (Direccion General de Trafico or DGT) you can still be sent the fine in the UK. The town hall can only seize the payroll of a company or put an embargo on a bank account located in the municipality. However, due to the number of debts mounting up in the municipalities cooperative agreements are being signed with provincial, autonomous communities and the State tax agency which provides a far wider area in which the different municipalities can collect the debts.
If you are married under the regime of joint assets then the salary of your spouse, their pension or income may be seized to cover your debt. When your account is frozen the administration asks the bank to block your account for the amount to cover the debt. This amount will be retained and will not be able to be used for twenty days. If you have traffic fines and your income tax returns mean that you are due to receive money back from the government then the amount of the fine will be deducted from the money that you should have received.
Embargoes can seriously affect your credit rating or your credit report as the information can remain on your credit report for years.