Several debts with one creditor: which one your payment goes to

It is Section Five of Chapter I of Title II of Book Four of the Civil Code of 2020, Articles 1126 to 1130, closing the chapter on payment. It settles which of several debts a payment goes to and what paperwork the payer may require.

Any debtor with several debts of the same nature in favour of a single creditor, and anyone making a partial or full payment of an obligation.

• That there be several debts of the same nature and in favour of a single creditor: the two conditions in Article 1126.Verified against the official source
• Declaring the application at the time of paying, not afterwards.Verified against the official source
• Covering the interest first if the debt produces it: until then the payment cannot be applied to the principal.Verified against the official source

• The receipt for the partial payment, which the creditor must give and in which the payer may have the reservations they consider pertinent included.
• The document in which the obligation is recorded, whose delivery the payer may require where payment extinguishes it in full.

1. 1

   Step 1: The debtor chooses, and at the moment of paying

   Article 1126 gives the first word to the payer: a person with several debts of the same nature in favour of a single creditor may declare, at the time of paying, to which of them the payment is to be applied. The moment matters: it is when paying, not when the statement arrives.

2. 2

   Step 2: If you take the receipt, you take the application

   The same article closes the back door: if the debtor accepts from the creditor a receipt in which the application of the payment is made, they cannot complain against it, unless a cause invalidating it intervened. It is worth reading the receipt before filing it away.

3. 3

   Step 3: Interest goes first

   Article 1127 says it in one line and limits the debtor’s choice: if the debt produces interest, the payment cannot be applied to the principal while the interest is not covered. That is why an instalment may not reduce the principal at all.

4. 4

   Step 4: If nobody applies it

   Article 1128 steps in where the payment cannot be applied under the preceding rules and the debtor does not apply it after being required to: then the debt deemed paid is the most onerous to the debtor, among those already due. Only among those due, and the most onerous for them, not the most convenient for the creditor.

5. 5

   Step 5: And if they weigh the same, it is shared

   The same article closes: if these are of equal nature and burden, the payment is applied to all, pro rata. Nobody decides on a whim when the debts are tied.

6. 6

   Step 6: The receipt for an instalment is a right

   Article 1129 recognizes it: a person making a partial payment has the right to require the corresponding receipt from the creditor, and may also require that the reservations they consider pertinent be included in the receipt. That second part is what stops a badly worded receipt from closing an argument on you.

7. 7

   Step 7: And when you finish paying, the document comes back

   The second paragraph of Article 1129: where the payment extinguishes the obligation in full, the payer has the right to require delivery of the document in which the obligation is recorded. Not a payoff letter: the document.

8. 8

   Step 8: Two presumptions that play in your favour

   Article 1130 closes the chapter with both. If the creditor gives a receipt for payment of the principal without any reservation as to the interest, the interest is presumed paid. And if the creditor made no reservations in the receipt for the last instalment of a debt, the earlier instalments are presumed paid. They are presumptions: they can be contested, but whoever contests them carries the burden.

The application is made to the creditor themselves, at the moment of paying, and the receipt is requested from them. Where there is disagreement over which debt a payment went to, the Court of First Instance decides. The Code names no agency here.

• Letting the moment of payment pass without declaring which debt the instalment goes to: the choice is at the time of paying.
• Filing away unread a receipt that already applies the payment: accepting it closes the claim absent a cause invalidating it.
• Expecting an instalment to reduce the principal where the debt produces interest: interest is covered first.
• Believing the creditor may apply it to whichever debt they like where the debtor is silent: the debt deemed paid is the most onerous to the debtor among those due.
• Applying the default rule to debts that have not yet fallen due.
• Not asking for a receipt for a partial payment: it is the payer’s right.
• Accepting a receipt without the reservations that matter to you, when you can require them to be included.
• Finishing the payments and not requiring delivery of the document in which the obligation is recorded.

These are the government pages this guide is based on.

• Poder Judicial de Puerto Rico

  Poder Judicial

  bvirtualogp.pr.gov