Your debt was sold to someone else: what happens to what you owe

They are Articles 1210 to 1215 of Title VI of Book Four of the Civil Code of 2020. They govern what happens when a creditor transfers their credit to someone else: from when it counts against third parties, what happens to a debtor who did not learn of it, and what the assignor answers for.

Any creditor who assigns their credit, whoever acquires it, and the debtor of that credit. The assignor-liability rules yield to what the parties expressly stipulate.

• For the assignment to take effect against a third party, that its date must be held certain; and if it concerns an immovable, its recording in the Registry of Property.Verified against the official source
• For the assignor to answer for the debtor’s solvency, that it was expressly stipulated or that the insolvency is prior and public.Verified against the official source
• To be released by paying the original creditor, having done so before learning of the assignment.Verified against the official source

• The assignment document with a certain date, and the registry recording if the credit concerns an immovable.
• Evidence of the payment made to the original creditor and of the date the assignment became known.

1. 1

   Step 1: From when it counts against everyone else

   Article 1210 conditions it: the assignment of a right or an action does not take effect against a third party until its date must be held certain. And if it concerns an immovable, it takes effect against third parties from the date of its recording in the Registry of Property. Between assignor and assignee the assignment holds earlier; against third parties, it does not.

2. 2

   Step 2: If you paid without knowing it had been assigned

   Article 1211 is the debtor’s most practical protection and fits in one line: the debtor who pays the creditor before learning of the assignment is released from the obligation. Whoever bought the credit will have to sort it out with whoever sold it.

3. 3

   Step 3: If the assigned right is in litigation

   Article 1212 stops the assignment from cleaning the credit: the action the assignee exercises is without prejudice to any counterclaim or other right existing at the time the assignment is notified, or before. With one specific exception: this does not apply to the assignment of a negotiable instrument transferred in good faith and for value before its maturity.

4. 4

   Step 4: What comes with the assignment

   Article 1213 fits in a handful of words: the assignment of a credit comprises that of all accessory rights. Sureties, pledges, mortgages and other securities pass with the credit.

5. 5

   Step 5: What the assignor answers for

   Article 1214 distinguishes by good faith. A good-faith assignor answers for the existence and legitimacy of the credit at the time of the assignment, unless they assigned it as doubtful. And they do not answer for the debtor’s solvency, unless it was expressly stipulated that they do, or where the insolvency is prior and public; even then, they answer only for the value received and the necessary expenses of the contract.

6. 6

   Step 6: And if they assigned in bad faith

   The second paragraph of the same article removes the caps: the bad-faith assignor answers for the value received, for all expenses and for damages. Good or bad faith changes the whole account.

7. 7

   Step 7: One year, if nothing else was agreed

   Article 1215 puts a clock on the solvency guarantee: where a good-faith assignor has made themselves liable for the debtor’s solvency and the parties stipulated nothing about the duration of that liability, it lasts only one year from the assignment of the credit, if the term had already fallen due. And if the credit is payable on a term not yet due, the liability ceases one year after maturity.

The assignment is executed between assignor and assignee. Recording the assignment of a credit over an immovable is done in the Registry of Property, whose rules we did not read here. If the validity or effects of an assignment are disputed, the Court of First Instance decides.

• Paying the assignee again after paying the creditor before learning of the assignment: that payment releases you.
• Treating an assignment as good against third parties without a certain date.
• Forgetting the recording where the credit concerns an immovable.
• Believing the assignment cleans a litigious credit of claims that already existed.
• Applying that rule to a negotiable instrument transferred in good faith and for value before maturity.
• Assuming the securities stay with the assignor: the assignment comprises all accessory rights.
• Claiming from a good-faith assignor for the debtor’s insolvency without having stipulated it and without it being prior and public.
• Leaving the duration of that solvency guarantee unagreed and claiming it after the year.

These are the government pages this guide is based on.

• Poder Judicial de Puerto Rico

  Poder Judicial

  bvirtualogp.pr.gov