What is Debt Prescription?
Debt prescription is a legal mechanism that cancels the creditor’s right to demand payment through legal means, but it does not eliminate the debtor’s obligation. Personal loans, salary loans, credit cards, or mortgages are subject to prescription, although the timeframes vary depending on the type of product and actions taken by both parties.
How Long Does it Take for a Debt to Prescribe in Mexico?
According to Gerardo Rosales, a commercial lawyer, debts backed by a promissory note typically prescribe in three years from the document’s expiration. If the debt lacks a promissory note, such as in many credit cards or personal loans, the timeframe extends to ten years. It’s crucial to know that these time limits can restart if the debtor acknowledges the debt in any way, such as through a partial payment, phone call, email, or any communication accepting the debt.
What Can Stop or Renew Debt Prescription?
The prescription process halts when the creditor initiates a legal lawsuit. If more than 180 days pass without any judicial activity, the creditor’s right to demand payment through that route expires. Ángel González, General Director of the National Organization in Defense of the Debtor, points out that the prescription period also restarts if the debtor accepts the debt’s existence in any way or makes a partial payment.
Does the Debt Disappear When it Prescribes?
No. While a prescribed debt does not mean it no longer needs to be repaid, the creditor loses their right to demand payment legally. However, they can still attempt collection outside of court under the rules set by the Comisión Nacional para la Protección y Defensa de los Usuarios de Servicios Financieros (Condusef). In secured debts like mortgages and auto loans, if prescription occurs, the right to claim that security before a judge is also lost.
Key Questions and Answers
- What is debt prescription in Mexico? Debt prescription is a legal mechanism that cancels the creditor’s right to demand payment through court, but it doesn’t eliminate the debtor’s obligation.
- How long does it take for a debt to prescribe in Mexico? Debts backed by promissory notes usually prescribe in three years from the document’s expiration. For debts without a promissory note, like many credit cards or personal loans, the timeframe extends to ten years. Acknowledgment of the debt by the debtor can restart these time limits.
- What can stop or renew the debt prescription process? The prescription process halts when a creditor initiates legal action. If there’s no judicial activity for more than 180 days, the creditor loses their right to demand payment legally. Acknowledgment or partial payment by the debtor can restart the prescription period.
- Does a prescribed debt disappear? No. A prescribed debt still needs to be repaid, but the creditor loses their legal right to demand payment. They can still attempt collection outside of court, and in secured debts, the right to claim that security before a judge is lost.
