When people want to start a judicial collection process, they often ask what means they have in order to guarantee payment in an eventual conviction, in other words, how to ensure that the amount to which the defendant is sentenced will actually be collected and if it’s not going to be just a paper conviction.

Now, for this our legislation provides us with different alternatives according to each case. For example, if the debt comes from a mortgage or a pledge, this debt is already properly guaranteed with an asset, whether it is real estate (a piece of land, a house, etc.) in the case of the mortgage, or a movable asset (a car, a motorcycle, etc.) in the case of a pledge loan.

This means that in the process said collateral will serve to be executed through the figure of the auction and with what is obtained in said auction the debt that is pending is settled.

In a similar way, other types of judicial collection processes, such as those based on enforceable titles (promissory notes, bills of exchange, etc.), although it is true that they are not guaranteed in a preferential manner with a specific asset, allows to request a seizure on the assets that the debtor may have, in this way once the process is finished and in case the debtor does not comply with making the corresponding payment, they can be auctioned off so that the debt is paid off with the proceeds of the auction.

But now, many times creditors wonder what happens in those cases in which a good goes up for auction, however, at the time of the auction there are no bidders and consequently there is no position (that is, there are no offers).

This, according to Costa Rican doctrine, could be defined as a failed auction since by virtue of the foregoing it fails and the auction is not held, although it is understood that it should be held.

In itself, the act gathers all efficacy, but it does not reach its goal , the objective for which it was born, due to the lack of the third party called to participate and make the necessary offer and acquisition of the good.

The Civil Procedure Code, in article 161, mentions the following:

“If there is no bidder in the first auction, the second auction will be held after a period of not less than five days has elapsed, lowering the base by twenty-five percent (25%) of the original. If there are no bidders in the second auction either, a third auction will be held within a period of no less than five days. The third auction will begin with twenty-five percent (25%) of the original base and in it the bidder must deposit its entire offer. If there are no bidders in the third auction, the goods will be considered awarded to the performer, for twenty-five percent (25%) of the original base.”

The same Code, in article 162, indicates that:

“If the best bidder does not consign the price within the indicated period, the auction will be deemed non-subsistent. Thirty percent (30%) of the deposit will be delivered to the executors as fixed compensation for damages and the rest in credit payment to the executing creditor of preferential degree. When there are several executing creditors of overdue credit, the amount corresponding to damages will be turned over to all of them in equal parts. Once the unsubstantiation of the auction has been declared, it will be ordered to hold it again and the deposit to participate will be the entire base.”

It is important to take this into consideration, since the purpose of the auction is for the executing creditor to obtain payment in cash for the obligation that the executed debtor failed to pay; however, it is necessary to take precautions in the event of a failed or non-substantial auction, since this will delay the receipt of the cash to the creditor and the latter would be awarded the property(s) according to each case for 25% of the original basis.

This means that the asset must be kept, which will serve to cover 25% of the original base, so the rest of the debt would remain for collection. The creditor may sell it if he so decides or may keep it if it is of greater benefit to his interests.

If you require advice on judicial collection matters, ERP Lawyers puts at your disposal a team specialized in the matter. Do not hesitate to contact us!