Brazil's Supreme Court Authorizes Banks to Reclaim Properties from Debtors without a Judicial Decision

Most of the justices followed the vote of the rapporteur Luiz Fux, who stated that extrajudicial execution does not exclude judicial control


On Thursday (26), the Supreme Federal Court (STF) validated the possibility for banks and other financial institutions to take properties involved in financing processes with accumulated debts without a judicial decision. There were eight votes in favor of the winning argument and two against. Most of the ministers followed the vote of the rapporteur Luiz Fux, who stated during Wednesday's session (25) that extrajudicial execution does not exempt judicial control, as debtors can, in case of any irregularity, approach the court and protect their rights.

BRASILIA, DF, BRASIL, 27-09-2023: Session of the Supreme Court (Foto: Pedro Ladeira/Folhapress, PODER) - Folhapress

In this case, the Supreme Court discussed a 1997 law that established fiduciary alienation of properties, allowing the purchased property to be used as collateral for financing. In fiduciary alienation, the property remains in the name of the financial institution until the debt is fully paid. The buyer has the right to use the property until the end of the financing period. After settling the debt, the borrower needs to go to the registry office to transfer the property to their name. According to the norm, if the payment is not made throughout the contract, the bank can resume the process extrajudicially. In other words, through the registry office without the need for judicial interference.

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