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Determining Debt Allocation: Imputation Rules in Payment

When making payments towards multiple debts, debtors have the right, as outlined in Article 1253 of the Civil Code, to declare which specific debt they intend to discharge. However, it is crucial that the imputation is determined at the time of payment to ensure its validity and applicability.

Creditor-Designated Imputation: Article 1255 of the Civil Code

In cases where no explicit instructions are provided by the debtor, Article 1255 of the Civil Code grants the creditor the authority to determine the imputation of the payment in the receipt issued to the debtor. Consequently, the debtor cannot later request a different imputation unless there is evidence of fraud or surprise on the part of the creditor.

Default Imputation: Article 1256 of the Civil Code

In situations where neither the debtor nor the creditor has explicitly specified the imputation, Article 1256 of the Civil Code comes into play. According to this article, the payment must be imputed to the debt that the debtor had the greatest interest in discharging at the time, among the debts that are equally due. If there is no clear distinction in interest, the payment is imputed to the debt that is due, even if it is less burdensome than the other debts. In cases where the debts are of equal nature and interest, the imputation is made to the oldest debt. If all factors are equal, the imputation is done proportionally.

Ensuring Fair Allocation and Legal Clarity

The imputation rules regarding debt payments provide a framework for fair allocation and prevent disputes between debtors and creditors. By allowing debtors to specify the intended imputation, Article 1253 recognizes their right to manage their financial obligations strategically. Similarly, Article 1255 enables creditors to determine the imputation when debtors have not provided explicit instructions, ensuring that debtors cannot later contest the allocation.

Article 1256 establishes a default imputation rule to guide payment allocation in cases where neither party has designated the imputation. This provision aims to promote fairness by considering the debtor’s interest, the burden of the debts, and the chronological order in which they were incurred.

Overall, these imputation rules within the Civil Code provide a clear framework for debt payment allocation, preserving the rights and obligations of both debtors and creditors. By adhering to these rules, parties involved can prevent misunderstandings, promote transparency, and maintain the integrity of financial transactions.