Brazil: STF confirms rule that allows banks to repossess properties without going to court in the event of default

 The Federal Supreme Court (STF) declared the constitutionality of the rule set forth in Law No. 9.514 of November 20, 1997 (Law No. 9.514/97), which allows banks or financial institutions to repossess properties in the event of default of home loan installments without the need to go to court. 

The discussion involves a law enacted in 1997 that created the fiduciary sale, a system in which the very property that is being purchased is offered as guarantee. 

In this modality, there is a provision in the agreement executed between the financial institution and the client, pursuant to which the client occupies the property until payment of the entire loan amount, but the bank will be the owner thereof and may repossess it in the event of lack of payment. Therefore, this procedure, which is provided by law, is not new and has been carried out since the rule was published in 1997. 

In the trial of the Appeal to the Federal Supreme Court (RE) 860.631, the STF only settled the understanding that the rule does not breach the principles of the due process of law and opportunity to be heard, as the citizens may go to court in case they understand that their rights have been harmed. 

In the case that originated the judgment, Caixa Econo mica Federal extended a loan to a client for him to purchase a property. The client agreed to pay the loan amount in 239 installments, but paid only the first 11 installments. For that reason, the bank instituted a procedure in the Register of Deeds to repossess the property and sell it in an auction. 

The debtor then challenged in court the repossession procedure instituted by the bank, claiming that the procedure could not be carried out in the Register of Deeds. The claim was denied in all levels of jurisdiction. 

The STF acknowledged the existence of general repercussion in the matter, which means that the judgment rendered by the Full Bench shall be replicated in similar cases in progress in other levels of jurisdiction. 

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For more information on the above or other matters, please contact Maristela SA Rossetti ( or Gilberto Rossetti ( 

This article is based on publicly available information and given for informational purposes only. It is not intended as legal advice foreign subsidiary as a comprehensive analysis of the matters referred to herein.