Over the past week we were once again confronted with news that reveals a scenario increasingly present in the lives of Brazilian companies and families: high levels of debt and the growing difficulty of meeting financial obligations.
Casas Bahia filed for judicial reorganisation. The group that controls Habib’s entered judicial reorganisation. Oi’s bankruptcy returned to the centre of the news, and Braskem began an out-of-court reorganisation.
Companies of completely different sizes, sectors and histories, but which help to illustrate the same reality: financial crises do not pick a size, a segment or a length of time in the market.
Situations of this nature clearly have causes of their own and cannot simply be compared with one another. Even so, high interest rates, restricted credit, shrinking margins, falling consumption and rising debt have been shaping a particularly challenging environment for anyone doing business in Brazil.
And it is precisely when financial difficulties appear that one of the business owner’s greatest concerns arises: how far can a company debt reach into their personal assets?
This is a question we hear frequently at the firm.
Faced with service of process in a collection suit, an enforcement proceeding, a freeze on bank accounts or a labour, tax or banking debt, one of the first questions is usually:
“Can the house I live in be attached to pay this debt?”
The answer, as is usually the case in law, depends on the circumstances. But there is an important protection set out in Brazilian legislation.
Law No. 8,009/1990 establishes that the residential property used as the family’s home is, as a rule, exempt from attachment. In other words, it does not answer for civil, commercial, tax, social security or other kinds of debt.
This is the well-known bem de família protection, the Brazilian equivalent of a homestead exemption.
That protection is naturally not absolute. The statute itself provides for exceptional situations in which attachment may occur, including, among others, debts relating to the financing used to acquire the property, alimony and child support, certain taxes levied on the property, a mortgage offered by the family, property acquired with the proceeds of crime, and obligations arising from a guarantee given in a lease agreement.
Outside the exceptions set out in the statute, however, the protection must prevail.
And a recent decision by the Superior Court of Justice (STJ) reinforced precisely that understanding.
In its ruling on AREsp No. 2,791,033/PR, the STJ’s Third Panel held unanimously that the mere fact that a property has a high market value does not authorise its attachment.
The case is particularly interesting because the lower court had allowed the judicial sale of a high-end property, on the argument that part of the proceeds could settle the debt while the remainder would be enough for the debtors to buy a new home.
The STJ rejected that solution.
For the STJ, the exceptions to protection from attachment listed in Law No. 8,009/1990 are exhaustive and must be interpreted restrictively. If the legislation sets no limit of value, location or building standard for a property to be regarded as a family home, it is not for the Judiciary to create that distinction.
In other words: a home does not cease to be protected simply because it is valuable, large or located in a sought-after area.
The precedent matters because it reaffirms something fundamental in moments of financial crisis: the existence of a debt does not automatically mean the loss of everything built over a lifetime.
Naturally, each situation has to be examined individually. It is necessary to understand the origin of the debt, who appears as the debtor, any guarantees that were given, the company’s corporate structure, the existence of other properties, any piercing of the corporate veil, and the circumstances in which a given asset was built up.
That is exactly where the difference lies between merely reacting to an enforcement proceeding and genuinely managing a crisis in legal terms.
In short, faced with so much news and such complex scenarios, I can say that our firm will continue to walk alongside each client, guided by strategy, ethics and responsibility.
Ricardo Petereit
