PEC dos Precatórios: is it worth selling your INSS arrears?

The PEC dos Precatórios, under discussion in the National Congress and seen as essential by the Bolsonaro government for the payment of the Auxílio Brasil, is another point of attention for INSS (National Social Security Institute) creditors who await the arrears of revisions or concessions benefits gained in court.

Whoever wins a review or concession action against the INSS with an amount above 60 minimum wages (equivalent to R$ 66,000 in 2021) receives the arrears through a precatório. Currently, the INSS orders are being paid on time, and the money falls into the creditor’s account within two years after the payment order from the judge of the action.

In this case, payment is made once a year and is entered into the Budget set by the federal government. However, if the PEC, which has already passed the first vote in the Chamber of Deputies, is approved as it is, specialists in social security law believe there are chances of the payment being postponed.

If you do not want to wait, the creditor can choose to sell its precatório to specialized companies and individuals, as has been the case for years. There is no legislation in Brazil that prohibits the trade of this debt. However, to receive the money ahead of schedule, the creditor must be willing to pay the discount price (discount on the total amount), that is, to sell for an amount much lower than what he would receive from the agency, whether federal, state or municipal.

For federal court orders, such as INSS arrears, companies pay 65% ​​to 85% of the net value of the corrected debt, depending on the wait. But with the possibility of the Precatório PEC coming into force, the negotiation is less advantageous.

Companies that buy court orders fear that the federal government will default on creditors and tend to offer less for these debts at the moment. The greater the value of the precatório, the greater the insecurity.

Although lawyers and the precatório market are in doubt about the future, the federal government has never defaulted on or paid the INSS arrears money after the deadline. Therefore, before selling the debt, the lender must make sure that it is your best option now.

The first step is to contact the attorney for the case that generated the precatório to find out what the current debt amount is and where it is in the payment queue. The professional is the ideal person to advise on the decision to sell or not the precatório. Regardless of the lender’s choice, he will receive your fee. But, the lawyer cannot buy his client’s court order. This attitude violates the code of ethics of the OAB (Ordem dos Advogados do Brasil).

Anyone who is close to turning 60 or 80 years of age or has been diagnosed with a serious illness, such as cancer, should verify that it is not worth waiting to enter the priority payment queue for court orders, a right guaranteed by the Constitution.

The lender must still consider your current personal situation. If you are financially stable, waiting for the precatório payment can be seen as an investment for the future. If you are in debt with very high interest, about to lose your home or in health treatment, the sale of arrears can avoid greater losses.

If you decide to sell the precatório, the lender must make sure that the buying company is trustworthy and is offering the best value. It is common for creditors to experience harassment, especially by telephone and letter, from buyers. The ideal is not to give in to pressure. The guarantee of the best deal lies in researching the company’s suitability through its CNPJ (National Register of Legal Entities) and consumer protection agencies.

“The process is public. So the interested party sees the value of the precatório and locates the creditor to make an offer. Sometimes, he offers the face value, without any correction, so it is important for the creditor to consult his lawyer to find out how much, in fact, it has to receive from the government”, warns the lawyer Messias Falleiros, member of the OAB-SP Precatório Commission.

Under no circumstances should the interested company ask for an advance payment to keep the precatório. This offer is a common scam in the square. Serious companies do not ask the title owner to advance amounts.

“They tell the creditor that he will never receive the precatório, which is not true. If the harassment bothers him, the creditor can complain to Procon and register the phone number on the Não Me Perturbe website. If you suspect it is a scam, hang up the phone and do not give any information”, says the lawyer Diego Cherulli, vice president of the IBDP (Brazilian Institute of Social Security Law).

Sale of court orders | understand how it works

• Receiving the payment of a court order can take anywhere from a year to decades, depending on the debt and budget of each government
• The Precatório PEC, under discussion in the National Congress, has moved the market for the sale of precatório, demanding even more attention from those who intend to sell the debt
• In addition to deferring the payment of some court orders, the PEC offers the opportunity for the creditor of a federal court order to receive payment at a 40% discount to reduce the wait

the payment queue

• To be a precatório, the debt must have a minimum value, which varies according to the debtor agency (Union, states and municipalities)
• In the case of judicial debts from federal government agencies, the initial value to be a precatório is 60 minimum wages
• This is the limit that applies to those who sued the INSS for review or granting of benefit

how to receive

• To have the money, the action must be completed, with no possibility of more resources
• Although there is the premise that court orders take a long time to be paid, the federal governments line of court orders is up to date and is the fastest moving so far
• This queue is composed, in its majority, of debts of late amounts of retirement, pensions and other INSS benefits granted or reviewed in court
• It is possible to obtain information on the internet, on the page of the Regional Federal Court responsible for the location where the action was initiated
• Those who started the process in the state of São Paulo, for example, must consult the TRF-3 website (Federal Regional Court of the 3rd Region)

What are the rules?

• Under the current rule, court orders registered between July 2 of one year and July 1 of another are obligatorily paid by December 31 of the following year
• Debts from municipal and state agencies, however, can take two decades or more to be paid
• The state of São Paulo, for example, is paying off court orders released for payment in 2006
• However, in the last year and a half, the state government managed to pay its debts from 2004 to 2006

Is it possible to sell a court order?

• Yes, because there is no legislation that prohibits a citizen from selling what belongs to him.
• But, before making this decision, it is necessary to know well what you are giving up
• The ideal is to talk to the lawyer of the cause that generated the precatório to be guided on the correct amount due and the best possibilities

Attention! Some companies that buy court orders inform creditors of the face value, nominal, without monetary correction or interest. Run away from those.

Discount (discount) at the time of sale

• In the case of precatório, in addition to giving up part of the security’s value, the sale results in the loss of part of the interest and monetary correction
• For federal court orders, such as INSS arrears, companies pay from 65% to 85% of the net value of the corrected debt, depending on the waiting period
• For municipal and state court orders, the buyers market pays between 10% and 35% that the beneficiary would receive from the debtor agency. That is, discount of up to 90%

Analyze if the sale pays off

• The sale of any property is a personal decision and the economic conditions of the creditor or family must be considered.
• The creditor must verify with his lawyer his specific situation in the queue and that of his precatório
• Losing part of the value of the precatório with the sale to pay off high interest debts, avoiding the loss of the property where you live, for example, and dealing with health issues can be decision factors
• Whoever has a stable financial condition should consider keeping the precatório as an investment to enjoy in the future

Stay tuned! If the PEC for Precatório is approved, the federal precatório should be devalued, as the uncertainty about the payment term will increase

Receiving Priorities

• The creditor who is about to turn 60 or 80 years of age should be aware, as they have priority in the precatório payment queue and this will not change with the PEC
• If you are thinking about selling the debt and about to have an anniversary, check with the lawyer if it is not worth it to join the priority queue and receive 100% of the amount owed
• Anyone with a serious illness, such as cancer, for example, is also entitled to join the priority queue

CARE WHEN SELLING

1) Talk to your lawyer

• Whoever is in the precatório queue has a lawyer appointed to take care of the process
• The lawyer does not lose money on the deal, as the buyer must preserve the fees
• The consultation with the professional is for him to guide and make sure that his client will not be harmed

2) Trade only with recommended companies

• There are some companies in the country that specialize in buying court orders, which are resold to investors
• As there is no regulatory body in this market, the interested party will have to research on their own
• It is essential to check if there is a CNPJ (National Register of Legal Entities), if the company has a registered office, has employees who answer phone calls and what is its reputation in consumer protection agencies

3) Registered contract

• Before closing the deal, the company interested in buying the title will request a simple power of attorney with the specific purpose of having access to the original process and the precatório
• The last step of the process will be the signature, at the notary’s office, of the purchase and sale agreement and public deeds to transfer the ownership of the credit
• Only sign these papers after confirming that the combined amount is already deposited in your account!

4) Don’t give in to harassment

• Those awaiting payment of a court order usually receive calls offering to buy the debt
• The creditor must not give in to pressure from negotiators who charge very high fees to anticipate INSS court orders
• Taking advantage of the population’s lack of knowledge on the subject, scammers say that the amount will take a decade to be paid. This is not true
• So far, the federal government has never defaulted on or paid the INSS precatories after the deadline

Anticipated value hit

• Serious companies that buy court orders do not ask the titleholder to advance cash amounts
• Whoever sells a court order must receive amounts and not pay the advance of part of the debt

Sources: Messias Falleiros lawyers, member of the OAB-SP Precatório Commission; Roberto de Carvalho Santos, from Ieprev (Institute of Social Security Studies) and Diego Cherulli, vice president of the IBDP (Brazilian Institute of Social Security Law); and South Investments