Italian Civil Code prohibits automatic transfer of collateral to creditors

Under Article 2744 of the Italian Civil Code, the prohibiton of the 'commissory pact' ensures that a creditor cannot automatically become the owner of a mortgaged or pledged asset if a debtor fails to make a payment by a set deadline. This legal safeguard is designed to protect debtors in financial distress from losing assets that hold significantly higher value than the debt owed.

The prohibition applies to agreements made at the inception of the debt as well as those entered into later when a debtor is already facing economic difficulties. Italian jurisprudence maintains that this rule prevents private shortcuts to asset seizure, ensuring that all creditors are treated equitably through official state procedures.