An unpaid mortgage-loan instalment is not an indivisible amount for priority purposes. Principal and interest must be separated and treated under their respective rules.
The Italian Court of Cassation clarified this in Order No. 26010/2026, concerning proof of a claim arising from a mortgage loan in insolvency proceedings.
The decision
The bank argued that interest already included in overdue instalments should enjoy mortgage priority together with principal. The Court rejected that argument: the accounting structure of an instalment cannot extend the security beyond the statutory limits.
Under Article 2855(2) of the Italian Civil Code, mortgage priority for interest is limited to the two years preceding, and the year current at, the date of the bankruptcy declaration.
Earlier interest is not automatically extinguished or no longer due. Where otherwise recoverable, it is excluded from mortgage priority and ranks as an unsecured claim.
Practical implications
The distinction directly affects how a proof of debt is prepared and reviewed. The creditor should identify separately the outstanding principal, the interest element of each instalment, the accrual period and the amounts claimed as secured and unsecured.
The amortisation schedule cannot be treated as evidence of one entirely secured item. Each instalment and its timing in relation to the opening of proceedings must be examined.
The current Insolvency Code
The order applies the former Bankruptcy Law. The criterion remains relevant under the current Italian Crisis and Insolvency Code through the relationship between Article 153 of that Code and Article 2855 of the Civil Code, subject to verification of the rules applicable to each case.
The principle
Contractual unity of an instalment does not entail unity of its insolvency ranking. The ruling concerns the priority attached to the claim, not the validity of the loan or, in principle, the existence of excess interest.