Insolvency proceedings in a situation of insolvency
The insolvency proceeding is a judicial procedure designed to solve the problems of insolvency and lack of liquidity of a business, a procedure that seeks on the one hand that the creditors can collect and on the other hand the search for solutions to achieve the continuity of the business and avoid bankruptcy.
Who is it aimed at?
It is aimed at both a natural person and a self-employed person, as well as a legal person (SMEs, large companies, etc.). Most of the insolvency proceedings requested in Spain. But more and more, it is the self-employed professionals
Insolvency proceedings help companies or firms and self-employed professionals in the event of insolvency to devise a mechanism for dealing with debts in the best possible way. By applying for insolvency proceedings, the matter is placed in the hands of a judge and debt executions can be stopped or debt payment can be reduced and postponed with the Commercial Court.
What does the procedure consist of when a natural person becomes insolvent?
In accordance with Law 22/2003 of 9 July, the Bankruptcy Law (Article 5), as a debtor you must apply for a declaration of bankruptcy within two months of the date on which you became aware or should have become aware of your insolvency. The application must be accompanied by various documents, including a reference to the debtor's marital status, i.e. whether the debtor is a married person; the report must indicate the identity of the spouse, with an expression of the economic regime of the marriage: community of property, separation of assets, community or any other regime.
The consequence of this is that in the case of a community of property society or any other form of joint ownership, the assets corresponding to that society will be included in the estate. In this case, the spouse of the bankrupt party may request the dissolution of the company or community of property and the judge may agree on the liquidation or division of the assets to be carried out in coordination with the agreement that has been approved or the liquidation that occurs.
What effects does the declaration of bankruptcy have on individuals?
With respect to individuals, whose mortgage credits or debts are the most common, the paralysis of the executions of real guarantees is produced. Creditors with a real guarantee may not initiate the execution or enforcement of the guarantee until an agreement is approved whose content does not affect the exercise of this right or one year has passed since the declaration of bankruptcy without the opening of the liquidation.
If the aforementioned actions have already been initiated, they will be suspended as soon as the declaration of bankruptcy is recorded in the corresponding procedure and may be resumed under the terms provided above. The accrual of interest on ordinary debts is suspended, but this suspension does not apply to secured loans, which will be due to the extent of the respective guarantee.
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