When a company in difficulty files for bankruptcy, any natural or legal person to whom the company owes debts is considered a creditor in bankruptcy.
To remedy this situation, the reform of the Insolvency Act launched in September 2022 establishes new debt cancellation mechanisms that aim to provide greater protection to both insolvency creditors and debtors.
With this objective in mind, the new Insolvency Law seeks an early solution and introduces mechanisms to resolve potential problems of default by companies as quickly and efficiently as possible. To this end, it gives the insolvency creditor the opportunity to participate in the negotiations to obtain its money. If both parties do not reach an agreed solution, the insolvency creditor must participate in the insolvency proceedings. In this respect, it should not be forgotten that in the insolvency proceedings it is also a priority to avoid, whenever possible, that the debtor loses all economic stability and is forced to liquidate his assets. If the debtor’s situation is insurmountable, insolvency law provides the necessary legal tools so that the debtor can make an orderly exit from the market by carrying out a liquidation with the least possible impact for all parties involved.
Rights of an insolvency creditor
The reform of the Insolvency Law grants more participation and prominence to the insolvency creditor, who has a series of legal protections. Their most important rights are:
- Submit all relevant documentation proving that a debt does indeed exist. All parties adversely affected by the debtor’s insolvency must be accredited in accordance with the law in order to participate in the negotiations. Ideally, this should be done through evidence showing the origin, nature, amount, acquisition and maturity dates of the claim.
- Apply for a declaration of insolvency of your debtor.
- If several of your debtors are part of the same corporate group, the insolvency creditor can apply for a joint court declaration.
- To be able to know the declaration of the commencement of the insolvency proceeding in a public manner in order to have the opportunity to participate in it. This pronouncement is called the order of declaration of insolvency and must be published in the Official State Gazette, in the Public Insolvency Register and in the Commercial Register. After this publication, creditors have a period of one month to file with the insolvency administration.
- Send by e-mail to the insolvency administration any documents it considers relevant to support the classification of the insolvency proceedings as guilty.
- Appearing in the qualification phase of the insolvency proceedings, even when the insolvency administrator issues the report on the insolvency proceedings, in order to defend this position.
- Creditors who have made allegations and whose debt exceeds one million euros or represents at least 5% of the total liabilities of the insolvent company may file a qualification report.
Obligations of creditors in bankruptcy
In order to carry out the insolvency proceedings, the insolvency creditors must comply with the following obligations:
- Respect what is established in the negotiations and do not demand other conditions.
- Accept payment from third parties to settle the debt. However, you are not obliged to subrogate the debt.
- Pay compensation to the debtor in the event of a change in the debtor’s address where payment is due.
Whether your company is about to file for bankruptcy or you are acting as a creditor in bankruptcy, the team of professionals at Confianz can advise you and help you to overcome these difficulties in the best possible way.