BANKRUPTCY LAW Pre-bankruptcy and bankruptcy advice

As business experts, special mention must be made regarding bankruptcy law. The work of our professionals focuses both on pre-bankruptcy advice, carrying out the necessary reviews to detect and assess risks and propose appropriate measures to correct them, as well as bankruptcy advice. The latter involves advising both the bankrupt in claims, agreements, settlement plans and bankruptcy incidents, with particular attention given to evaluating the possible liability of the administrative bodies, and also the creditors, in the communication and recognition of the credit provided and possible bankruptcy incidents, along with their monitoring and all associated procedures until objectives are achieved.

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The work of our professionals focuses on both pre-bankruptcy and bankruptcy advice.

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PRE-BANKRUPTCY ADVICE

DETECTION AND ASSESSMENT OF RISKS

BANKRUPTCY ADVICE

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PRE-BANKRUPTCY

A pre-bankruptcy out-of-court work-out is one of the options for dealing with an imminent insolvency situation. Two mechanisms exist - the out-of-court payment agreement or the refinancing agreement. Communicating the start of any of the phases implies that executions against the debtor's assets may not be initiated and those initiated will be suspended. The following outline summarises what is implied by pre-bankruptcy: 

BUDGETS

Notify the court of the start of negotiations for a refinancing agreement or a request for an out-of-court settlement of payments.

LIMITS

The debtor may not make a new request within one year of the previous communication.

EFFECTS OF ARTICLE 5B OF THE BANKRUPTCY LAW

EFFECTS

Executions may not be initiated and those initiated will be suspended on essential assets or singular executions.

DURATION

A maximum of three months from its communication. In the following month, if agreement is not reached, a bankruptcy claim must be presented.

This outline shows the out-of-court payment agreement process:

Applicants (insolvent) (ex. Art. 231 LC)
  • Individuals: liabilities less than €5M
  • Companies: with sufficient assets to honour the agreement.
    • REQUEST (ex. Art. 232 LC)
  • Inventory with cash, assets, property, rights, income...
  • List of creditors.
    • Effects of proceedings (ex. Art. 235 LC)
  • Debtor: continues in business.
  • Creditors: they will not be able to initiate executions, those initiated are suspended and no interest is accrued.
    • Bankruptcy mediator (ex. Art. 233 LC)
  • A bankruptcy mediator will be appointed to prepare the agreement proposal and mediate in the meetings.
    • Meeting of creditors (ex. Art. 234 LC)
  • The bankruptcy mediator will call the meeting.
  • They will prepare a proposal for agreement and send it to creditors.
    • Consecutive bankruptcy (ex art. 242 LC)
  • When the agreement fails, the bankruptcy proceedings go ahead.
  • If it is classified as unforeseeable, it implies the exoneration of the unsatisfied liability.

    • Below is a simple introduction to the refinancing agreement:

    Refinancing agreements

    Pre-bankruptcy mechanisms to face business crises.

    Effects of communicating the start of negotiations to the court.
    (ex. art. 5b LC)

    For 3 months:
    1. Executions cannot be initiated and those initiated will be suspended on essential assets or singular executions

    General
    (ex. Art. 71b LC)

    Agreements that do not refer to financial liabilities.

    Specific
    (ex. DA 4ª LC)

    Refinancing agreements for financial liabilities.

    Groups

    Responsible for at least 3/5 of the liability. They must involve an increase in the available credit or modifications to the obligations.

    Individuals

    Specific action on the part of the debtor with its creditors to increase assets.

    1. Require judicial authorisation.
    2. Must underwrite at least 51% of the liability.

    There is the possibility of extending the effects of the agreement to creditors who did not sign it.

    SECOND OPPORTUNITY LAW

    The second opportunity is another of the mechanisms that regulates our rights so that natural persons can manage their debts and have another chance following insolvency. 

    The process consists of the bankruptcy of a natural person, which must be properly prepared, including activating prior mechanisms, to achieve the objective of exoneration of the liability; that is, that the debtor is exempt from debts, under certain conditions, and is granted that longed for second chance. 

    In this table we summarise everything involved. 

    Second chance mechanism in Spain

    What it consists of

    • It involves the granting, upon request, of the exoneration of the unmet liability (ordinary and subordinated credits), once administration is concluded.

    Creditors:

    • The application is forwarded to creditors who may oppose.
    • Vis-à-vis joint and severally bound guarantors or guaranteeing parties, the credits remain unaffected.
    • They may request revocation if the debtor is found to have concealed assets.
    • It involves the granting, upon request, of the exoneration of the unmet liability (ordinary and subordinated credits), once administration is concluded.

    Granting and effects:

    • If you can pay the credits in full in a one-off payment, the exemption is granted.
    • If you cannot pay them, a payment plan is prepared, over a maximum of 5 years, to pay the credits.
    • After the term of the payment plan is concluded, the debtor can request the granting of the benefit of exoneration.

    Good faith assumptions (requirement for benefit):

    • Bankruptcy declared unforeseeable.
    • Out-of-court settlement of payments attempted.
    • No conviction of property crimes.

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    For this reason, we invite you to contact us and tell us about your case so that we may give you a personalised response that is tailored to your needs.

    If you wish to know about our way of working, we will tell you about our methodology..

    “Los datos personales cumplimentados en el presente documento, así como los datos que nos suministren a lo largo de la relación con el presente DESPACHO se incorporarán a los ficheros de los que es titular SIRVENT & GRANADOS ABOGADOS, S.L.P., con la finalidad de prestarle el servicio o consulta jurídica solicitada.

    Asimismo, consiente expresamente que los datos de salud, afiliación sindical, creencias, origen racial o étnico, vida sexual, ideología o religión necesarios para la prestación del servicio jurídico se incluyan en nuestros ficheros. Los datos que nos suministren podrán ser comunicados a colaboradores y procuradores, elegidos por el presente despacho, cuando dicha cesión de datos sea necesaria para prestarles dichos servicios, cediéndose en tales supuestos, única y exclusivamente los datos estrictamente necesarios.

    Finalmente, le informamos que los datos de carácter personal que figuran en el expediente se conservarán con la finalidad de mantenimiento de un histórico de casos y expedientes tramitados por el despacho.

    El suscriptor del presente documento garantiza la veracidad de los datos personales y de salud aportados. Asimismo, se compromete a comunicar cualquier modificación que se produzca en los mismos.

    En el caso de que en el presente documento o en la documentación aportada se incluyan datos de carácter personal de otras personas físicas distintas del suscriptor del presente documento, el suscriptor deberá, con carácter previo a su inclusión, informarles de los extremos contenidos en los párrafos anteriores.

    De acuerdo con la Ley Orgánica 3/2018, de 5 de diciembre. Vd. tiene derecho en cualquier momento a acceder, rectificar, cancelar u oponerse al tratamiento de los datos referentes a su persona incluidos en nuestras bases de datos dirigiendo un escrito a SIRVENT & GRANADOS ABOGADOS, S.L.P.: C/ Aguere, 15 - Edificio Torres de Cristal (Torre 3) - Local Bajo B; 38005 (Santa Cruz de Tenerife); adjuntando copia del DNI por ambas caras y dirección a efectos de notificación.”