The objective budget for the declaration of bankruptcy

Abstract

Insolvency proceedings are a collective enforcement process governed by the principle of equal treatment of creditors (par conditio creditorum) for the ordinary creditors of the common debtor. This process excludes individual enforcement actions, specifically when such actions are insufficient to satisfy multiple creditors of the common debtor. If the debtor has only one creditor, insolvency proceedings are not applicable, and individual enforcement of their claims must be pursued. The commencement of insolvency proceedings is linked to the common debtor’s application for a declaration of insolvency. The debtor must file for insolvency in cases of current insolvency and may do so in cases of imminent insolvency. The debtor must prove their insolvency by demonstrating the external facts indicative of insolvency, as listed in Article 2.4 of the Consolidated Text of the Insolvency Law, or by providing any other relevant evidence. Current insolvency differs from imminent insolvency in that, in the former, the debtor cannot regularly meet their due obligations, while in the latter, the debtor anticipates that within the next three months they will be unable to regularly and punctually meet their obligations. This timeframe was introduced by Law 16/2022 and did not exist previously. If a creditor initiates insolvency proceedings, they must explicitly base their claim on one of the indicators of insolvency listed in Article 2.4 of the Consolidated Text of the Insolvency Law (which operates as a closed list for them).