This document discusses key concepts in insolvency and bankruptcy law. It explains that insolvency law aims to [1] provide for the collective and orderly enforcement of debts when a debtor's assets are insufficient, to avoid conflicts between creditors, and [2] facilitate the restructuring of viable but distressed enterprises to preserve jobs and avoid unnecessary liquidation. The modern functions of insolvency law also include preventing further build-up of non-performing loans to improve financial stability. While restructuring benefits many stakeholders, it also presents risks like keeping unviable businesses operating and delaying reallocation of resources. Insolvency law for individuals pursues a "fresh start" but may encourage moral hazard or breach the principle
This document discusses key concepts in insolvency and bankruptcy law. It explains that insolvency law aims to [1] provide for the collective and orderly enforcement of debts when a debtor's assets are insufficient, to avoid conflicts between creditors, and [2] facilitate the restructuring of viable but distressed enterprises to preserve jobs and avoid unnecessary liquidation. The modern functions of insolvency law also include preventing further build-up of non-performing loans to improve financial stability. While restructuring benefits many stakeholders, it also presents risks like keeping unviable businesses operating and delaying reallocation of resources. Insolvency law for individuals pursues a "fresh start" but may encourage moral hazard or breach the principle
This document discusses key concepts in insolvency and bankruptcy law. It explains that insolvency law aims to [1] provide for the collective and orderly enforcement of debts when a debtor's assets are insufficient, to avoid conflicts between creditors, and [2] facilitate the restructuring of viable but distressed enterprises to preserve jobs and avoid unnecessary liquidation. The modern functions of insolvency law also include preventing further build-up of non-performing loans to improve financial stability. While restructuring benefits many stakeholders, it also presents risks like keeping unviable businesses operating and delaying reallocation of resources. Insolvency law for individuals pursues a "fresh start" but may encourage moral hazard or breach the principle
Jagiellonian University Krakow deudor estandar- relación con el acreedor
claim and liability
relevant only for the parties – usually no
effect for third persons
the creditor can take recourse to compulsory
enforcement → „grab law” – „first come – first served” insufficiency of assets for total satisfaction of all debts relevant for other creditors Any payment to one creditor means less assets for covering the debtor’s liabilities towards other creditors → CONFLICT BETWEEN CREDITORS Compulsory enforcement of a debt by one creditor harms all the other creditors on the margin: insolvency law or bankruptcy law? cf. Latin concursus creditorum / Italian banca rotta cash flow insolvency - the debtor has stopped to pay his debts as they fall due Attention – insolvency vs. illiquidity
balance-sheet insolvency - the debtor’s total
assets are worth less than his total liabilities collective debt enforcement: - including all assets of the debtor (→ insolvency estate) - in the interest of all creditors - within organized and orderly proceedings provided for by the law, aimed at achieving a just distribution among creditors
Two purposes: creditor satisfaction and maintaining
social peace (avoiding chaotic and/or violent acts by creditors)
ban on individual debt enforcement
impact on almost all legal relations of the debtor →
interactions with several branches of law etapas del procedimiento de insolvencia tradicional
taking over and assessment of the debtor’s assets by an
external administrator/liquidator verification of the debtor’s liabilities/admission of claims
possibility of invalidation of the debtor’s previous acts
detrimental to the creditors
winding-up (liquidation) of the debtor’s estate (mostly by
sale)
distribution of proceeds among creditors, depending on
priority rules and/or collateral
effect: winding-up of the debtor’s enterprise. If the debtor
is a legal person, in most cases it is dissolved. reestructuración, función moderna del derecho de insolvencia
• restructuring distressed but viable enterprises → corporate
rescue, „second chance” • avoiding unnecessary liquidation → preserving jobs, avoiding further insolvencies („domino effect”) • reducing losses of creditors and business partners → interest of a wider range of stakeholders involved • preventing a further build-up of non-performing loans → improving financial market stability • focus on preventive restructuring → early measures to prevent insolvency → applicable also in case of likelihood/threat of insolvency Como puede lograrse la reestructuración?
sale of the entire enterprise to a new investor
negotiating an arrangement between the debtor and his creditors enabling a continued functioning of the debtor’s enterprise. Varying complexity of solutions adopted. typical feature of the arrangement: the majority of creditors overrule the minority → the arrangement is binding also on the minority voting against it („hold-outs”) varying extent of the debtor’s divestment – from ‘debtor in possession’ to administration by an external administrator/liquidator Inconvenientes potenciales de la restructuración
• moral hazard?
• keeping in existence unviable enterprises / outdated
business models on „life support” → preventing or delaying reallocation of resources to more productive uses
• „creative destruction” as a fundamental mechanism of the
market economy Insolvencia individual
• insolvency of individuals vs. corporate insolvency
• „fresh start” – discharge of overindebted natural persons in order to reintegrate them into the economy and socjety • justification: social and economic reasons • potential drawbacks: moral hazard; a breach of the basic rule „pacta sunt servanda” • applicable to: consumers and/or entrepreneurs • one-off decision or (more often) after a specified „good behaviour” period or after partial payment of debts en definitiva, las funciones habituales de la ley de insolvencia
• creditor satisfaction - collective debt
enforcement
• restructuring
• „fresh start”/discharge (in case of individuals)
Th. Jackson, The Logic and Limits of Bankruptcy Law (any edition): - Introduction: The Two Roles of Bankruptcy Law - Chapter 1: The Role of Bankruptcy Law and Collective Action in Debt Collection [available on Google Books]