Insolvency Law at Paraguay
Paraguay's insolvency framework is primarily governed by Ley Nº 154/69 – Ley de Quiebras, enacted on December 13, 1969. This law provides a comprehensive legal structure for addressing both corporate and personal insolvency, including liquidation, creditor rights, and debt restructuring mechanisms.
🏛️ Legal Framework
Ley Nº 154/69 – Ley de Quiebras
This law outlines the procedures and regulations for declaring and managing insolvency in Paraguay. Key provisions include:
Initiation of Insolvency Proceedings: Insolvency can be declared by the debtor, their heirs, or one or more creditors. Creditors with real guarantees or privileges over specific assets may request insolvency if they demonstrate that the secured assets do not cover the debt and renounce their privilege or guarantee. However, certain familial relationships are prohibited from initiating insolvency proceedings against each other, such as spouses or direct relatives. (Justia Paraguay :: Nacionales > Leyes > Ley 154 :: Ley de Paraguay)
Insolvency of Deceased Debtors: If a debtor dies insolvent, their heirs or creditors may request the declaration of insolvency within six months of the death. The declaration results in the separation of the deceased's estate for the benefit of creditors. (Justia Paraguay :: Nacionales > Leyes > Ley 154 :: Ley de Paraguay)
Insolvency of Companies: The law applies to various business entities, including corporations and limited liability companies. It allows for the initiation of insolvency proceedings during liquidation and addresses the insolvency of irregular companies. (Ley Nº 154 / LEY DE QUIEBRAS)
⚖️ Insolvency Process
1. Initiation of Insolvency
Insolvency proceedings can be initiated by:
Debtor's Request: The debtor may voluntarily request insolvency.
Creditor's Petition: Creditors may petition for the debtor's insolvency.
Legal Representatives: In the case of companies, legal representatives may initiate proceedings.
The court evaluates the request and determines whether to admit the insolvency petition.
2. Appointment of a Trustee (Síndico)
Upon admission of the insolvency, a trustee is appointed to oversee the process. The trustee's responsibilities include:
Asset Management: Managing and liquidating the debtor's assets.
Creditor Meetings: Organizing meetings with creditors to discuss the insolvency process.
Debt Settlement: Distributing proceeds from asset liquidation to creditors.
3. Debt Restructuring (Concordato)
The law provides for a debt restructuring mechanism known as "concordato." This process allows the debtor to negotiate with creditors to reach an agreement on debt repayment, which may include:
Debt Reduction: Partial forgiveness of debt.
Extended Payment Terms: Longer periods to repay debts.
Interest Rate Adjustments: Modification of interest rates on outstanding debts.
The concordato must be approved by the court and is binding on all creditors.
4. Liquidation and Distribution
If a debt restructuring agreement is not reached, the debtor's assets are liquidated. The proceeds are distributed to creditors according to the following priority:
Secured Creditors: Creditors with collateral or guarantees.
Preferential Creditors: Employees and tax authorities.
Unsecured Creditors: General creditors without collateral.
Shareholders: Any remaining funds are distributed to shareholders.
The trustee oversees this process to ensure fair distribution.
🧾 Key Considerations
Legal Representation: Parties involved in insolvency proceedings should seek legal counsel to navigate the complex legal landscape.
Timely Filing: Creditors must file their claims within the stipulated time frame to ensure consideration.
Compliance with Regulations: Companies and individuals must adhere to the provisions of Ley Nº 154/69 to avoid legal complications.
📚 Further Reading
Ley Nº 154/69 – Ley de Quiebras
Justia Paraguay – Ley 154
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