How Spain's insolvency proceeding works when someone cannot pay debts

Automatic summary, not yet reviewed

1. The law creates a single proceeding, the concurso, for any debtor, whether an individual or a company, replacing the old figures of quiebra and suspensión de pagos. It is declared when the debtor cannot regularly meet due obligations.
2. The debtor must file for the concurso within two months of learning of insolvency. Creditors may also file, citing facts such as general nonpayment or embargoes.
3. A commercial court judge (juez de lo mercantil) hears the case, with exclusive jurisdiction over actions against the debtor's assets, executions and precautionary measures. Jurisdiction is set by the place of the debtor's main interests.
4. The case is managed by a collegial body: a lawyer, an economist or auditor, and a creditor. Its main tasks are to oversee or replace the debtor and to draft the report with the asset inventory and the creditor list.
5. Claims are classified as privileged, ordinary or subordinated, sharply reducing earlier privileges. Tax and Social Security claims are privileged only up to 50% of their amount, and subordinated claims are paid last and get no vote at the creditors' meeting.
6. The declaration halts executions and collection actions against the debtor and suspends the accrual of interest. Contracts remain in force in principle, though they may be judicially terminated in the interest of the proceeding.
7. The case can end in a convenio, with write-offs of up to half and deferrals of up to five years, or in liquidation, where assets are sold and creditors paid by rank. Liquidation can be opened at the debtor's request, by a creditor, or by the court on its own motion.
8. The case is classified as fortuito (not the debtor's fault) or culpable. If culpable, due to fraud or gross negligence by the debtor or its managers, disqualification of two to 15 years and duties to return assets and pay damages are imposed.

Who it affects

• Individuals and companies unable to pay their debts: They must file within two months and are subject to oversight or suspension of control over their assets.
• Creditors: Individual executions are halted and they are paid according to the classification of their claims.
• Workers of insolvent companies: Recent wages and collective-dismissal compensation are paid with priority as claims against the estate.
• Directors and liquidators of companies: They may face asset freezes, disqualification and liability if the case is classified as culpable.

Words worth knowing

Concurso de acreedores

Spain's single court proceeding for a person or company that cannot pay its debts, aimed at paying creditors in an orderly way.

Masa activa y masa pasiva

The masa activa is the debtor's assets and rights; the masa pasiva is the debt owed to creditors.

Quita y espera

Quita means writing off part of the debt; espera means deferring its payment.

Créditos contra la masa

Claims paid before and ahead of others because they arise from the proceeding itself or from activity after the declaration.

Incidente concursal

A special, fast procedure used to resolve issues that come up during the insolvency case.

It summarizes the law as published in the BOE. It is written by artificial intelligence and may contain mistakes: the official text is what counts. Read the official text · How we make summaries