Creditors’ Rights and Bankruptcy Proceedings
General Attendance of Credits
Debtor’s Responsibility
The debtor is responsible for fulfilling their obligations with all their assets, except those that are inalienable or exempt from attachment.
Meeting of Creditors
A meeting of creditors should occur if the debtor suspends payment of civil debts that are liquid and payable. The trial judge will declare bankruptcy through established formalities.
Debtor’s Disqualification
The debtor is disqualified from managing their assets and any other authority assigned by law. This disqualification applies to all their debts.
Mortgage and Pawnbroker Credits
Mortgage and pawnbroker credits will continue to accrue the corresponding legal interest, up to the value of the assets that guarantee them.
Agreements with Creditors
The debtor may enter into agreements with their creditors as deemed appropriate. However, these agreements must be formally constituted in a meeting of creditors. Private agreements between the debtor and any individual creditor are void.
Convention Proposal
The convention proposal will be discussed and voted upon. The voting decision requires a majority of creditors representing half plus one of the company, provided their interest in the proceedings covers three-fifths of the liabilities, net of the amounts allocated to mortgagees and pawnbrokers who have chosen not to participate in the proceedings.
Creditor Opposition
Within eight days of the meeting where the agreement was approved, dissenting creditors and those who did not attend may oppose its adoption.
Grounds for Opposition
- Defects in the procedures for convening, holding, and deliberating the meeting.
- Lack of legal capacity or representation of any voter.
- Collusion between the debtor and one or more creditors, or among creditors themselves, to vote for the agreement.
- Fraudulent overstatement of receivables.
- Fraudulent inaccuracies in the inventory of the debtor’s assets or the trustee reports.
Consequences of Agreement Fulfillment or Failure
If the debtor fulfills the agreement, their obligations are terminated under the stipulated terms. However, if the debtor fails to comply in whole or in part, the creditors’ rights are reinstated for the unpaid amounts of the original credit. They may then request the declaration or continuation of the bankruptcy proceedings.
Creditor Rights After Bankruptcy
Unless expressly agreed otherwise, creditors retain the right, after the bankruptcy proceedings, to collect from assets acquired by the debtor subsequently, if the credit has not been satisfied.
Fraudulent Preference
If the agreement’s provision results in fraudulent preference between the creditor and the debtor, the preference is lost, unless the fraud originates solely from the debtor. In that case, the debtor is liable for further damages to other creditors and may also be subject to penalties for fraud.
Privileged Claims
Tax Debts
Tax debts will be paid preferably from the value of the assets that generated them.
Worker’s Compensation
Workers are not required to enter the bankruptcy proceedings to receive payment for wages or salaries earned in the last year, or for compensation.
Mortgage and Pawnbroker Claims
Mortgagees and pawnbrokers need not enter the bankruptcy proceedings to enforce their claims.
Order of Payment for Mortgaged or Pledged Property
- Expenses of the respective trial and those incurred in the sale of the goods.
- Costs of maintenance and administration of such property.
- Debt secured by the goods themselves.
Redemption of Mortgages and Collateral
The bankruptcy estate is entitled to redeem mortgages and collateral security charges on the debtor’s assets by paying the debts or a portion thereof. These assets then become part of the bankruptcy estate.
Separation of Property
Lenders who obtain the separation of property cannot participate in the heir’s bankruptcy proceedings if the separated property is insufficient to cover their debts.
Funds on Certain Preferred Property
The value of the following assets will be used for immediate payment:
- Debt for rescue expenses, with the value of the saved item.
- Debt incurred before the bankruptcy proceedings, specifically for work strictly necessary for the conservation of certain property.
- Allocations for the price of construction work.
- Provision of seeds, cultivation, and harvesting costs.
- Credit for freight, with the price of the goods carried, if in the creditor’s possession.
- Credit for housing.
- Credit of the lessor, with the price of attached movable property located within the leased property, or the price of the fruits of the respective harvest if the property is rural.
- Allocations registered in the property registry under court order for seizure, attachment, or execution of judgments on the noted property, and only for subsequent claims.
Funds of First Class
- Court costs.
- Costs of strict maintenance and property management of the bankruptcy proceedings.
- Funeral expenses of the debtor, their spouse, and children under their custody, provided their social standing and lack of personal assets justify it.
- Expenses of the last illness of the persons mentioned in the preceding section.
- Food credit provided to the debtor for their livelihood and that of their family in the six months prior to the bankruptcy proceedings.
- Liability covering funeral or cleansing expenses and food allowances due to families of victims.
Funds of Second Class
- Allocations from the treasury not covered by Article 2149 of this code and credits referred to in section V of article 2091 of the same, which have not been guaranteed in the manner prescribed therein.
- Provision of public services or private charity.
Funds of Third Class
After satisfying the aforementioned credits, credits documented by deed or other authentic document will be paid.
Funds of Fourth Class
Credits documented by private paper will be paid.
Remaining assets will be used to pay all other claims not covered by the above provisions, pro rata and regardless of dates or origin of funds.