How to Manage Individual Insolvency Law in Colombia
August 17, 2018
Did you know that when natural persons experience a financial instability by problems that get out of their hands and cannot meet the agreements made with their creditors, the law also protects them? If you didn't know, this information will be useful!
Natural persons who are in a similar situation should seek for a Law Firms in Colombia, thereby receiving legal assistance and get to know the individual insolvency law in Colombia to take the next step in front of the financial issue. Before getting to the substance, let's define a concept: insolvency.
What is Insolvency?
This term is the state of a natural or legal person, who has incurred in default or has been delayed in payment agreements, previously set with a creditor due to an economic setback. Fortunately, according to the insolvency law, debtors can make a payment agreement with creditors to avoid administrative processes that risk their patrimony.
Now, let's learn about the individual insolvency law in Colombia.
The insolvency regime regulated under this law is intended to allow the debtor (natural person, non-merchant), take advantage of a legal procedure that allows them to include a payment agreement with their creditors, and meet as well with their obligations through a process of negotiation of debts in an out-of-court conciliation hearing. In addition, the economic insolvency regime always seeks to promote good faith in financial and commercial relations of the natural person.
The following are the principles of the individual insolvency law in Colombia, expressed in its 4th article:
- Universality: From the beginning of the process, the debtor's assets will be linked to the insolvency proceedings.
- Collective: All creditors of the debtor must attend the insolvency process.
- Equality: All creditors who attend the insolvency proceeding will receive a fair treatment, without prejudice to the application of the rules on the legal priority of credits.
- Effectiveness: Maximizing the results of the insolvency proceedings, for the benefit of both the debtor and its creditors.
- Celerity: Briefness in the terms foreseen in the insolvency process.
- Transparency: The debtor must provide the information requested by the conciliator or the judge in a timely, transparent and comparable manner, allowing access to it at any time during the procedure. For its part, the creditor must provide the insolvency procedure with all the information related to the credit, its interests and its guarantees.
- Good faith: The procedures during the insolvency proceedings must be invested in the good faith of both the debtor and the creditors and other intervening parties, who should promote the non-litigious, public and informed negotiation in relation to the debts and assets of the debtor.
- Publicity: Timely disclosure of the insolvency proceeding start, as well as the result of the debt negotiation process and the corresponding payment agreement or its failure, as the case may be, for the public information.
- Balance: The rights of the debtor and the creditor will be protected so that they can have equal access to the insolvency proceedings.
- Simplicity: The procedure must be simple and easy, unrelated to litigation, clear, precise and brief in stages and in proceedings.
- Prevalence of fundamental rights: During the insolvency proceedings will prevail the fundamental constitutional rights and substantial right over procedural rights.
Individuals and legal entities, national companies or branches of foreign companies that carry out trade activities in Colombia with a financial deficit that doesn't allow them to fulfill their economic obligations, can come under the insolvency law to remedy their inconveniences.
The article 531 of the individual insolvency law establishes the guidelines and parameters for natural persons to validate payment agreements between debtors and creditors. Debtors have the following alternatives to negotiate with creditors:
- Negotiate their debts through an agreement with their creditor to obtain the normalization of their credit relationships.
- Validate private agreements consented with their creditors.
- Liquidate their assets.
Only will initiate the first case, persons that have been in default with respect to two or more obligations in favor of two or more creditors, for more than 90 days; also, those who have against two or more administrative processes or coercive jurisdiction.
The second event may be processed by a person who is in default within 120 days, can request the validation of the private agreement that they have entered with a plural number of creditors, representing more than sixty percent (60%) of the total amount of the capital.
Finally, in the third event, the liquidation of the non-merchant natural person debtor will begin as a result of:
- Failure in the payment agreement negotiation.
- As a consequence of the nullity of the payment agreement, declared in the challenge process set in this Title.
- For breach of the payment agreement.
In conclusion, all natural or legal person who is in an economic emergency in which they can not pay their debtors can come over the protection of a law that helps them – through legal processes, to recognize payment plans to avoid administrative procedures against or penalties for non-payment.
For this type of issues, it is advisable to seek professional help of experienced lawyers, experts in individual insolvency law in Colombia to get the guidance you need during the process, and finally organize your finances to pay your creditors in new terms of time.
Whether you live in Colombia or abroad, and you are facing a difficult financial situation, with AGT Attorneys you can find the solution! We are a law firm in Bogotá with allies in other countries to provide you with a staff of well-trained lawyers that can help you to solve the problem. Call us at +57 310 5706331
or leave us a message in our contact
form and we will gladly assist you!
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