Toni Freixa
Lawyer
Despite the fact that the Bankruptcy Proceeding Law is clear about the purpose of requesting the voluntary arrangement between creditors, sometimes, businessmen are reluctant to the adoption of this measure due to the fact that it can be identified as a step before of the closure of their business. The real effects of bankruptcy proceeding involve a withdrawal of the actions that creditors hold in front of the insolvent party and, at the same time the adoption of the measures in order to carry on with the business activity.
Thus, the bankruptcy proceeding implies the immediate suspension of executive proceedings, either judicial or administrative. Even mortgage executions are suspend, whichever phase of procedure are, for one year. Regarding administrative compulsion and labor executions will follow their procedure unless the impeded goods are indispensable to carry on with the business activity. Other legal proceedings against the insolvent party, if they are already ongoing, will follow until the judged launch a sentence but it cannot be executed while bankruptcy proceeding lasts.
On the other hand, bankruptcy proceeding does not concern the enforced contracts with mutual pretentions which are not yet fulfilled, which credits will be paid against the mass. In this respect, clauses which state that the contract will be terminated due to the bankruptcy are null and void. Thus, labor and administrative contracts will be enforced, which should be fulfilled against the mass.
The credits which are expired and liquid on the date of the request of the bankruptcy will be considered as a part of the insolvency proceeding or bankruptcy assets (with special privilege, simply privileged, ordinary or subordinates). The credits which depend on a certain facts are named contingent and the ones which are accrued after the date of the declaration of bankruptcy are called credit against the mass (or passive mass of bankruptcy).
The guaranty to the insolvent party is that according to the insolvency administrator report, once the contesting are solved, the bankruptcy assets will be an object of an agreement between the insolvent party and creditors in order to meet their rights according to what is foreseen in the Law. The credit against the mass will be met during the bankruptcy proceeding. Hence, the declaration of bankruptcy allows arranging the fulfillment of obligations and it is an effective tool to skip situation of a provisional insolvency.
