An Insolvency Claim (Formerly Known As Temporary Receivership In Spain) May Be Rejected, And In Many Cases, Is Not The Solution

17 December 2008

The last few months have witnessed a previously uncommon “phenomena”: an increase in the rejections of insolvency claims.

Spanish commercial courts, in view of the avalanche of bankruptcy filings, are rejecting or dismissing more and more claims each day due to, first and foremost, the inexistence of applicant solvency, assets, wealth, etc.

Facing the impossibility ab initio of reaching a settlement or liquidation, bearing in mind that these are the two possible avenues cited in the Insolvency Act, the legal proceeding is rendered meaningless.

If there is not even the possibility of subtracting or lowering, waiting for or postponing payments, and nothing to liquidate, then insolvency is not even declared; although all those who are unable to punctually meet their debt obligations can be considered legally obligated to file for insolvency.

From the strictly legal point of view, the dismissal of insolvency cases, on those grounds, is debatable.

In any event, when faced with a lack of assets and accumulated debts, it is advisable to file for insolvency even when materially unattainable assets, as frequently occurs, are declared and even in view of the possibility of rejection or dismissal. In conclusion, the Insolvency Act and bankruptcy proceedings can and should provide legal alternatives to analyze each case individually.

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