Bankruptcy proceedings

The Provincial Court (AP) of Barcelona has dealt with a case where it was debated whether a bankruptcy proceeding could beterminated(due to "insufficient assets") when the debtor, despite having debts, receives over 2, 300 euros each month,well above the minimum wage.

The case reached the courts because a lower court hadclosed the bankruptcy proceeding stating that the debtor did not have enough assets (property or money to pay the debts) and only had one creditor. According to this ruling, since the debtor was receiving a relevant amount of money monthly,they were no longer insolvent and the conditions for the bankruptcy proceeding were not met.

However, the AP recalls thatcertain requirements such as having more than one creditor and insolvency itselfhad been established when the proceeding was declared andcannot be questioned later on, except in very clear situations. Additionally, even if only one overdue debt is recorded, there are usuallyother periodic obligations(such as supplies), so it cannot be simply stated that there is a lack of plurality of creditors.

Regarding theincome, the PA clarifies that the amounts that the debtor receives each month above the "non-seizable" amount (the minimum wage plus certain bonuses)are part of the estate that can be used to pay debts. In other words, the money that can be seized from the debtor mustbe added to the bankruptcy estate.

Therefore, although havingrecurring income does not always mean that there is sufficient estate, it does happen when the seizable portion of that incomeallows for some payments. In this case, since it was not proven that the seizable portion was small, the PA states that the bankruptcycannot be processed as "assetless", and therefore, the debtor cannot benefit from the fast debt relief reserved for assetless bankruptcies. Anordinary bankruptcy should have been filed, with a bankruptcy administrator and the submission of a payment plan.If you find yourself in a situation similar to the one described, our professionals can provide you with the necessary assistance and take any actions that may be relevant.