Insolvency Lawyer in Portugal, Porto
Personal insolvency, discharge of remaining liabilities and company insolvency
Someone who can no longer pay what they owe and a company that must choose between recovering and closing are in different situations, each with its own route within the insolvency regime.
Situations in which we act
Individuals
- Debts you can no longer pay, with or without enforcement proceedings under way
- Application for discharge of remaining liabilities
- Insolvency requested by a creditor
- Proceedings already declared, with doubts about what follows
- Joint debts of a couple, or debts you have guaranteed
Companies
- Deciding between recovering the company and filing for insolvency
- Special Revitalisation Process or Payment Agreement
- Insolvency requested by creditors
- Classification of the insolvency and liability of managers
Insolvency of individuals
01
Personal insolvency and discharge of remaining liabilities
A person is insolvent when unable to meet their obligations as they fall due. It is not having more debts than assets, nor missing a single instalment.
Once insolvency is declared, the assets that can be seized are liquidated to pay creditors. What remains unpaid does not disappear on its own: you must apply for discharge of the remaining liabilities, which is an independent application and is not automatic.
If granted, a three-year assignment period begins, during which part of the income is handed to a trustee. Only at the end of that period, and if the obligations have been met, is there a final discharge decision.
02
What the discharge does not erase
The discharge does not cover everything, and what is left out determines whether it is worth going ahead.
Once granted, it extinguishes any claims against the insolvency that remain at the end, whether or not they were lodged. But the CIRE expressly excepts some categories, and these remain payable after everything.
Left out are maintenance claims, damages for wrongful acts committed with intent, fines, penalties and other pecuniary sanctions, and tax and Social Security claims.
Anyone who files for insolvency expecting to be rid of debts to the tax authority is deciding on an assumption the law does not confirm.
03
What happens to your salary during the proceedings
The question is almost always the same: do I keep the minimum wage?
The law does not set a figure. It requires the disposable income to be assigned, and excludes from that income whatever is reasonably necessary for the minimally dignified support of the debtor and their household, and for carrying on their activity.
This means the amount left over cannot be read from a table. It depends on how many people depend on the income, the household's fixed expenses and what the person's work requires. It is a judgement, and it is made in the proceedings.
04
The home and the mortgage
There is no single answer.
What is at stake is the meeting of three things: the value of the property, what is still owed to the bank, and the position the bank takes as a secured creditor. From there, the scenarios diverge considerably.
This analysis is done before anything is filed.
05
Spouse and guarantors
The discharge is personal. It extinguishes the debts of the person who obtained it, and no one else's.
Anyone who acted as guarantor remains liable to the creditor, and can be asked for everything once the main debtor has been discharged.
For a couple, what matters is who took on the debts, the property regime and which assets are joint. In some situations a joint filing is allowed, and in others separating is what protects one of the two.
Before deciding, it is important to know what the discharge does not cover and who else remains liable.
Insolvency of companies
01
Duty to file
Here there is a difference that separates the two audiences of this page. An individual who does not own a business is not subject to the duty to file for insolvency. They can do so when they choose.
Companies and sole traders are. And failing to comply is not without consequence: it is one of the circumstances the law associates with the presumption of gross negligence in the classification of the insolvency. If classified as culpable insolvency, the decision can reach the personal assets of managers and directors, with disqualification from administering and a duty to compensate creditors.
This makes the calendar part of the problem, and not just the decision.
02
Recovering instead of liquidating
Not every company in difficulty has to go into insolvency. There are specific processes for negotiating with creditors before that, with effects on ongoing actions while they run.
The choice between recovering and liquidating does not depend only on the manager's wishes. It depends on there being a viable business, on creditors willing to negotiate and on when the decision is taken. Too late, there is nothing left to recover.
03
Culpable insolvency and managers' liability
The judgment classifies the insolvency as fortuitous or culpable. It is culpable when the situation was created or worsened by intentional or grossly negligent conduct by the debtor or its directors, de jure or de facto, in the three years before the start of the proceedings.
If classified as culpable, the judgment identifies the persons affected, and the effects fall on the assets and activity of each one. The law provides for disqualification from administering the assets of third parties and from carrying on trade or holding positions in company bodies, for a period of two to ten years. It provides for forfeiture of any claims those persons hold against the insolvency or the estate. And it provides for an order to compensate creditors in the amount of the unpaid claims, up to the limit of the person's own assets, with joint liability among all those affected.
What is examined concerns acts before the proceedings: what was done with the company's assets, how the accounts were kept, whether some creditors were paid preferentially, and when the insolvency was filed.
In company insolvency, the timing of the decision conditions everything else.
How we handle insolvency cases
We start by understanding the make-up of the debts, because it determines whether insolvency solves anything. Liabilities that are mostly bank debt and liabilities that are mostly tax debt lead to different conclusions.
After that, the rest is assessed: the assets, who else is liable, and whether there is an alternative before insolvency.
There are cases where the conclusion is that insolvency is not the best route, and we say so.
- Professional secrecy guaranteed in all cases
- One lawyer in charge follows each case from start to finish
- Scope and terms set case by case, communicated before any commitment
- Reply to new enquiries within one business day, in Portuguese and English
- Law firm in Porto, in practice since 2011
Frequently asked questions about Insolvency
How do I file for personal insolvency?
Whoever files for insolvency does so by application to the court, with the documentation showing their financial situation and the list of creditors. The application for discharge of the remaining liabilities is independent and has its own timing. Before filing, it is important to know which debts are left out of the discharge and who else answers for them, because that determines whether the route is worthwhile.
Does insolvency erase my debts to the tax authority?
No. Tax and Social Security claims are expressly excepted from the discharge of remaining liabilities, as are fines, penalties, maintenance and damages for intentional acts.
Do I keep the minimum wage?
The law does not set a figure. It excludes from the income assigned whatever is reasonably necessary for the minimally dignified support of the debtor and the household, which is determined case by case.
How long does the assignment period last?
Three years from the closure of the insolvency proceedings. Older proceedings may be subject to the previous regime.
I was a guarantor for someone who declared insolvency. Am I released too?
No. The discharge extinguishes the debts of the debtor who obtained it. Those who guaranteed the debts remain liable to the creditor.
A creditor has applied for my insolvency. Can I object?
Yes. Insolvency requested by a third party has its own adversarial stage and deadlines, and what is argued at that stage conditions the rest of the proceedings.
Speak to an Insolvency Lawyer in Porto
Describe your situation and what kind of debts you have. We will tell you what insolvency solves in your case, what it does not solve, and whether there is an alternative to consider first.