List of Payments of the Bankruptcy Credits

Classification of credits

The credits in a bankruptcy are classified in:

• Credits against the estate
• Bankruptcy procedure credits. Within these you can distinguish:
• Credits with special privilege
• Credits with general privilege
• Ordinary credits
• Subordinated credits

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Credits against the estate

The first in the order of recovery are the credits against the estate. They are regulated in Article 154.2 of the Bankruptcy Law (LC). They will be collected from assets and rights that are not subject to specially privileged credits. Credits against the estate are those debts that have been generated after the declaration of the bankruptcy procedure. In other words, any assets that enter after the bankruptcy procedure will be used to pay these credits. In addition to these, the credits included in the list of Article 84.2 LC are also credits against the estate. They fall within the latter, for example:

• Credits for salaries of the last 30 days prior to the declaration of the bankruptcy procedure.
• Costs and legal expenses necessary for the application and declaration of the bankruptcy procedure.
• Costs and legal expenses for the assistance and representation of the debtor, the receivership or the creditors.
• Those of maintenance of the debtor or of the persons over whom he has the legal duty to provide it.
• Those arising from the professional or business activity of the debtor once the bankruptcy procedure has been declared.

Bankruptcy procedure credits

They form the state of the bankruptcy procedure. They are the credits born before the declaration of the bankruptcy procedure. As we have said, the bankruptcy procedure credits are divided into privileged, ordinary and subordinate credits.

Privileged Credits

Of the bankruptcies procedures, privileged credits are the first to be collected. They will be charged to those who are entitled to special privileges. They are divided into two types:

• With special privilege
• With general privilege

The bankruptcy procedure credits with special privilege are included in Article 90 of the Bankruptcy Law. They are:

• Those guaranteed by mortgages
• Those guaranteed with antichresis
• Credits arising from finance leases or purchase contracts with deferred payment for real state or personal property
• Securities-guaranteed credits
• Credits secured by a pledge in a public document.

Credits with general privileges are regulated by article 91 of the LC. These include:

• Credits for salaries that do not have a general privilege.
• Tax and social security deductions due by the bankrupt.
• Tax and other public law credits.
• Credits of natural persons derived from non-dependent personal work.
• Credits for extra-contractual civil liability.
• Credits for civil liability derived from crimes against the Public Treasury and Social Security

Speciality of Article 155.4 of the Bankruptcy Law

This article includes a singularity for the realization of assets subject to credits with special privilege. Normally, this is done through an auction. However, the judge may authorize the direct sale or lieu of payment to realize these goods. This point is controversial, since there is a debate as to whether there should be other requirements in addition to judicial authorization. S.T.S. 625/2017 says that there should be and requires the consent of the creditor or the qualified majority of the creditors.

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Ordinary credits

These are credits that do not fall into the category of either privileged or subordinate. For example, an ordinary credit would be an unpaid invoice.

Subordinated Credits

Subordinated credits are the last to be collected. They are relegated to the latter position in the order of collection for various reasons:

• They have been reported late
• Its nature is punitive
• They are of an accessory nature
• Due to the personal condition of its holders, as they are especially related to the debtor.

A list of these credits is given in Article 92 of the Bankruptcy Law. Some of the subordinated credits according to this article are

• Credits that have this category by contractual agreement.
• Those originated in surcharges and interests
• Credits arising from fines and other financial penalties
• Credits of persons especially related to the debtor

Alteration of the order of payment of credits against the estate in accordance with Article 176 bis 2 LC

Article 176 bis 2 LC allows the order of collection of credits against the estate to be altered. This occurs when it is established that the estate is insufficient for payment. Once detected, the receivership notifies the bankruptcy judge.

At that time, the receivership must pay the credits in the following order:

• Salary credits for the last thirty days of effective work.
• Credits for salaries and compensation. By the amount resulting from multiplying three times the interprofessional minimum wage by the number of days remaining to be paid.
• Credits for maintenance under article 145.2, as long as it does not exceed the interprofessional minimum wage.
• Credits for costs and legal expenses of the bankruptcy procedure.
• The rest of the credits against the estate.

Credits essential to the completion of the liquidation shall be excluded from this new order. This is a controversial point, since it is not clear what is considered essential for the liquidation. The doctrine of the T.S. requires the receivership to identify a credit as indispensable:

• What actions have been strictly indispensable for the liquidation; and
• Its amount.

Conclusion of the bankruptcy procedure

Article 176 LC contains the causes for the conclusion of the bankruptcy procedure. These are:

1. When the order of the Provincial Court revoking the appeal of the order declaring the bankruptcy procedure is signed.
2. When the order declaring compliance with the agreement is unappealable.
3. Once the actions for declaration of non-compliance have expired or have been rejected by a final judgment.
4. When the order declaring the liquidation phase to be completed becomes final.
5. When it is established that the estate are insufficient to cover the credits against the estate. This may be at any time during the process.
6. When all the recognised credits have been paid or registered or the interest of the creditors has been satisfied by other means.
7. The insolvency situation ceases to exist.
8. When the resolution recognizing the withdrawal or waiver of all creditors becomes final. The common phase of the bankruptcy procedure must be completed.

Point 4 of this Article is what is known as “express bankruptcy procedure”. For this point 4 of Article 176 to come into play, a number of conditions must be met:

• That the judge of the bankruptcy procedure considers the insufficiency of the estate to cover the claims against the estate.
• That no provision be made for actions for reinstatement, challenge or liability of third parties.

Once this has been accredited, the bankruptcy judge may decide in the same order to declare and conclude the bankruptcy procedure.

Conclusions

The order of collection in an bankruptcy procedure has a regulation and an assigned classification. But as we have seen this order can be modified under certain circumstances. In addition, the bankruptcy judge can order the simultaneous declaration and termination of the bankruptcy procedure if he considers the estate to be insufficient. Knowing this regulation and exceptions is essential to evaluate the collection options of a creditor.

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The Express Bankruptcy Procedure