Our country is still in a precarious economic situation which has led to a growing number of citizens failing to meet their financial commitments.
The solution often goes through the establishment of payment agreements with the various creditors that allow adjusting the amounts owed to disposable income. However, such negotiation is not always feasible or feasible for a number of reasons: creditors’ inflexibility, the existence of various claims distributed by different creditors, lack of time or even competence to lead the necessary negotiations.
To that extent, the Government through Decree-Law no. 79/2017 of June 30th 2017 added articles 222-A to 222-J to the Insolvency and Business Recovery Code on the special plan for a payment agreement.
This special procedure for payment agreement “is intended to enable the debtor who, not being an undertaking and is demonstrably in a difficult economic situation or in a situation of imminent insolvency, to enter into negotiations with its creditors in order to conclude with these agreements the debtor, a natural person, who is in a difficult economic situation or in an imminent insolvency situation, may present a plan for the payment of his obligations to his creditors.
Firstly, what is meant by the “difficult economic situation” must be defined. Article 222-B states that the debtor will be in a difficult economic situation to “face serious difficulty in fulfilling his obligations”, that is to say, the debtor who can not obtain credit or has liquidity to fulfil his financial obligations.
This procedure shall be initiated by the intention of the debtor and at least one of the creditors by means of a written declaration showing that they intend to start negotiations with a view to drawing up a payment agreement.
Article 222c contains further formalities and requirements relating to this declaration, namely that it must be signed by all the declarants, must contain the date of signature, must be presented to the court competent to declare the insolvency of the debtor and be accompanied by the following documents:
– List of all outstanding debt collection actions against the debtor;
– Proof of the debtor’s income statement;
– Proof of their professional status or, if applicable, unemployment;
– Copies of the documents listed in Article 24 (1) (a), (d) and (e).
After delivery of the declaration with the aforementioned documents, the judge immediately appoints, by order, a provisional judicial administrator, and then the debtor is notified.
As soon as the debtor has been duly notified of the order, he shall inform all his creditors, who have not signed the declaration, and by registered letter, which has begun negotiations with a view to drawing up a payment agreement. The aim of this communication is to invite the remaining creditors to participate in the ongoing negotiations and to inform them that the above documentation is available for consultation at the Registry of the Court.
The order issued by the Judge will also be published in Justice web portal (“Citius”) and any creditor has 20 days to claim credits, and the request must be addressed to the Provisional Receiver who, within 5 days, will draw up a provisional list of credits and send the same for the registry of the Court for publication in CItius. Since this list is subject to challenge within 5 working days, and if not challenged becomes final.
The declarants are then given a period of two months to conclude the negotiations. This period may be extended, once and for a period of one month, by prior written agreement between the Provisional Receiver and the debtor.
Creditors who agree to participate in the negotiations declare it to the debtor by registered letter and can do so throughout the time of the negotiations.
These negotiations shall be governed by the terms agreed between the declarants or, in the last case, by the rules defined by the Interim Judicial Administrator. Since the latter participates in the negotiations in order to guide, monitor and expedite the progress of the process.
The most important aspect of this scheme is the impossibility of bringing any action for recovery of debts against the debtor from the moment the Judge issues the order, as well as suspending all actions of the same purpose during the negotiations and extinction thereof as soon as the payment agreement is approved and approved, except in cases where it is foreseen.
The insolvency proceedings in progress against the debtor are also suspended upon issuance of the Judge’s order, provided that a declaratory judgment of insolvency has not been issued and will also be extinguished as soon as the payment agreement is approved and approved.
As in the general insolvency regime, the debtor is prevented from performing acts of special importance without the authorization of the Provisional Receiver. The request for authorization must be made in writing and if the Administrator does not respond within a maximum of 5 days, the silence should be considered as a refusal to the request made.
Debtors should also pay attention to their rights under the scheme in question, which provides in Article 222e (8) of the Insolvency and Bankruptcy Code that, from the time of delivery of the order by the Judge and during the negotiations, they can not be suspended the following public services:
a) Water supply service;
b) Service of electricity supply;
c) Supply service of natural gas and liquefied petroleum gas channelled;
d) Electronic communications service;
e) Postal services;
(f) Sewage collection and treatment service;
(g) urban solid waste management services.
Once the negotiations have concluded, with the unanimous approval of a payment agreement, involving all their creditors, the same must be signed by all the interveners and referred to the process for homologation or refusal by the Judge, who must do so within 10 days from receipt of all documentation.
If the plan is approved, it binds the debtor and all creditors even those who have not claimed credits or participated in the negotiations and the costs of the approval are borne by the debtor.
Otherwise, where the plan has not been approved, the provisions of Article 222g, paragraphs 2 to 5, 7 and 8, which cover in particular cases where the debtor is not in a case in which it is effectively insolvent.
Finally, this special procedure for payment agreement is deemed to be closed after the final decision on the approval of the payment plan or, in the case of non-approval, after compliance with the stipulations of paragraphs 1 to 6 of article 222-G.
This new scheme is intended to benefit individual debtors who are in an imminent insolvency situation or who do not have sufficient financial liquidity to meet their obligations and thus manage to negotiate with their creditors a payment plan that would otherwise not be possible.