Best Restructuring & Insolvency Lawyers in El Salvador

About Restructuring & Insolvency Law in El Salvador

Restructuring and insolvency law in El Salvador provides a legal framework for individuals and businesses experiencing financial distress. The purpose is to facilitate the orderly reorganization or liquidation of debts under court supervision. This process helps both debtors and creditors by ensuring rights are protected and obligations are met as fairly as possible. The Salvadoran legal system has established specific procedures that allow businesses in trouble to either restructure their debts and continue operating or to wind down operations with a proper allocation of assets to creditors.

Why You May Need a Lawyer

Seeking legal advice is essential when facing potential insolvency or restructuring needs. Some common situations where you may require a lawyer include:

• Facing overwhelming debts and unsure of your options
• Receiving payment demands or threats of legal action from creditors
• Need to negotiate with creditors for payment plans or debt reduction
• Dealing with the risk of foreclosure or seizure of assets
• Unsure how to start an insolvency process according to Salvadoran law
• Suspecting unfair or fraudulent practices by debtors or creditors
• Wishing to protect personal assets while a business is in financial distress
• Seeking to wind down a company in compliance with the law

A lawyer can help evaluate your specific situation, explain your options, guide you through legal procedures, and defend your interests in court if necessary.

Local Laws Overview

In El Salvador, restructuring and insolvency are mainly governed by the Ley de Procedimientos de Insolvencia (Insolvency Proceedings Law). This law outlines the procedures for both bankruptcy (quiebra) and reorganization (concurso preventivo).

• Bankruptcy: Initiated when a debtor is unable to pay debts as they become due. The court appoints a trustee to manage asset liquidation and distribute proceeds to creditors.
• Reorganization: Allows a financially distressed but potentially viable business to propose a plan to restructure its debts. Creditors must usually approve the plan, and the process is supervised by the court.
• Voluntary and Involuntary Proceedings: Debtors can begin proceedings voluntarily, or creditors can request it if certain conditions are met.
• Preferential Rights: Certain creditors, such as employees and the government (for tax debts), may receive priority in the distribution of assets.
• Asset Protection: Upon commencement of insolvency proceedings, the court may order measures to prevent the transfer or concealment of assets.
• Simplified Procedures: For small businesses and individuals with fewer assets, simplified procedures may be available for faster resolution.

The law is designed to balance the interests of debtors and creditors, protect jobs when possible, and prevent fraud or abuse of the insolvency process.

Frequently Asked Questions

What is the difference between restructuring and bankruptcy in El Salvador?

Restructuring, also known as reorganization, allows a financially troubled business to renegotiate its debts and continue operating under court supervision. Bankruptcy, or liquidation, leads to the sale of assets and distribution to creditors, typically ending the business or individual's operation.

Who can start insolvency proceedings in El Salvador?

Both debtors and creditors can initiate proceedings. Debtors usually file voluntarily when they cannot pay debts, while creditors may request insolvency if the debtor meets certain legal criteria for default.

How long does the insolvency process take?

The duration varies depending on complexity, the amount of assets and creditors, and any disputes that arise. Some cases may resolve in a few months, while others can take years.

Can an individual declare bankruptcy or is it only for businesses?

Both individuals and businesses can declare bankruptcy under Salvadoran law. The specific procedures and consequences may differ, but both have access to legal relief.

What happens to my assets if I enter insolvency?

Once proceedings begin, your assets may be managed or liquidated under court supervision. Essential assets or those needed for business continuity may sometimes be protected, depending on the type of proceeding and court orders.

Are all my debts discharged in bankruptcy?

Not necessarily. Some obligations, such as alimony, certain tax debts, and criminal fines, may not be discharged even after bankruptcy.

How are creditors prioritized in insolvency?

There is a hierarchy set by Salvadoran law. Secured creditors, employees, and the tax authority usually have priority over other unsecured creditors.

Can I continue operating my business after starting restructuring?

Yes, the goal of restructuring is typically to allow the company to continue operating while it reorganizes its debts, subject to court and creditor approval.

Do I need court approval for all decisions during insolvency?

Significant actions, such as asset sales or debt negotiations, usually require approval from the court or the appointed trustee. Everyday business operations may continue under supervision in some cases.

Where can I get more information or help about insolvency in El Salvador?

There are several resources, including legal professionals, governmental agencies, and business associations, which can provide guidance and support.

Additional Resources

If you need further information or support regarding restructuring and insolvency in El Salvador, consider these resources:

• Corte Suprema de Justicia (Supreme Court of Justice): Manages the court system and provides information about judicial processes, including insolvency.
• Ministerio de Economía: Offers guidance related to business regulations and insolvency-related inquiries.
• Registro de Comercio: Responsible for business registrations, an important contact for company-related restructuring matters.
• Cámara de Comercio e Industria de El Salvador: Provides support and resources for business owners, including legal advice and information sessions.
• Colaboración con abogados especializados: Consulting with lawyers who specialize in insolvency is recommended for tailored guidance.

Next Steps

If you believe you are facing restructuring or insolvency issues, consider taking the following actions:

• Gather detailed information about your current financial situation, including assets, liabilities, contracts, and creditor details.
• Consult a lawyer with experience in Salvadoran restructuring and insolvency law. They can evaluate your situation and explain your rights and options.
• Prepare any relevant documentation for your legal consultation, such as financial statements, correspondence with creditors, and business records.
• Follow your lawyer's advice regarding communication with creditors and steps to protect your assets.
• Remain proactive and transparent throughout the process to ensure the best possible outcome and to comply with all legal requirements.

Timely legal advice is critical in managing financial distress, protecting your interests, and achieving the best possible resolution under Salvadoran law.