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Insolvency and bankruptcy proceedings in Spain

The enforcement mechanisms are specific procedures, i.e. they are not concerned with an individual’s entire estate, but refer only to specific assets or rights within it; which is why, for example, there is a need for an order of attachment, which selects certain assets of the judgment debtor for the purposes of implementing enforcement. However, there are processes that concern an individual’s entire asset portfolio, or at least, a set of these assets, these fall under the category of general judgments; such as is the case with inheritance matters; bankruptcy proceedings; and, after a fashion too, matrimonial settlement proceedings. On closer examination it becomes clear that these wide scale procedures have as their objective the liquidation and division of the assets with which they are concerned; they affect a broad and diverse range of assets and rights, as well as a diversity of subjects, in addition to also being complex processes both in terms of their regulation and practical implementation.

 

The debtor who becomes insolvent must submit to bankruptcy proceedings, which is a general form of insolvency procedure. Historically, both in Continental and Anglo-Saxon legal systems, though with some special peculiarities in the latter, it is accepted that when an estate is insufficient to meet all the obligations incumbent upon it, then it is preferable to proceed with an orderly liquidation and a proportionate distribution of the assets and rights of which it is composed, rather than allowing individual creditors to proceed with their own personal actions. The justification for this is that allowing a free for all system viz. individual enforcement actions may privilege certain creditors at the expense of others, for reasons that are at one remove from the legal relationship they had with the insolvent debtor (the greater flexibility of the court handling the enforcement; the quality of information that the creditor is able to access; the nature of the debt, that is more or less straightforward to enforce), while summoning all creditors to be party to one process of insolvency addresses the principle of par conditio creditorum (on like terms among creditors) i.e. considering all creditors to be in the same position, treating them equally, and as regards the repercussions; thus as a consequence, the crisis situation in economic terms brought about by a declaration of insolvency has a fallout for an individual that operates equally or proportionally among his creditors