Our director of the Civil Litigation and Arbitration Group, Francisco Fuentes, talked to Diario Financiero about the impact that the reform of the Insolvency Law has had during the last year in our country.
In just one year, bankruptcy and debt renegotiation processes of individuals have skyrocketed in Chile. According to data from the Superintendency of Insolvency and Reinsolvency (Superir), renegotiations increased by 144% between 2023 and 2024, while liquidations doubled, reaching 4,709 cases. In contrast, company liquidations decreased 41% in the same period.
This increase coincides with the entry into force, in 2023, of the amendments to the Insolvency Law (Law No. 20,720). The law provides, among other things, for the creation of simplified procedures of fast processing and low administration costs for individuals and SMEs, the incentive to the reentry of the debtor to the credit system, the increase of credit recovery rates, the promotion of restructuring of liabilities and the streamlining and facilitation of procedures.
Pedro Goic, a research professor at Universidad del Desarrollo’s Center for Regulatory Law and Business, indicates that there are different structural and circumstantial causes behind the increase. In the first place, the over-indebtedness of households. “Many debtors are reaching their solvency threshold and have found in the law a formal channel to reorganize themselves”, he says. Along with this, he stresses that the reforms introduced facilitated access to these procedures. “Today, any person who issues fee slips or who has informal income can renegotiate their debt without legal proceedings, without a lawyer and without incurring costs,” Goic says.
Superir points out that the group of people who access bankruptcy proceedings is diverse, although there is a predominance of self-employed workers, entrepreneurs and professionals who face economic difficulties due to irregular income, over-indebtedness or complex family and work contexts. “In both renegotiation and liquidation, we observed a greater participation of men and people between 30 and 44 years of age,” says the superintendent of insolvency. says the superintendent of the entity, Hugo Sanchez.
Opportunity
The director of the Civil Litigation and Arbitration Group of Albagli Zaliasnik (az), Francisco Fuentes, points out that there used to be a certain fear of initiating these processes. Today, the objective of the new law and its reforms has been to change this paradigm, he points out, giving the possibility to renegotiate debts. “Natural persons have seen these processes as an opportunity to start up again, under the legal protection of a process that is easy to follow and inexpensive, with good benefits in the event of repacting debts with creditors. The same can be said of liquidations, where, although the road has its ups and downs, the prize at the end of the road is the ‘rehabilitation’ of the person,” says the expert.
The founder of DefensaDeudores.cl, Ricardo Ibáñez, warns that there are some challenges. Among them, speeding up debt renegotiation and eliminating entry barriers. “Today, for example, defendants cannot renegotiate debts under Law 20,720. In terms of liquidation, the law must also be adjusted so that more companies – especially small ones – can take advantage of these mechanisms, without being left out for not having their accounting 100% up to date”, he says. he says.
