The reconfiguration of the requirements for the opening of insolvency proceedings

Abstract

Argentina’s Bankruptcy Law has become outdated—if not entirely obsolete—when it comes to two key issues: the preservation of small and medium-sized enterprises and the treatment of insolvency affecting non-entrepreneurial natural persons. The preventive reorganization process has often proven to be a late response, intervening only once the crisis is fully underway or already finished. The rigidity of the legal definition of cessation of payments as an objective requirement, together with the absence of specific procedures for individuals who are not business owners, constitute initial barriers to debt restructuring and the resumption of economic activity. Creditors are also negatively impacted. Their chances of recovery are significantly higher when the debtor’s activity continues, compared to judicial liquidation scenarios. In this context, there is a pressing need to legislate the intermediate phase between the onset of financial distress and the occurrence of cessation of payments. Rethinking the protection of enterprises, over-indebted individuals, and the creditor’s right to recovery is an urgent and structural task in building a more effective and equitable insolvency system.