When the Money Runs Out: An Orderly Queue
Insolvency is the state of a debtor who cannot regularly meet its due obligations. Left alone, it triggers a destructive race — first creditor to grab an asset wins. Insolvency law replaces the race with a single collective procedure: the concurso de acreedores.
Opening the concurso: the debtor must petition within two months of knowing its insolvency (voluntary concurso); any creditor may petition (necessary concurso). Filing late is one of the acts that can make the concurso culpable — with directors personally liable for the shortfall.
What the declaration does: individual enforcement actions freeze, interest generally stops accruing, and a concurso administration supervises (or replaces) management. All creditors are pulled into one proceeding, one inventory, one list of claims.
The ranking — who gets paid first:
Payment order: estate claims → secured → general privileged → ordinary → subordinated.
- Claims against the estate: costs of the procedure itself and post-declaration debts — paid as they fall due.
- Secured (special privilege): mortgage and pledge holders — paid from their collateral.
- General privilege: workers' recent wages, taxes and social security (in part).
- Ordinary: the unsecured mass — suppliers, most lenders.
- Subordinated: latecomers, fines, interest, and insiders (loans from partners and directors).
The fork: the procedure ends in a convenio — an agreed haircut and/or rescheduling that keeps the firm alive — or in liquidation: selling everything and paying the queue in order until the money stops. Ordinary creditors' recovery usually depends entirely on where the line runs dry — which is why credit managers study ranking before they study interest rates.
The creditor queue
| Class | Typical claims |
|---|---|
| Estate claims | Costs of the procedure itself, post-declaration debts |
| Secured (special privilege) | Mortgage- and pledge-backed credit |
| General privileged | Recent wages, taxes, social security |
| Ordinary | Suppliers, unsecured loans |
| Subordinated | Interest, fines, insider loans |
Common pitfall: Directors waiting "one more quarter" to file. The two-month clock from knowing the insolvency is hard law — filing late risks a culpable classification, and with it the directors' personal patrimony covering the shortfall.