# Insolvency and the Concurso

Business I · Business Law · https://tryals.app/learn/business-i/insolvency-and-the-concurso

## When the Money Runs Out: The Concurso

**Insolvency** is the legal state of a debtor who **cannot regularly meet its due obligations**. Instead of a destructive race where the first creditor to grab an asset wins, the law imposes a **single collective procedure**: the **concurso de acreedores**.

**Opening the concurso**: The debtor **must** petition within **two months** of knowing its insolvency (voluntary concurso), or any creditor may petition (necessary concurso). Filing late makes the concurso **culpable**, leaving directors personally liable for the deficit.

**Declaration effects**: Individual enforcement actions freeze, interest generally stops, and a **concurso administration** supervises or replaces management. All creditors enter one proceeding with one inventory and claim list.

**The fork**: The procedure ends either in a **convenio** (an agreed haircut and/or rescheduling to keep the firm alive) or in **liquidation** (selling everything and paying the queue in order).

## The Creditor Queue and Ranking

When liquidation hits, recovery depends entirely on where your claim sits in the strict legal order. **Payment order**: Estate claims to secured to general privileged to ordinary to subordinated.

| Class | Typical claims | Paid from |
| --- | --- | --- |
| **Estate claims** | Procedure costs, post-declaration debts | As they fall due |
| **Secured (special privilege)** | Mortgage and pledge credit | Their specific collateral |
| **General privileged** | Recent wages, partial taxes/social security | Designated assets/funds |
| **Ordinary** | Suppliers, unsecured loans | The remaining mass |
| **Subordinated** | Fines, interest, insider/partner loans | Last, if anything remains |

**Common pitfall**: Directors waiting one more quarter to file. The two-month clock is strict; filing late risks a **culpable** rating and personal liability for company debts.

## Practice questions

5 of this lesson's 14 practice questions, with answers. The full set is in the app.

### 1. Order the phases of a concurso.

**Answer:**

1. Insolvency: due debts can no longer be met
2. Petition filed within two months
3. Declaration: enforcement freezes, administration appointed
4. Common phase: inventory and list of claims
5. Convenio agreed, or liquidation and payment by rank

**Why:** Insolvency → petition → declaration → common phase → convenio-or-liquidation. Each phase exists to keep the race from restarting.

Page: https://tryals.app/practice/business-i/insolvency-and-the-concurso/order-the-phases-of-a-concurso

### 2. The debtor learns of its insolvency on March 1. Set the slider to the day of the legal deadline for filing the voluntary concurso petition (days after March 1).

**Answer:** 60 (within ±5)

**Why:** **Two months** (~60 days). Filing late feeds the presumption of a *culpable* concurso, the doorway to directors paying creditors from their own pockets. The calendar is a liability clock.

Page: https://tryals.app/practice/business-i/insolvency-and-the-concurso/the-debtor-learns-of-its-insolvency-on-march-1-set-the-slider-to-the

### 3. A struggling but viable firm is worth more running than sold for parts, yet uncoordinated creditors would dismantle it. Which problem is insolvency law solving?

A. Fraud by the debtor, who would otherwise hide assets from creditors
B. Unfair ranking, since some creditors have better security than others
C. A collective action problem: the race destroys going-concern value
D. The debtor's inability to negotiate with many creditors at once

**Answer:** C. A collective action problem: the race destroys going-concern value

**Why:** Individually rational grabbing is collectively ruinous, so the stay replaces a race with a queue and preserves the value everyone is claiming against. It is the same structure as a bank run, nobody is behaving badly, and the outcome is a disaster anyway.

Page: https://tryals.app/practice/business-i/insolvency-and-the-concurso/a-struggling-but-viable-firm-is-worth-more-running-than-sold-for

### 4. A liquidation yields 250k€. Estate claims take 20k€, secured creditors 130k€, general privilege 60k€. How many thousand euros remain for the ordinary creditors?

**Answer:** 40 (within ±1)

**Why:** $250 - 20 - 130 - 60 = 40$k€ reach the ordinary tier. Whether that is generous or a pittance depends on the size of ordinary claims, the waterfall fixes the *order*, arithmetic fixes the fate.

Page: https://tryals.app/practice/business-i/insolvency-and-the-concurso/a-liquidation-yields-250k-estate-claims-take-20k-secured

### 5. Why does insolvency law freeze individual enforcement actions the moment the concurso is declared?

A. Because frozen claims stop existing legally
B. To give the debtor time to hide assets
C. To replace a race for assets with one procedure
D. To punish creditors for lending imprudently

**Answer:** C. To replace a race for assets with one procedure

**Why:** Uncoordinated seizures dismember a business that might survive, or sell for more, as a whole. The freeze converts a first-come-first-served scramble into the ranked queue, maximizing what there is to share.

Page: https://tryals.app/practice/business-i/insolvency-and-the-concurso/why-does-insolvency-law-freeze-individual-enforcement-actions-the