Home train investment trust What is happening with so many people declaring bankruptcy during the pandemic?

What is happening with so many people declaring bankruptcy during the pandemic?

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The effects of the pandemic have been devastating for thousands of businesses across the country, but along with their financial woes, there have been various legal complications.

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February 4, 2021

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This article was translated from our Spanish edition using AI technologies. Errors may exist due to this process.


By: Cimet & Almazán.

The effects of the pandemic have been devastating for thousands of businesses across the country, but along with their financial woes, there have been various legal complications. One of them was the increase in bankruptcy or possible bankruptcy claims, given the inability of many companies to fully comply with their obligations.

“From the first months of the confinement, this situation was foreseen and despite the fact that the closure of the federal courts did not affect the commercial bankruptcies, which are considered as” urgent cases “, as indicated in General Agreement 8 / 2020 of the Council of the Federal Judicial Power (CJF), everything indicates that the wave of these processes is a reality ”, declares Yisroel Cimet, partner of the law firm Cimet & Almazán, specializing in civil, commercial, financial, real estate, law. insurance and bonds.

Even on April 27, two months after the first case of COVID-19[female[feminine in Mexico, a business bankruptcy law reform initiative was presented to the Senate to resolve this avalanche of petitions. The idea was to design a solution that corresponded to the new needs of this complicated context, but it remained as is: in a proposal.

Among the changes sought by this initiative, according to the Cimet & Almazán office, the following stand out:

  • That recourse to the commercial bankruptcy procedure under the emergency regime will be applied from the existence of the fortuitous event or force majeure, as well as a declaration of emergency and as long as it exists and during the following six months.
  • The request can be submitted digitally and without the need for a physical file.
  • The trader will not have to prove a general breach of his obligations.
  • Within three working days, the judge will immediately accept, and without further formality, the request for commercial bankruptcy and without the need for a summons, he will declare a declaration of bankruptcy.

The unusual increase in bankruptcy applications puts on the table the need to reassess how said federal proceedings are conducted, as well as processing times, so it is worth continuing to monitor how the judges will assist. to the requests they already have at the door.

Bankruptcy is not the same as bankruptcy

According to data from the Mexican Social Security Institute (IMSS), last May nearly 10,000 formal sector companies had already registered their employer leave with the agency; in other words, the same number of companies went bankrupt. For this reason, it is important to note that bankruptcy and bankruptcy are not the same, since the former penalizes the lack of liquidity to comply with obligations and seeks in an orderly manner to reach an agreement between the creditors and the debtor. in order to organize who is due, how much is due and how payment will be made, taking into account the majority of votes.

Contrary to this, bankruptcy is when the commercial bankruptcy proceedings are not successful: the parties do not come to an agreement between them and go to a stage of bankruptcy and liquidation.

In this sense, the main objective of commercial bankruptcy is to safeguard the source of work and economic activity, hence its importance not only as an entity that contributes to the conservation of sources of work in difficult times, but in as a reactivator of the economy, necessary for the new normal.

Bankruptcy or Bankruptcy What is right?

Whether the best thing for a business is to aspire to bankruptcy or to go bankrupt will depend on each of them, their ability to negotiate with creditors and their financial viability; however, it is important that they know the effects and scope of each of these procedures.

“The reconciliation and respect for what has been agreed is the key to success, we must find a way not to throw in the towel and try to save companies, sources of employment, but also to comply with those who have obligations, “he said to Cimet.

The faster the problem is resolved, the better the response will be, don’t wait until you have a really problematic financial situation in which there is no way to pay anyone. Commercial bankruptcy should not be a cause for fear; on the contrary, it can be a good alternative for many companies.