Insolvency law modification

1.     Change in the Regime's Denomination

Law 2445 of 2025 modifies the denomination of Title IV of the General Procedural Code, which is now titled "Insolvency of Non-Merchant Natural Persons and Small Merchants." This change expands the scope of application, including small merchants within this regime.

2.     Expansion of the Scope of Application

Previously, the insolvency regime applied exclusively to non-merchant natural persons. With the reform, it now extends to small merchants who have assets valued at less than 1,000 current legal monthly minimum wages (excluding housing and work-related vehicles).

3.     Flexibility in Insolvency process

Process In response to the post-pandemic economic crisis, Law 2445 introduces measures to increase flexibility, including:

• Greater speed in asset liquidation, with the expedited delivery of assets to adjudicatees.
• Validation of private agreements, allowing their application to all creditors when a qualified majority is reached.

4.     Protection of Debtors Against Abusive Practices New provisions are established to prevent actions that could harm debtors

• Nullification of contractual clauses that impede access to insolvency through early termination of contracts or the imposition of restrictions.
• Prohibition of employment discrimination against individuals who have undergone or are undergoing insolvency proceedings.

5.     Adjustments to Payment Default Requirements The new law establishes that a person will be considered in payment default when

• They have failed to pay two or more obligations to two or more creditors for more than 90 days.
• They have had two or more collection processes initiated against them
• The sum of the unpaid obligations represents at least 30% of their total liabilities.

Exclusion of Payroll Deduction Loans

It is specified that in this calculation, loans paid through payroll deductions will not be included unless these deductions have ceased for any reason. This prevents debtors with ongoing payroll deduction loans from being considered in default, thereby easing access to the regime.

6.     Access to Insolvency as a Family Group

Law 2445 introduces the possibility for several members of the same family unit to access the insolvency process in a coordinated manner. This means that a conciliator may jointly manage the processes of spouses, permanent partners, and relatives up to the second degree of consanguinity and the sole civil degree.

• Special rules will apply to harmonize the cash flows of family group members extend extend to other co-debtors within the family unit.
• If a group member defaults on an agreement involving a real or movable guarantee, they defaults may extend to other co-debtors within the family unit

7.     Regulation on Jurisdiction and Procedure

• Insolvency procedures may be conducted virtually by notaries and conciliation centers, allowing access even for debtors residing abroad.
• The jurisdiction of civil judges in supervising debt negotiation and asset liquidation processes is strengthened.

Conclusion

Law 2445 of 2025 represents a significant advancement in insolvency matters by extending the regime to small merchants, increasing procedural flexibility, and strengthening debtor protections. Additionally, it introduces a more comprehensive approach by allowing family group insolvency and excluding certain payroll deduction loans from the payment default calculation. At the same time, it imposes restrictions on creditors to prevent abuses and aims to foster the economic recovery of individuals facing financial crises.