By: Vitor Ferrari and Ivan Kubala

According to Law 11.101/05, an individual entrepreneur is considered bankrupt when he/she carries out business without the proper separation of assets, the unlimited liability partner and the business corporation as a whole, i.e., the company. With bankruptcy declared, the debtor becomes responsible for a series of obligations, in addition to losing the administration of his/her assets, which will be used to pay off debts. Only with the termination of bankruptcy will there be a return to the status quo.

After the law that regulates the bankruptcy process was changed, the bankrupt's obligations were reduced from 5 to 10 years to 3 years, counting from the end of the bankruptcy. The change was of great help to the bankrupt, since previously the various obligations arising from the bankruptcy decree simply could not be resolved, generating great expectations among creditors and several difficulties for the debtor, whose rights to undertake in new areas were constantly curtailed by the previous bankruptcy.

Although 3 years is a considerable period, it is nothing compared to 1 decade. The legislative change only came about due to a series of legal determinations imposed on the Judicial Administrator and the creditors themselves, aiming at faster and more effective processing.
However, there is a possibility that the process will be terminated before the stipulated 3 years, since this is the maximum period for processing the bankruptcy. If the debtor's obligations are fulfilled before then, according to the following hypotheses, the bankruptcy will be terminated:

First, if all credits are paid. This will occur if the credits subject to the effects of bankruptcy are settled with the sale and distribution of all the Bankrupt's assets.

Another possibility is the occurrence of payment, after all the assets have been realized, of more than 25% of unsecured or unsecured credits. In this case, the law allows the bankrupt (his partner or representative in this case) to make a deposit of the amount necessary to reach the aforementioned percentage in the event that the full liquidation of the assets has not been sufficient.

Finally, there are cases in which no assets are found to collect, or, if collected, the amount obtained is insufficient to cover the costs of the process. Therefore, it is up to the Judicial Administrator to inform the judge and the Public Prosecutor's Office of the incident. In light of this information, the judge will publish a notice giving interested parties 10 days to respond.

If any creditor presents an interest in continuing the bankruptcy, the creditor, or group of creditors, must take responsibility and pay the necessary amount relating to the expenses and fees of the judicial administrator so that the bankruptcy can continue.

If there is no creditor or interested party who comes forward and pays the fees due to the Judicial Administrator, the AJ must promote the sale of the seized assets within 30 to 60 days, and then present a report on the amount collected so that the costs of the process can be paid and distributed among the creditors.

Finally, a decision will be issued authorizing the distribution of assets and other payments, and, after that, the bankruptcy will be closed by the judge in the case records.

Whether due to the expiration of the maximum period, 3 years, from the declaration of bankruptcy, or any of the aforementioned hypotheses, the bankrupt's obligations will be extinguished.

With the collaboration of Luis Felipe Simões