Many consumers believe that when filing an insolvency request in the Court, all existing debts will be removed in a miraculous way. Deco believes that there is a lot of misinformation about the insolvency process and its consequences.
When is the insolvency process a good option?

  1. If any of the other solutions to restructure the credits haven’t worked out and you have no options to solve your financial situation. As we mentioned in the previous edition of The Portugal News, when you realise that you are in difficulty and unable to comply with the payment of your monthly installments, you should contact your bank and check the options of reviewing your credit agreement, extending your credit agreement, the term of payment or payment at the associated interest rate, as well as the mechanisms of Decree-Law No. 227 / 2012 (PARI and PERSI).
  2. It should be noted that the insolvency process in Portugal is a complex process. To file an insolvency request, you must use the services of a lawyer, if you do not have the economic means to do so, you can apply for Legal Aid (Legal Protection), from Social Security. Then, it should be taken into account that if you have assets in your name (property, car, and bank accounts) these can be included in the insolvency plan.
  3. It is true that the declaration of insolvency can be a path to follow. There is the possibility that the insolvent debtor will present a plan or the possibility of getting rid of some of their debts (economic recovery / fresh start principle).
  4. A minimum wage for a dignified life for the insolvent and their household is established by the court for five years, and this level may be a little higher if there are dependent minors.
  5. After these 5 years, the Court may declare that after this period all debts will become extinct. It is almost a benefit for the good faith demonstrated throughout this process and in which the debtors must demonstrate true willingness to recover through good and responsible management.
  6. Thus, it is important to make sure whether insolvency is really a good option or not, as it is an important and irreversible decision that has real world consequences.