Bankruptcy or Renegotiation? Discover the Best Option to Get Out of Debt

If you have bank debts and cannot pay them, Law 20.720 offers two main ways to relieve your financial burden: bankruptcy (liquidation) and renegotiation. But which option is best for you? We explain the key differences so you can make an informed decision.

1. Bankruptcy (Voluntary Liquidation): When You Cannot Pay

Bankruptcy allows an individual to eliminate their debts by handing over their assets for creditor repayment.

Advantages:

• Legally frees you from unpaid debts.
• Stops collection actions and embargoes.
• No need to negotiate with banks.

Disadvantages:

• You may lose assets such as properties or vehicles.
• Affects your credit history for up to 5 years, depending on the financial institution and commercial records.

2. Renegotiation: If You Can Still Pay with New Terms

Renegotiation is a free administrative process before the Superintendence of Insolvency and Reentrepreneurship (Superir), where the debtor negotiates new payment terms with creditors.

Advantages:

• You do not lose your assets.
• You can access better payment terms and rates.
• It is a quick and free process.

Disadvantages:

• You need demonstrable income to pay the renegotiated debt.
• It depends on creditor acceptance.

Which One to Choose?

• If you cannot pay your debts and have insufficient income, bankruptcy may be the best option to start over.
• If you can still pay with some relief, renegotiation will help you avoid asset foreclosure.

At MTH Abogados, we guide you through every step of the process to help you choose the best strategy for your financial situation. Consult with us and regain your financial peace of mind!