Resolving insolvency in Latvia

In terms of resolving insolvency, Latvia takes the 43rd place amongst the 185 countries ranked by The World Bank Group. On average, a debtor from Latvia is able to recover approximately 50% of the insolvent creditor's assets in currency, once the insolvency procedures are completed. This is slightly lower for creditors from Europe and Central Asia (~40%) and higher for creditors from high-income countries as measured by the OECD (Organisation for Economic Co-operation and Development) - ~73%. It may take from 1.5 to 2 years to complete all the procedures.

As for the outcome for a debtor, Latvian laws provide frameworks for both selling assets individually (piecemeal) and the reorganization of the business to be operated under another owner. In practice, however, the reorganization procedures are seldom used. More often creditors prefer piecemeal selling of the assets, although consolidation always remains a possible option.

Starting insolvency procedures

In case of insolvency, Latvian laws allow both the creditor and the debtor to take action. The debtor can file for both liquidation and reorganization. However, if the debtor applies for a reorganization, the creditor can either approve or decline the reorganization plan. The plan may be rejected, for example, if the creditor sees that the insolvency-incurred debt will take too long to be paid. It must also be noted, that the decision about the reorganization plan must be approved by all the creditors.

If the debtor is hesitant to take action, the creditor is able to file for liquidation, but not for the reorganization. In case the debtor files for reorganization and the creditor for liquidation, only one option must be eventually chosen. Although the decision is made by the court, the creditors' opinion is very important - as it is the creditor who suffered losses due to the debtor's insolvency and inability to pay, there have been cases where reorganization applications have been dismissed by the court in favour of liquidation as had been proposed the creditors.

Resolving process

The initial stages of the insolvency resolving process involve applying for either liquidation or reorganization, and it can take up to 3 or 4 month before and agreement is reached. If the initial application is rejected by a court, another has to be submitted, which prolongs the process. Next, there is a number of procedures like submission of claims, meeting of the creditors, etc., which can take up to 10 month depending on the number and content of the actual proceedings. Another couple of months will be taken up by the sale of assets (in case of liquidation), and only after that the creditor will receive the money.

Insolvency claim

An insolvency claim must contain the following:

• basis of the claim
• type of the claim
• amount of the claim
• time of the claim submission
• whether the creditor is recognised as an interested person within the meaning of Section 72 of the Insolvency law
• contact information including electronic mail address
• bank account number

The maximum deadline for submitting the claim is 6 months from the moment when an entry concerning the beginning of insolvency proceedings has been made in the Insolvency Register (a href='http://ws.ur.gov.lv/urpubl?act=mnp_pjur' title='Maksātnespējas Reģistrs'>Maksātnespējas Reģistrs). It also cannot be submitted later than the insolvency proceedings plan is confirmed. If a creditor misses on of the deadlines, it is not considered a creditor for the purposes of this insolvency case anymore, and cannot claim against the debtor.