Financial Crime World

Insolvency Procedures in Peru

Overview

This article provides an overview of insolvency procedures in Peru, including the steps involved in repossessing assets and foreclosing mortgages.

Insolvency Criteria

  • A debtor is considered insolvent when their liabilities exceed one-third of their total assets.
  • A debtor is also considered insolvent if they have overdue debts exceeding 50 Tax Units (approximately USD 1,200).
  • Creditors can initiate insolvency proceedings, which are confidential until approved by INDECOPI and published.

Repossession Steps

Suspension of Payable Debts

  • Once insolvency is declared, all the debtor’s payable debts become suspended.
  • Private enforcement of security on the borrower’s assets is no longer allowed, unless these assets are third-party obligations.

Liquidation and Dissolution

  • If liquidation and dissolution of the debtor is decided, payment will follow a specific order:
    • Remuneration and social security credits
    • Alimony credits
    • Secured credits
    • Tax credits
    • Credits not included above

Mortgage Foreclosure

  • The enforceability of mortgages can be done through civil proceeding if the mortgage has been incorporated according to law.
  • Enforceable titles include securities (promissory notes) and public deeds, provided that the obligation contained in the title is true, express, and liquid or able to be liquid through an arithmetic operation.

Auction Procedure

  • Once foreclosure begins, a judge orders the appraisal of the property if the parties have not agreed on its value.
  • The appraisal will be made by experts appointed by the judge within the term established in the court order.
  • The base price for the first auction call will be two-thirds of the value of the property (either judicial or conventional appraisal).
  • If no bids are submitted, a second and third call can be issued, reducing the base price by 15% each time.
  • If there are no bidders in the third call, the creditor can request the award of the property.

Important Note

Please note that this is a summary of a complex legal document, and you should consult with an attorney for specific advice on insolvency and foreclosure procedures in Peru.