People’s financial stability may vary throughout their lives: there are periods of being well off and other periods when they do not have sufficient resources.
These periods of scarcity and economic instability can cause indebtedness in the person, who is forced to acquire more debts to try to save others, causing a breakdown in their patrimony and finances.
It is for this reason that the insolvency of a non-trading natural person arises, a mechanism that seeks to help Colombians in good faith to reach an agreement with their creditor agents to achieve a restructuring of all their debts.
Below, we will explain more about the insolvency of a non-trading natural person, what it consists of, who can access this tool and the benefits it brings.
What is the insolvency of a non-trading natural person?
The insolvency of a non-trading natural person is a mechanism that allows a person who has financial obligations in arrears to negotiate with its creditors a payment plan that adjusts to the debtor’s needs in order to be able to liquidate its liabilities. This mechanism is found in the General Procedural Code, in Title IV.
As its name indicates, this mechanism is designed for non-traders, i.e., those who do not carry out an economic activity considered to be commercial, which are indicated in Article 20 of
article 20
of the Colombian Code of Commerce.
In
article 532
of the General Procedural Code specifies that only non-trading natural persons may declare themselves insolvent by means of this figure. Non-commercial persons that are part of financial groups or are controlling entities in commercial companies will be subject to the regime set forth in Law 1116 of 2006.
In order for a person to have access to this mechanism, he/she must:
- Having 2 or more debts or obligations with different entities or other natural persons with a moratorium of more than 90 days.
- Or, That 2 or more executive or collection processes are pending against the person.
In all cases, debts must represent less than 50% of total liabilities.
What does the insolvency of a non-trading natural person allow?
This mechanism allows the non-trading natural person:
- Negotiate your debts with the different creditors to normalize your credit life.
- Validate the private agreements reached with its creditors.
- Liquidate its assets.
This mechanism is designed for people who, although they do not have the economic facilities, are interested in organizing their credit life.
What can be negotiated in the insolvency of a non-trading natural person?
It seeks to negotiate the debts that at the moment the person has; these debts can come from:
- Mortgage loans, pledge loans, free investment loans and credit card installments.
- It is also possible to negotiate debts with public and private entities, such as taxes before the National Tax and Customs Directorate (Dirección de Impuestos y Aduanas Nacionales).
- Home or office leases and management, overdue utility bills, vehicle or store payments where credit has been applied for.
- Accounts and overdue payments with cooperatives, schools or universities.
Benefits of insolvency of a non-trading natural person
This mechanism is not an excuse to encourage a culture of indebtedness; on the contrary, it seeks to help people reorganize their credit life, give them a break and provide them with a negotiation with their creditors to pay their debts in installments that are fair to both parties.
When an agreement is reached, all legal proceedings against the debtor are suspended and the collection of taxes, interest and garnishments is made impossible. Creditors also lose the possibility of initiating new enforcement proceedings against the debtor.
Once an agreement is reached, all creditors must conform to the decision, even those who are not in favor. The payment of the debt must not exceed a term of 5 years, except in the case of mortgage loan processes, in which case longer terms may be agreed upon, as agreed with the financial entity.
In general, the insolvency of a non-trading natural person is a lifesaver for people who are in an economic crisis or are about to fall into one. It is a mechanism that gives you the possibility of paying your debts in a term and installments that adjust to your needs and income.
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