In terms of bankruptcy handling, Latvia ranks 43rd among 185 countries evaluated by the World Bank Group. On average, a debtor from Latvia can recover about 50% of the insolvent creditor's assets in cash after the bankruptcy proceedings 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 (Organization for Economic Co-operation and Development) – ~73%. It may take 1.5 to 2 years to complete all procedures.
As for the outcome for a debtor, Latvian laws provide a framework for both selling individual assets (in parts) and restructuring the company to continue under a different owner. In practice, however, the remediation methods are rarely used. More often, creditors prefer to sell the assets in stages, although consolidation always remains a viable option.
Opening of insolvency proceedings
In the event of bankruptcy, according to Latvian law, both the creditor and the debtor can take action. The debtor can apply for both liquidation and reorganization. However, if the debtor applies for reorganization, the creditor can either approve or reject the reorganization plan. For example, the plan may be rejected if the creditor realizes that the bankruptcy debt will take too long to settle. It should also be noted that the resolution on the reorganization plan must be approved by all creditors.
If the debtor hesitates to take action, the creditor can request liquidation, but not reorganization. If the debtor applies for reorganization and the creditor for liquidation, only one option ultimately has to be chosen. Although the decision is made by the court, the opinion of the creditors is very important – since the creditor has suffered losses due to the debtor's insolvency and insolvency, there have been cases where reorganization requests have been dismissed by the court in favor of the liquidation as proposed to the creditors had been.
Solution process
In the initial phase of the insolvency proceedings, either liquidation or reorganization is requested. It can take up to three to four months to reach an agreement. If the first application is rejected by a court, another must be submitted, which lengthens the process. Next there are a number of procedures such as filing claims, meeting of creditors etc. which can take up to 10 months depending on the number and content of the actual procedure. The sale of assets (in the event of liquidation) will take several more months, 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.
