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The characteristics of insolvency cases and the parties have a strong impact on case duration

25.02.2022

Economics in a picture: The characteristics of insolvency cases and the parties have a strong impact on case duration

 

In recent years there has been a clear reduction in the duration of insolvency cases. In 2020, the median expected duration until closure was 4 months for private insolvencies and 16 months for corporate, which compares with, respectively, 5 and 29 months in 2015.

A regression analysis indicates that the duration of private and corporate insolvencies depends on the characteristics of cases and parties involved. In particular, the cases filed by creditors (rather by the debtors themselves) tend to progress more slowly, and the same happens when more creditors intervene, and some creditors are individuals.

Furthermore, in the case of corporate insolvencies, the closing of proceedings also tends to be delayed by a larger size of the insolvent, a greater amount of its debt and fixed assets, and by the existence of real collateral (which gives priority to guaranteed credits). Companies belonging to the construction sector have lengthier insolvencies. On the contrary, insolvencies in which most debts are to the State tend to proceed more quickly.

 

 

For more details see article “Characteristics of parties and duration of insolvency cases in Portugal”, published in the Banco de Portugal Economic Studies, Vol.8, Nº 1.

 

Prepared by Manuel Coutinho Pereira and Lara Wemans. The analyses, opinions and findings expressed above represent the views of the author and not necessarily those of Banco de Portugal or the Eurosystem. 

 

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