Our Heavy Debts: Who to Contact in Latvia if Your Partner or Employer Goes Bankrupt 0 10

Ahead of Europe

"The goal of the reform is to ensure a balance between state oversight and industry self-regulation, reducing administrative burden and optimizing functions and resources. It also aims for effective competencies and ensuring stable, long-term oversight of the insolvency system," stated the Ministry of Justice.

"In recent years, we have significantly strengthened the profession of insolvency process administrators and modernized the oversight system, making the insolvency process fairer, more transparent, and more efficient," assured Minister Inese Libina-Egnere ("New Unity").

Meanwhile, the scale of the bankruptcy epidemic that has struck the country is astounding.

According to the Electronic Insolvency Accounting System (EMUS), as of the beginning of this year, there were 33,593 insolvency processes and 2,252 legal protection processes occurring in Latvia. In this regard, the system registered 868,529 documents! However, the employees of the Insolvency Control Service were still only pleased: "Latvia has managed to create a digital insolvency system that is recognized at the European level as an example of good practice and experience exchange."

Thus, starting in the fall, the Ministry of Justice will take on functions related to the official activities of administrators, oversight of administrators, and those overseeing the legal protection process, including the consideration of complaints.

Given the already highly developed competencies of the Judicial Administration in managing financial resources and maintaining information systems, from October 1, this body will manage the guarantee fund for employee claims – and will consider employee claims for payments from it, ensure the payment of deposits in the insolvency process, as well as fully maintain and develop the electronic insolvency accounting system.

In turn, strengthening industry self-regulation, the "Latvian Association of Insolvency Process Administrators" will organize the administrator exam and qualification exam; it will gain the right to initiate disciplinary proceedings in connection with violations of professional ethics.

Good to Complain

The Law on the Protection of Employees in the Event of Employer Insolvency currently stipulates that the administration of the guarantee fund for employee claims and functions related to ensuring the satisfaction of employee claims are performed by the Insolvency Control Service. According to the decision of the Cabinet of Ministers, the Insolvency Control Service is being reformed, and all its functions and tasks will subsequently be carried out by the Ministry of Justice and the Judicial Administration.

Meanwhile, the Insolvency Control Service previously clarified: "The insolvency process of a legal entity is a set of legal measures through which the debtor's assets are used to cover creditors' claims to assist in fulfilling the debtor's obligations. The insolvency process of a legal entity is not a mechanism for debt collection, and its initiation does not mean that the creditor will recover the entire amount of the debt."

In Latvia, there are a total of 131 representatives of the heroic profession of insolvency administrators — but next to some, unfortunately, on the computer screen, one can see a sign like "brick": "Activity limited..."

The list of administrators is available on the homepage of the Insolvency Control Service. All of them are considered state officials, even though they work as practicing lawyers or individuals conducting economic activities. Therefore, on the website of the State Revenue Service, one can find out that, for example, 10 years ago, administrator Maris Spruds had a total of 502,239.34 EUR in three bank accounts, owned land, an apartment, and a building in Riga, as well as possessed 2 Bentley cars.

In addition to his numerous professional positions, he also engaged in public work in the very Latvian Association of Certified Insolvency Administrators — as a member of the commission for improving the Insolvency Law and the Commission for Cooperation and Communication. But since 2017, unfortunately, he has become a figure in one of the longest criminal proceedings in Latvia. Along the way, he won a case against his home state in the European Court of Human Rights — for 8 months spent in prison.

Where to Turn

But let's return to the situation when an employer is declared insolvent. Here, the state pays the debt from the Guarantee Fund. It covers: salary for the last 3 months (within 12 months prior to bankruptcy), vacation compensation, severance pay. An application must be submitted to the insolvency administrator. This must be done in a timely manner; otherwise, one may lose the right to payment.

If you are a creditor (supplier, partner) – debt collection from an insolvent enterprise occurs within the framework of the bankruptcy process. Here, a creditor's claim must be submitted to the insolvency administrator with supporting documents (contracts, invoices). Claims are satisfied in order of priority. Unsecured creditors often receive only a portion of the debt – or receive nothing at all if the firm has no assets...