Prepackage bankruptcy in Mexico

 A debtor may file a petition to be adjudicated in bankruptcy in three ways: the ordinary petition, the prepackage petition, and the imminent general default petition.

Bankruptcy adjudication is not automatic, and even in voluntary petitions, a prebankruptcy procedure needs to be initiated before the bankruptcy adjudication. In the prebankruptcy, the parties will submit evidence to prove whether the debtor is in general default. It is not sufficient that the debtor merely confesses a general default to the court. However, there is no need for a prebankruptcy procedure in case of a prepackage petition, and the judge will immediately adjudicate the debtor in bankruptcy.

The prepackage petition must be signed by the debtor and the creditors representing at least the simple majority of the total liabilities stating, under oath, that the debtor is in general default.

Besides avoiding the prebankruptcy procedure, there is no other utility of the prepackage petition because:

-        The reorganization plan, signed and submitted by the debtor and his creditors, will not necessarily be the final plan submitted for approval because the creditors that signed it might not be allowed as creditors or because they do not meet the majority while other creditors that did not sign the initial plan do.

-        There is no legal provision to compel the creditors who signed the prepackage petition to sign the plan's final draft (Lock-up agreements).

For further information about bankruptcy law in Mexico, my work "Bankruptcy Law in Mexico", can be accessed at https://works.bepress.com/francisco-rodrigueznepote/4/, where it can be downloaded freely. A complete translation of the legal text can be found there, as well.

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