Bankruptcy & Insolvency Law in Chile

Chile's insolvency system in plain English

Chile does not use the word bankruptcy in its statute. Law 20.720, the law on reorganization and liquidation of assets of companies and individuals, sets up the framework, and it is supervised by the Superintendency of Insolvency and Re-entrepreneurship (Superintendencia de Insolvencia y Reemprendimiento, SIR). The cases are heard by ordinary civil courts, with court-supervised professionals running the process.

There are two basic outcomes. In a reorganization, the debtor negotiates a restructuring agreement with its creditors and keeps operating. In a liquidation, the assets are sold and the proceeds are shared out according to the legal order of priority. Both procedures freeze most individual collection actions, so timing and filing deadlines decide who gets paid.

Insolvency is a time-sensitive area. Most of the rules that affect a foreign creditor or owner are deadlines, and many are triggered by publication of a notice in Spanish. Our attorneys monitor the process for you and explain, in English, what each stage means and what decision is needed from you.

What we handle

If you are a creditor, especially a foreign one

The law does not distinguish between Chilean and foreign creditors, but foreign creditors tend to find out late. Once a company enters reorganization or liquidation, claims must be presented and substantiated within the periods that the court sets, and only creditors on the list of recognized claims share in distributions. Missing a deadline can mean being left out.

Priorities matter: employee wages and taxes generally rank ahead, secured creditors are paid from their collateral, and unsecured creditors, which is where most foreign suppliers and lenders sit, are paid last. Whether a transaction made shortly before the filing can be challenged is another question we analyze in each case. The law also includes a cross-border insolvency framework, which helps when a debtor has assets in several countries.

If you own or direct a Chilean company in trouble

Directors and owners often wait too long. The law includes deadlines for filing a liquidation petition in certain situations, and it contains criminal offenses for fraudulent conduct around insolvency, such as hiding assets or favoring some creditors. A reorganization can protect a business from creditor actions while a plan is negotiated, but only if it is requested at the right moment and supported by a credible plan.

Individuals also have mechanisms under the same law, including a renegotiation procedure for consumers through the SIR and a personal liquidation. We refer individual over-indebtedness cases to the right procedure after reviewing the debts.

Common mistakes in Chilean insolvency cases

Foreign suppliers often continue shipping on open terms after warning signs appear, and then discover they are unsecured creditors with little recovery. Others ignore gazette notices because they are in Spanish. On the debtor side, owners sometimes move assets or favor friendly creditors in the weeks before a filing, which can lead to challenges and personal exposure.

Review credit terms, security and guarantees before trouble arises. If you suspect a Chilean customer is failing, a short call with counsel about security and deadlines is usually worth more than months of reminders.