Insolvency Law at Iceland
Iceland's insolvency framework encompasses both personal and corporate bankruptcy procedures, aiming to balance debtor relief with creditor protection. Here's an overview of the key aspects:
Personal Bankruptcy (Individuals)
Individuals in Iceland facing insolvency can initiate bankruptcy proceedings by filing a claim with the district court of their legal domicile. The process involves: (Bancruptcy of individuals | Ísland.is)
Filing a Bankruptcy Claim: The debtor submits a written claim detailing their financial situation, including assets, liabilities, income, and expenditures. Supporting documents, such as wage slips and tax returns, are required. (Questions and answers)
Court Hearing: The district court reviews the claim. If the conditions for bankruptcy are met, a hearing is scheduled. The debtor must attend; failure to do so may result in the dismissal of the claim. (Bancruptcy of individuals | Ísland.is)
Appointment of a Trustee: Upon approval, a trustee is appointed to manage the bankruptcy estate, liquidate assets, and distribute proceeds to creditors.
Two-Year Limitation Period: After the liquidation, a two-year period begins during which certain debts are deferred. Debtors can discharge these debts if they do not acknowledge or make payments during this period. (Bancruptcy of individuals | Ísland.is)
Post-Bankruptcy: Bankruptcy affects creditworthiness and is registered in the default register for two years. Debtors may also face liability obligations if they have provided guarantees for others' debts. (Bancruptcy of individuals | Ísland.is)
Corporate Bankruptcy
For companies unable to meet their obligations, bankruptcy proceedings are initiated by filing a claim with the district court. The process includes: (...due to a company’s bankruptcy - VR union)
Filing a Bankruptcy Claim: The company's board submits a written claim detailing the company's financial status, including assets, liabilities, and operations.
Court Hearing: The district court reviews the claim. If the conditions for bankruptcy are met, a hearing is scheduled. Company representatives must attend; failure to do so may result in the dismissal of the claim.
Appointment of a Trustee: A trustee is appointed to manage the company's assets, liquidate them, and distribute proceeds to creditors.
Employee Claims: Employees with wage claims against a bankrupt company must lodge their claims within two months of the liquidator's announcement. Wage claims are priority claims and are paid first if assets are available. If not, the Wage Guarantee Fund may cover unpaid wages up to certain limits. (Company bankruptcy - VR union)
Financial Institution Resolution
The Central Bank of Iceland, through the Resolution Authority, oversees the resolution of failing or likely-to-fail credit institutions and investment firms. The process involves: (Resolution Authority)
Assessment of Financial Distress: Determining if the institution cannot meet its obligations or is highly likely to fail. (Resolution Authority)
Resolution Measures: Implementing measures such as bail-in, establishment of a bridge institution, sale of business, or asset separation to ensure continuity of critical functions. (Resolution plans)
Minimum Requirement for Own Funds and Eligible Liabilities (MREL): Determining the minimum financial buffer institutions must maintain to absorb losses and support resolution efforts. (Resolution Authority)
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