Countries › Paraguay › Guide › 14. Disputes › Insolvency in Paraguay: creditors' meeting (convocatoria), bankruptcy (quiebra), claw back and ranking of claims under Ley 154/1969

Insolvency in Paraguay: creditors' meeting (convocatoria), bankruptcy (quiebra), claw back and ranking of claims under Ley 154/1969

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Last verified: 2026-10-28 · Status: Stable

Paraguay's insolvency law dates from 1969: an insolvent merchant must apply for a creditors' meeting (convocatoria) or bankruptcy, and the court decides within 25 days while a court appointed trustee supervises. A composition binds unsecured creditors if approved by two thirds of those present holding 75 percent of verified claims (or the reverse), with haircuts capped at 50 percent within 2 years or 30 percent up to a 4 year maximum. In bankruptcy, gifts and early payments in the 12 months before are ineffective, assets are auctioned by a court auctioneer, and secured, tax and labour claims rank ahead of unsecured creditors.

USD figures use PYG 5,868.31 per US dollar, the Banco Central del Paraguay reference quotation published for Wednesday 28 October 2026. Conversions are for orientation only.

Key facts

Insolvency statute	Ley 154/1969 Ley de Quiebras (in force 1 April 1970) Ley 154/1969, as of 2026-10-28 · in force
Time for the court to admit convocatoria or declare bankruptcy	25 daysLey 154/1969 art. 12, as of 2026-10-28 · in force
Window for creditors to file claims	20 to 40 daysLey 154/1969 art. 18, as of 2026-10-28 · in force
Composition approval majority	Two thirds of creditors present with 75% of verified claims, or the reverse Ley 154/1969 art. 44, as of 2026-10-28 · in force
Maximum haircut in a composition (term up to 2 years)	50 %Ley 154/1969 art. 46, as of 2026-10-28 · in force
Maximum composition term	4 yearsLey 154/1969 art. 46, as of 2026-10-28 · in force
Suspect period for gifts and early payments	12 monthsLey 154/1969 art. 125, as of 2026-10-28 · in force
Real estate auction base in bankruptcy	40% of appraisal Ley 154/1969 art. 138 (Ley 5025/2013), as of 2026-10-28 · in force
Tax claims with general privilege	Current and prior year Ley 154/1969 art. 241, as of 2026-10-28 · in force
BCP reference rate used for conversions	5868.31 PYG per USDBCP planilla 28 October 2026, as of 2026-10-28 · in force

The rule

1. Opening proceedings. Bankruptcy presupposes insolvency, shown by one or more defaults or other facts showing inability to pay debts regularly as they fall due; it liquidates all assets of a natural or legal person, merchant or not, in a single procedure. Every insolvent merchant must apply to the court for a creditors' meeting (convocatoria de acreedores) or bankruptcy; filing is itself proof of insolvency and the court decides on admission or bankruptcy within 25 days, may order attachments and a general ban on disposal, and may involve the Sindicatura General de Quiebras. Companies apply through their legal representatives with authorization of the shareholders' or partners' meeting, which may be supplied within 10 days for an S.R.L. and 25 days for other companies. Creditors may apply; secured creditors only if they prove the collateral is insufficient and waive their security. A non merchant can be put into bankruptcy by a creditor with an executive title who proves two or more executions by different unsecured creditors on different debts left unpaid.
Cost to do it: Edict publication for 5 days in a major newspaper, started by the debtor within 3 days of admission (art. 19); trustee fees.
Example: A Paraguayan agro trader that cannot pay its banks applies for convocatoria; the court must admit it or declare bankruptcy within 25 days of the filing. / A foreign supplier owed US$200,000 (PYG 1,173,662,000) by an insolvent distributor may petition for its bankruptcy as an unsecured creditor.Ley Nº 154/1969, Ley de Quiebras, Art. 1, 2, 3, 9, 12, 15, 16 and 65, 1970-04-01 official text · verified 2026-10-28

2. Creditors' meeting and composition. The order admitting the convocatoria appoints a trustee and sets a period of 20 to 40 days, from the last publication, for creditors to file their claims with supporting titles. All creditors, including secured and privileged ones but not workers under labour laws, must file. The judge rules on undisputed and disputed claims within 15 days. The debtor keeps managing its business under the trustee's supervision, but gifts, mortgages, pledges and other acts altering the creditors' position are ineffective unless authorized. Only unsecured creditors vote; secured creditors who vote lose their security, although they may waive at least 25 percent of it to vote for that part. A composition is approved by two thirds of creditors present representing at least 75 percent of verified claims, or the reverse. It may impose a haircut of up to 50 percent if the term does not exceed 2 years, or up to 30 percent if longer, with a maximum term of 4 years; merchants with 20 years of regular trading without prior proceedings may obtain up to 75 percent. Terms must be equal for all unsecured creditors, side deals are void, and dissenting or absent creditors may challenge within 8 days. Failure to comply allows any unsecured creditor to seek rescission and bankruptcy.
Cost to do it: Counsel to file claims within the 20 to 40 day window; costs of the creditors' meeting.
Example: An insolvent retailer with verified unsecured debt of PYG 5,868,310,000 proposes paying 60 percent over 2 years: it needs two thirds of creditors present holding at least PYG 4,401,232,500. / On US$1,000,000 of verified unsecured claims, a 50 percent haircut over 2 years leaves US$500,000 payable; a 3 year plan cannot cut more than 30 percent.Ley Nº 154/1969, Ley de Quiebras, Art. 18, 21, 32, 36, 43, 44, 45, 46, 47, 56 and 62, 1970-04-01 official text · verified 2026-10-28

3. Bankruptcy effects and claw back. The bankruptcy order secures all assets for the trustee, retains the debtor's mail, imposes a registered general ban on disposal, and is published for 5 days in two newspapers. Bilateral contracts are not terminated: the trustee, with court authorization, may perform them, and the counterparty may require it to decide. Acts in the 12 months before bankruptcy or the filing are ineffective against the estate if they are gifts (beyond customary ones) or payments of debts not yet due; onerous acts with manifestly unbalanced terms, payments in kind other than agreed and new security for prior unsecured debts in that period may be revoked unless the counterparty proves the debtor was solvent or it had good reason to think so; onerous acts with close relatives in the prior 6 months may also be revoked. If the trustee will not sue, creditors may ask the court to make it, or sue themselves with authorization. Conduct may be classified as negligent or fraudulent, with matters sent to the criminal courts; rehabilitation follows after 3 years if no such classification, or 4 or 7 years after a negligent or fraudulent finding.
Cost to do it: Litigation costs of claw back actions are borne by the estate or by the creditors who bring them.
Example: A debtor that granted a mortgage to one bank for an old unsecured loan 8 months before bankruptcy: the trustee may revoke it unless the bank proves it reasonably believed the debtor solvent. / A US$100,000 (PYG 586,831,000) prepayment of a debt not yet due, made 10 months before bankruptcy, is ineffective against the estate.Ley Nº 154/1969, Ley de Quiebras, Art. 67, 70, 93, 125, 126, 127, 146, 160, 165, 166, 167 and 171, 1970-04-01 official text · verified 2026-10-28

4. Realization and ranking. Once the bankruptcy order is final and claims verified, the trustee realizes the assets within 30 calendar days by auction through a public auctioneer appointed by the judge, after a 5 day edict; real estate has a base of 40 percent of a court appraiser's valuation, movables have no base, and a second auction for a business as a whole is held with a 25 percent reduction. The judge may authorize a tender, private sale of specific assets, or, at the request of the trustee or creditors holding two thirds of unsecured verified claims, a tender for transfer of the whole estate to a buyer who must pay estate costs and privileged claims in full. Secured creditors may request a special auction of their collateral. Workers' wages earned in the last 6 months and termination indemnities are paid within 30 days of verification or when funds exist. Estate costs (court, administration, trustee obligations) come first; special privileges over specific assets prevail over general ones; general privileges include, in order, funeral, last illness, food for the family and state and municipal taxes for the current and prior year; unsecured creditors share the rest pro rata. Labour privileges follow labour laws.
Cost to do it: Auctioneer commission and publication costs come out of the proceeds as estate costs (art. 240).
Example: A factory appraised at PYG 5,868,310,000 is auctioned with a base of PYG 2,347,324,000 (40 percent). / On an appraisal of US$1,000,000, the first auction base is US$400,000; unsecured creditors are paid only after estate costs, workers and privileged claims.Ley Nº 154/1969, Ley de Quiebras, art. 138 and 139 as amended by Ley Nº 5025/2013, Art. 138, 139, 141, 142, 154, 233, 234, 235, 236, 240, 241 and 242, 2013-09-05 official text · verified 2026-10-28 · changed: Ley 5025/2013 (promulgated 5 September 2013) rewrote art. 138 and 139: realization within 30 calendar days, one newspaper edict of 5 days for movables and real estate, and a real estate base of 40 percent of a court appraiser's valuation instead of the tax valuation.

5. Sindicatura General de Quiebras and small estates. The Sindicatura General de Quiebras is an auxiliary body of the Supreme Court that administers and realizes bankrupt estates, pays debts and performs the functions the law assigns; trustees are appointed by the Supreme Court for one year terms and must be Paraguayan, at least 25, lawyers, economists or accountants with three years of practice. For small estates (assets up to PYG 50,000 and liabilities up to PYG 200,000 or amounts updated by Supreme Court acordada), the creditors' meeting is a mandatory preliminary to bankruptcy, a composition needs only a majority of creditors present holding a majority of capital, and may impose a 70 percent haircut and a 2 year term.
Cost to do it: Trustee functions are performed by court appointed officials of the Sindicatura.
Example: The statutory small estate thresholds of PYG 50,000 and PYG 200,000 are 1969 amounts; any update depends on Supreme Court acordadas, none verified here. / In USD, the original thresholds are below US$35 at today's rate, so check for an acordada before relying on art. 226.Ley Nº 154/1969, Ley de Quiebras, Art. 210, 212 and 226, 1970-04-01 official text · verified 2026-10-28

Class	Claims	Article
Paid first	Estate costs: court, administration, realization, trustee obligations	240
On the specific asset	Special privileges over specific assets (court costs on the asset, taxes on the asset, pledge, mortgage) on those assets	233 to 239
Under labour laws	Workers: wages of the last 6 months and termination indemnities, under labour laws	154, 242
General privilege	General privileges in order: funeral, last illness, family food, state and municipal taxes for current and prior year	241
Last	Unsecured creditors pro rata	233

Classes of claims in a Paraguayan bankruptcy (Ley 154/1969); worker priority follows labour laws (art. 242)

Worked example

A Paraguayan meat processor files for convocatoria with US$1,000,000 (PYG 5,868,310,000) of unsecured debt. Creditors file within the window set by the court; the composition offers 55 percent paid over 2 years, a 45 percent haircut within the 50 percent cap. It passes with two thirds of creditors present holding 75 percent of verified claims. A dissenting supplier has 8 days to challenge. If the processor later defaults, any unsecured creditor can seek rescission and bankruptcy.

Step by step

Watch for the edict: the claim filing window of 20 to 40 days runs from the last publication.
File your claim with original titles or certified copies and state any privilege.
If secured, decide before voting: voting as unsecured forfeits security unless you waive only part (minimum 25 percent).
Review payments and security received from the debtor in the last 12 months for claw back risk.
Consider buying the business as a going concern through a tender under art. 141.

Common traps

Secured creditors who vote on the composition lose their security (art. 43).
New security for an old unsecured debt in the 12 months before bankruptcy can be revoked (art. 126).
Agreements giving one creditor better terms than the composition are void (art. 56).
The small estate thresholds of art. 226 are nominal 1969 figures; check Supreme Court acordadas.
The 1969 law has no modern reorganization tools such as debtor in possession financing rules or cross border insolvency provisions.

Sources

← Claims against the State in Paraguay: administrative appeals, the Tribunal de Cuentas and arbitration of public contractsConsumer claims in Paraguay: Ley 1334/1998, abusive clauses, prepayment of credit and collective actions →

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