Countries › Paraguay › Guide › 15. Exiting › Insolvency: creditors' arrangement (convocatoria) and bankruptcy (quiebra)

Insolvency: creditors' arrangement (convocatoria) and bankruptcy (quiebra)

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

Paraguay's 1969 bankruptcy law gives an insolvent debtor two doors: a creditors' arrangement (convocatoria de acreedores, concordato) or bankruptcy liquidation (quiebra), and an insolvent merchant must file for one of them. An arrangement needs two thirds of present creditors holding at least 75 percent of verified claims, and haircuts are capped by law. Acts in the twelve months before filing can be undone, and foreign bankruptcies cannot be used against creditors in Paraguay.

USD figures use PYG 5,868.31 per US dollar, the Banco Central del Paraguay reference quotation for 28 October 2026 (bcp.gov.py cotización referencial). Minimum wage figures use Resolución MTESS 670/2026: monthly PYG 3,044,000, daily for monthly paid workers PYG 101,467 and daily minimum wage (jornal) PYG 117,077, from 1 July 2026. Conversions are for orientation only.

Key facts

Creditor majority to approve an arrangement	2/3 of present creditors with 75% of verified claims Ley 154/1969 art. 44, as of 2026-10-28 · in force
Maximum haircut with a term of two years or less	50 %Ley 154/1969 art. 46, as of 2026-10-28 · in force
Maximum term of an arrangement	4 yearsLey 154/1969 art. 46, as of 2026-10-28 · in force
Clawback look back period	12 monthsLey 154/1969 art. 125 and 126, as of 2026-10-28 · in force

The rule

1. Insolvency, who files and duty to file. Bankruptcy requires insolvency, shown by one or more defaults or other external facts showing inability to pay debts regularly as they fall due. The debtor, its heirs or creditors may file; secured creditors only if their collateral is insufficient and they waive it. A merchant debtor in insolvency must apply for a creditors' arrangement or bankruptcy; an S.A. or S.R.L. files through its legal representatives with authorisation of the shareholders or partners meeting. The court decides within 25 days whether to admit the arrangement or declare bankruptcy.
Cost to do it: Court costs and trustee (síndico) fees, set in the proceedings.
Example: A subsidiary misses payroll and two supplier payments: insolvency is evident and the managers must authorise a filing. / Not quantified in the law.Ley Nº 154/1969 De Quiebras, Art. 1, 2, 3, 9, 12 and 15, 1969-12-09 official text · verified 2026-10-28

2. Arrangement denied in some cases. The court declares bankruptcy instead of admitting an arrangement where, among other cases, the debtor traded against its professional rules or the company was not regularly constituted, did not keep accounts as required, or hid accounts, diverted assets or fraudulently inflated liabilities.
Cost to do it: No separate cost.
Example: A company without proper books goes straight to bankruptcy. / Not a cash cost.Ley Nº 154/1969 De Quiebras, Art. 11, 1969-12-09 official text · verified 2026-10-28

3. Voting and haircut limits. An arrangement is accepted if two thirds of the creditors present, holding at least 75 percent of verified claims, vote for it, or the reverse. Terms must be equal for all unsecured creditors. The haircut can be up to 50 percent if the term is two years or less, at most 30 percent if longer, and the term can never exceed four years; merchants with twenty years of regular trading without prior proceedings can get up to 75 percent.
Cost to do it: The haircut is the creditors' cost.
Example: Unsecured claims of PYG 10,000,000,000: a two year arrangement with a 50 percent haircut pays PYG 5,000,000,000. / About US$1,704,068 owed, US$852,034 paid.Ley Nº 154/1969 De Quiebras, Art. 44, 45 and 46, 1969-12-09 official text · verified 2026-10-28

4. Look back period. Gratuitous acts and payments of debts not yet due made in the twelve months before the bankruptcy declaration or filing are ineffective against the estate. Onerous acts with clearly unbalanced terms, payments of due debts in an unusual form and new security for old debts in the same period can be revoked unless the other party proves the debtor was solvent or it had good reason to think so.
Cost to do it: Clawback of the amounts paid.
Example: An intragroup loan repaid early ten months before the filing can be clawed back. / Not quantified.Ley Nº 154/1969 De Quiebras, Art. 125 and 126, 1969-12-09 official text · verified 2026-10-28

5. Foreign bankruptcy and creditor ranking. A bankruptcy declared abroad cannot be invoked against creditors in Paraguay or over assets located there; if a Paraguayan bankruptcy is also declared, foreign creditors only share in any surplus after local creditors are paid in full. Estate expenses are paid first; specially privileged claims prevail on their assets, then general privileges, including taxes for the current and previous year; unsecured creditors share pro rata. Workers' privileges are governed by their own laws.
Cost to do it: Not applicable.
Example: A foreign court's bankruptcy order over a group parent cannot be used to stop Paraguayan creditors from enforcing against the parent's assets in Paraguay. / Not quantified.Ley Nº 154/1969 De Quiebras, Art. 8, 233, 240, 241 and 242, 1969-12-09 official text · verified 2026-10-28

6. Conduct review. Where the trustee reports wilful misconduct, the judge opens a procedure to qualify the debtor's conduct as fraudulent or negligent, considering whether the debtor met its duty to file, the state of its books and the causes of insolvency; criminal sanctions against directors, managers or representatives of a company are taken into account, and fraudulent or negligent findings are sent to the criminal court.
Cost to do it: Personal exposure of managers.
Example: Hiding assets or fictitious losses can lead to a fraudulent qualification and a criminal referral. / Not quantified.Ley Nº 154/1969 De Quiebras, Art. 160 to 165, 1969-12-09 official text · verified 2026-10-28

Worked example

Subsidiary with PYG 10,000,000,000 unsecured debt (about US$1,704,068): a 30 percent haircut over three years leaves PYG 7,000,000,000 to pay; a 50 percent haircut needs a term of two years or less.

Step by step

Test insolvency early; a merchant that is insolvent must file.
Get shareholder or partner authorisation and prepare the filing with balance sheet and creditor list.
Freeze unusual payments, especially to related parties, given the twelve month clawback.
Propose an arrangement within the haircut and term limits or prepare for liquidation.
Coordinate employee terminations with the trustee.

Common traps

Repaying the parent or granting it new security shortly before filing invites clawback.
Poor books lead straight to bankruptcy and a conduct review.
A foreign insolvency order has no effect on Paraguayan assets or creditors.
The 1969 law predates current company law; check procedural rules with local counsel.

Sources

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