New bill aims to allow “individual bankruptcies” in Brazil

A new bill presented to the House of Representatives creates the possibility of “individual bankruptcies” for people that earn up to three minimum wages (BRL 3,135), in an attempt to facilitate debt renegotiation. 

According to the bill, indebted people will be considered vulnerable when they do not have enough pledged assets or income to clear their debts. If signed into law, it would allow these individuals to present their own bankruptcy plan to the federal government, complete with a list of creditors, debts, and assets, plus a payment plan. 

If the bill were to be approved, the Caixa Econômica Federal bank would purchase these debts and offer the individual a loan with a six-month grace period and 120 months for repayment. The indebted person would also avoid being given a negative credit rating on the databases of credit reporting agencies. 

As of January, 61.3 million Brazilians were considered to be in default, corresponding to 39 percent of adults, according to research by credit reporting agency SPC. The bill follows the rationale behind other similar proposals in Congress, such one to forbid internet providers to cut off service to defaulting customers during the pandemic. However, there is no mention of the huge impact such a measure would have on public accounts, with the deficit already expected to reach almost 10 percent of Brazil’s GDP in 2020. 

• Go deeper: Covid-19 could push over 2,500 Brazilian companies close to bankruptcy, says study
• Also: Brazil’s Justice system could be the next Covid-19 victim
• And: Small business owners next in the firing line amid Covid-19 crisis

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