Personal Insolvency in Colombia: How to Legally Get Out of Debt
## What is personal insolvency?
Law 1380 of 2010 (amended by Law 2220 of 2022) created an insolvency framework for non-merchant individuals who can't pay their debts.
It's the individual equivalent of a corporate reorganization process — a second chance to get personal finances in order with legal protection.
Who can use it?
Any individual who: - Is not a merchant (business owners fall under a different law) - Has debts more than 90 days overdue - Has insufficient assets or income to pay all their debts
The two mechanisms of the process
1. Debt negotiation The goal is to reach an agreement with creditors: reducing principal, waiving interest, extending payment terms. The approved agreement carries the force of a court judgment.
2. Liquidation of assets If a payment agreement isn't possible or the debtor has no income to pay it, their assets are liquidated to pay the debts. Once liquidated, the debtor is released from any debts that couldn't be fully paid.
Advantages of using this process
- Suspension of seizures: once the request is admitted, all ongoing collection proceedings and seizures are suspended
- Protection of the home: the family home has special protection during the process
- Payment order: it sets who gets paid first (child support, labor, tax obligations)
- Debt relief: if the estate is liquidated, any remaining debt is extinguished
Where is it processed?
The process is handled through Conciliation Centers authorized by the Ministry of Justice. It doesn't require going to court (although a judge may step in at certain stages).
Documents needed
- National ID
- A detailed statement of assets and liabilities
- Bank statements for the last 6 months
- Property ownership documents
- A list of creditors with amounts and contact information
- Pay stubs or an income statement
Assets excluded from liquidation
- The legal minimum wage
- Tools and equipment necessary for one's livelihood
- The family home (with limits)
- Pension fund savings
Debts that are NOT extinguished
Even if the entire estate is liquidated, some debts don't disappear: - Child- and family-support obligations - Criminal fines - Obligations arising from intentional wrongdoing
Do your debts exceed your ability to pay, and are seizures keeping you from moving forward? The insolvency process could be the solution. We can tell you whether it applies to your situation and the initial steps to take.
Juri, our AI legal assistant, analyzes your specific situation. The initial review is free.
