The discharge of remaining liabilities, governed by Articles 235 et seq. of the Portuguese Insolvency and Corporate Recovery Code (CIRE), allows an individual declared insolvent to be released from the debts that are not paid in the insolvency proceedings or in the three years after they close. It is a second chance to start again without the weight of past debts, but it is not automatic: it depends on the debtor's conduct before, during and after the proceedings.

Which debts are excluded

The discharge does not cover (Article 245(2) of the CIRE):

  • maintenance claims;
  • compensation owed for intentional wrongful acts committed by the debtor, provided it was claimed as such;
  • fines and other financial penalties for criminal or administrative offences;
  • tax and social security claims.

How and when to apply

The debtor applies in the petition filing for insolvency or, if the insolvency was requested by a creditor, within 10 days of being served (Article 236 of the CIRE). A later application may still be admitted by the judge, but it is always rejected if made after the meeting that assesses the administrator's report or, where there is no such meeting, more than 60 days after the judgment declaring the insolvency.

Before: conduct that can prevent the discharge

The application is dismissed at the outset in several situations set out in Article 238 of the CIRE, including where the debtor:

  • intentionally or with gross negligence provided false or incomplete information about their financial situation to obtain credit, in the three years before the proceedings;
  • has already been granted a discharge in the previous 10 years;
  • failed to file for insolvency when required, or let more than six months pass, to the detriment of creditors and knowing there was no serious prospect of improvement;
  • is, on the evidence, very probably at fault in causing or aggravating the insolvency;
  • was convicted of fraudulent insolvency, negligent insolvency, frustration of creditors or preferring creditors (Articles 227 to 229 of the Penal Code) in the previous 10 years or after the insolvency petition.

During: the assignment period

If the application is admitted, the judge issues the initial order and appoints a trustee (fiduciário). For the three years after the insolvency proceedings close — the assignment period — the debtor's disposable income is deemed assigned to the trustee, who distributes it among the creditors (Article 239 of the CIRE).

Disposable income is everything the debtor receives, except what the judge excludes, in particular what is reasonably necessary for the minimally dignified support of the debtor and their household and for carrying on their professional activity. The amount excluded for support should not, as a rule, exceed three times the national minimum wage, unless the judge gives reasons for a different amount. If the debtor's circumstances change, the court may review that amount.

During the assignment period, the debtor must, among other duties (Article 239(4) of the CIRE):

  • not hide or conceal any income received, on any basis;
  • carry on paid work, not give it up without legitimate reason and, if unemployed, look diligently for work, without unjustifiably refusing a job they are fit for;
  • immediately hand over to the trustee the part of their income that is assigned;
  • inform the court and the trustee of any change of address or employment within 10 days;
  • make no payments to insolvency creditors other than through the trustee, and give no special advantage to any of them.

Extension and early termination

The assignment period may be extended by up to three years, on a reasoned application by the debtor, a creditor, the insolvency administrator or the trustee, in the cases provided for in Article 242-A of the CIRE. An extension is not a matter of mere convenience: the legal requirements must be met.

The court may also bring the discharge procedure to an early end (Article 243 of the CIRE), in particular where the debtor breaches their duties intentionally or with gross negligence, harming the satisfaction of claims; where any circumstance that would have justified dismissing the application comes to light after the initial order; or where the insolvency is classified as culpable.

After: the final decision and revocation

At the end of the assignment period, the judge decides, after hearing the debtor, the trustee and the creditors, whether to grant the discharge (Article 244 of the CIRE). It is granted only if the debtor has met their duties and none of the grounds for refusal provided by law applies. Once granted, it extinguishes the claims still outstanding, with the exceptions mentioned above.

Even after it is granted, the discharge may be revoked, under the terms and time limits of Article 246 of the CIRE, if it is shown that the debtor intentionally breached their duties during the assignment period, or that any of the situations preventing the discharge existed, with significant harm to creditors.

Frequently asked questions

Can a company benefit from the discharge of remaining liabilities?

No. The discharge is available only to individuals. Companies have other tools, such as the Special Revitalisation Proceedings (PER) or an insolvency plan.

How much of their income can the debtor keep?

The amount is set by the judge case by case, based on what is needed for the minimally dignified support of the debtor and their household. As a rule, it should not exceed three times the national minimum wage, but the judge may set a different amount in a reasoned decision.

Are tax and social security debts written off?

No. Tax and social security claims are excluded from the discharge (Article 245(2)(d) of the CIRE), as are maintenance debts and fines.

Final note

The discharge of remaining liabilities requires a three-year commitment and transparent conduct towards the court and the trustee. These matters fall within the Insolvency and Restructuring practice of ME&JBA — Advogados, in Lisbon.*

Manuel Elísio
Lawyer

* An artificial intelligence tool was used in preparing this article as an aid to structuring and drafting the text and to its linguistic review. The legal analysis, the selection and verification of the legal grounds and the final review of the content are the responsibility of the author.