MEXICO Law and Practice Contributed by: Alejandro Stamoglou, Jesús Pérez Alcántar and Julio Jiménez Manrique, Bello, Gallardo, Bonequi y García, S.C.
actions, including foreclosure of collateral, outside the insolvency process. Under Mexican insolvency law, control of the process shifts depending on the stage. During the conciliation stage, the debtor remains in possession but under the supervision of a conciliator, who is appointed by the court and oversees negotiations and the debtor’s management. If the process moves to bankruptcy ( quiebra ), control passes to a trustee ( síndico ), also appointed by the court, who takes possession of the debtor’s assets and manages liquidation and payment to recognised creditors. Other participants include the visitor ( visitador ) (who initially verifies insolvency conditions) and the inter - ventor, who represents creditors’ interests and is typi - cally proposed by them, with court approval. 7.2 Waterfall of Payments Under Mexican law, creditors are classified based on the nature of their claims, which determines their pri - ority in payment. As a general rule, labour and tax claims have statutory priority over all other claims. The law establishes the following ranking: • singularly privileged creditors – such as funeral expenses and medical expenses related to the debtor’s death; • secured creditors – including mortgage and pledge holders; • creditors with special privilege – those granted a statutory privilege or a right of retention; • unsecured creditors – those not falling under the previous categories; and • subordinated creditors – those who contractually agreed to subordinate their claims to common creditors. 7.3 Length of Insolvency Process and Recoveries Under Mexican law, the conciliation stage lasts 185 calendar days, which may be extended once for up to 90 additional days at the request of recognised credi - tors. If no agreement is reached, the process moves to the bankruptcy stage, whose duration is highly vari - able and often significantly longer.
In practice, recent judicial reforms have introduced delays in commercial matters, including insolvency proceedings, due to the appointment of new judg - es who may lack experience in complex insolvency cases. This has raised concerns in the market about longer timelines and procedural uncertainty. As for recoveries, while the conciliation stage aims to preserve value through restructuring, actual recover - ies for creditors often depend on the debtor’s asset quality and the success of negotiations. Labour and tax claims almost always receive priority payment, while unsecured and subordinated creditors typically recover only a fraction of their claims. 7.4 Rescue or Reorganisation Procedures Other Than Insolvency In Mexico, out-of-court restructuring processes are common. These typically involve direct negotiations between debtors and creditors aimed at debt restruc - turing, extension of payment terms, standstill agree - ments and other contractual arrangements. Such mechanisms are voluntary and lack the legal protec - tions available in formal insolvency proceedings, such as an automatic stay, so their success depends on creditor co-operation and the debtor’s ability to pre - As outlined above, key risk areas for lenders include: • from the issuance of the insolvency judgment and throughout the conciliation stage, all enforcement actions, including foreclosure of collateral, are sus - pended, except for labour and tax claims. This lim - its the lender’s ability to act individually and forces participation in the collective insolvency process; • labour and tax claims rank ahead of all other credi - tors, which can significantly reduce recoveries for lenders, even those with secured claims; • any clause in credit agreements that seeks to broaden obligations upon insolvency may be deemed null and void, limiting contractual protec - tions; and • judicial delays and procedural complexity often lead to prolonged processes, during which asset values decline, impacting overall recoveries. sent a viable turnaround plan. 7.5 Risk Areas for Lenders
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