Bankruptcy and insolvency lawyers in Iceland

Bankruptcy and insolvency law deals with what happens when a person or a company cannot pay its debts. It covers negotiations with creditors, formal debt restructuring, moratoriums and compositions for companies, and bankruptcy proceedings in which the debtor's assets are realised and shared among the creditors.

The legal framework

The main law is the Bankruptcy Act No. 21/1991 (lög um gjaldþrotaskipti), which also regulates the moratorium (greiðslustöðvun) and composition with creditors (nauðasamningar). For individuals, the Act on Debt Adjustment No. 101/2010 (lög um greiðsluaðlögun einstaklinga) offers a structured alternative to bankruptcy.

Options for individuals

• Free advice from the Debtors' Ombudsman (Umboðsmaður skuldara), which helps review your finances and negotiate with creditors.
• Debt adjustment (greiðsluaðlögun): a supervised arrangement in which creditors cannot enforce their claims while a payment plan is agreed.
• Bankruptcy: an administrator takes over your assets. Debts that remain unpaid generally expire two years after the bankruptcy ends, unless a creditor takes special steps to interrupt the limitation period.

Read more in debt problems in Iceland: what are your options?

Companies in difficulty

A company that cannot pay its debts can ask the court for a moratorium to gain time to reorganise, and propose a composition under which creditors accept partial payment. If these fail, the company is wound up in bankruptcy. Board members must act once insolvency is clear: continuing to trade can expose them to personal liability.

Creditors' claims

When a debtor is declared bankrupt, the administrator publishes a call for claims in the Legal Gazette (Lögbirtingablaðið). Creditors must file their claims within the deadline stated there, which is normally two months, or they risk losing them. Employees can claim unpaid wages from the Wage Guarantee Fund (Ábyrgðasjóður launa).

When to contact an insolvency lawyer

Seek advice as soon as debts become unmanageable, when a creditor petitions for your bankruptcy, when your company is close to insolvency, or when a customer or supplier goes bankrupt owing you money. Acting early keeps more options open.