Latvia’s Insolvency Landscape Shifts: Fewer Bankruptcies, More Restructuring

Latvia is experiencing a notable shift in its insolvency landscape, with a decrease in both personal and corporate insolvencies alongside a rise in the use of legal protection processes (TAP), according to recent data from the Insolvency Control Service (MKD). These trends suggest a proactive approach by businesses to address financial difficulties before they escalate into full-blown bankruptcy.

Rise in Legal Protection Processes

In 2025, 127 TAPs were proposed, a 7% decrease compared to 2024. However, the number of announced TAPs increased significantly, rising by 32% to 37 processes. This indicates a higher success rate in initiating and approving these restructuring plans. The proportion of proposed to announced TAPs reached 29%, a nine-percentage-point increase from the previous year. The proportion of declared TAPs to declared personal insolvency proceedings likewise increased by 4%.

Decline in Insolvencies

The number of initiated insolvency cases for legal entities decreased by 6%, and the number of declared insolvency processes for legal entities fell by 5%. Personal insolvency proceedings saw an even more substantial decline, dropping by 23% in 2025. This downward trend in personal insolvencies has been ongoing since 2021, potentially linked to increases in the minimum wage and the associated rise in the deposit required for personal insolvency proceedings [MKD].

Process Duration and Recovery Rates

Despite the positive trends in preventing insolvencies, the average duration of insolvency processes has increased to two years. This is attributed to factors such as legal proceedings, criminal investigations, and debt collection efforts [MKD].

Recovery rates for creditors showed mixed results. Unsecured creditors recovered 20 cents for every euro claimed, while secured creditors saw a recovery rate of 51 cents per euro – a decrease from 2024. The overall costs associated with insolvency processes amounted to 42 cents for every euro covered or recovered from creditors. The presence of “empty companies” – those with no assets – continues to hinder recovery efforts, accounting for 52% of cases where a report of no property was filed [MKD].

Current Status and Future Changes

As of the beginning of 2026, there were 2,156 active insolvency proceedings in Latvia: 872 involving legal entities and 1,292 involving natural persons, alongside 150 TAPs.

Significant changes are underway for the MKD. As of September 30, 2025, the MKD ceased operations, with its functions transferred to the Ministry of Justice (TM) and the Judicial Administration (TA) on October 1, 2025. The TM will oversee administrator activities and handle complaints, while the Latvian Association of Insolvency Process Administrators will focus on industry self-regulation. The TA will manage the employee claims guarantee fund, deposit costs, and the Electronic Insolvency Accounting System [MKD], [IAIR].

Key Takeaways

• A shift towards preventative financial restructuring is evident in Latvia, with a rise in the use of legal protection processes (TAP).
• Both personal and corporate insolvencies are decreasing, suggesting improved financial health among businesses and individuals.
• The duration of insolvency processes remains lengthy, impacting recovery rates for creditors.
• The MKD’s functions have been transferred to the Ministry of Justice and the Judicial Administration, signaling a restructuring of Latvia’s insolvency framework.