Determination of Monetary Debts in Iranian Bankruptcy Law: An Economic Analysis

Articles in Press

Document Type : Original Article

Author

Economic Law, Faculty of Law, Shahid behehshti University

Abstract

The principle of "equality of creditors" implies that the execution of bankruptcy law should treat creditors equally and not lead to discrimination. At the same time, bankruptcy law should not result in undue benefit for the bankrupt. In the Iranian legal system, where the acceptance of interest rates has been challenging due to the suspicion of usury (ribā), a duality exists between the inflation rate and the interest rate for discounting a bankrupt's debts. The issue becomes more complex when the temporal basis for discounting the debts is also not uniform. In fact, matured debts (relative to the date of cessation of payments of obligations by the merchant) are discounted using the inflation rate up to the date of cessation. However, unmatured debts (relative to the date of cessation) are discounted by applying a specific interest rate up to the date of the bankruptcy issuing in the court decision. This different approach to matured and unmatured debts violates the principle of equality among creditors. Furthermore, the significant gap between the date of debt settlement and the date of discounting the debts (both matured and unmatured), combined with inflation, has, in practice, by deviating from the principle of full compensation, led to undue benefit for the bankrupt at the expense of the creditors, exceeding the logic of bankruptcy law. Thus, the current practice of the bankruptcy law in Iran does not have a desirable status in terms of adhering to the principles of equality among creditors and full compensation.

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Legal Research Quarterly

Articles in Press, Accepted Manuscript
Available Online from 01 October 2025

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History

  • Receive Date: 18 August 2024
  • Revise Date:
  • Accept Date: 01 October 2025

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