Bankruptcy in Jordan is no longer governed by the traditional bankruptcy provisions that previously appeared in the Commercial Code. Insolvency Law No. 21 of 2018 repealed those provisions and replaced them with a modern framework for insolvency, business reorganization, liquidation, and creditor rights.
The Insolvency Law applies to persons and entities carrying on economic activities in the situations covered by the law, including companies, sole proprietors, traders, and registered professionals. It also regulates creditor priorities and whether a financially distressed business may be reorganized or ultimately liquidated.
Quick Answer
Does Jordan still have a bankruptcy law? The former bankruptcy and preventive composition provisions were repealed by Insolvency Law No. 21 of 2018. The current legal framework deals with insolvency declarations, reorganization, liquidation, and creditor rights.
What does filing for bankruptcy mean in Jordan today? What many people call “filing for bankruptcy” is now generally handled through an application for a declaration of insolvency where the requirements for actual or imminent insolvency are satisfied.
Who gets paid first when a company becomes insolvent? Creditor priority generally depends on the type of claim, including secured claims, preferential claims, unsecured claims, and subordinated claims, with separate rules for debts arising during insolvency proceedings.
Does Jordan still have the old preventive composition procedure? No. The former procedure was repealed, and financially distressed businesses are now dealt with under the Insolvency Law, including reorganization where the business can continue operating.
Is your company struggling with debt, facing creditor claims, or considering insolvency proceedings in Jordan? An insolvency lawyer can review the business activity, financial position, debts, security interests, and available documents to help identify the appropriate legal procedure.
Review an Insolvency Case via WhatsApp
Or continue reading about the effects of insolvency and creditor priorities in Jordan.
What Does Bankruptcy Mean Under Jordanian Law Today?
Historically, bankruptcy under Jordanian commercial law was associated with a trader’s inability to pay commercial debts. That system is no longer the current legal framework. Insolvency Law No. 21 of 2018 repealed the former bankruptcy and preventive composition provisions contained in Articles 290 to 477 of the Commercial Code.
Jordanian law now uses the concept of insolvency. The law describes insolvency as a situation in which a debtor stops or becomes unable to pay debts regularly as they fall due, or where total liabilities exceed the value of the debtor’s assets. It also recognizes imminent insolvency where the debtor is expected to lose the ability to pay within the following six months despite currently being able to meet obligations.
In short: Jordan no longer relies on the former Commercial Code bankruptcy system for the situations covered by the Insolvency Law. Insolvency Law No. 21 of 2018 now governs actual and imminent insolvency, reorganization, and liquidation for the persons and businesses within its scope.
Financial Distress vs. Legal Insolvency in Jordan
Financial distress and legal insolvency may look similar, but they are not the same. A business may experience temporary cash-flow problems without legally meeting the conditions for insolvency.
Insolvency is a financial condition defined by law, while a declaration of insolvency is the court decision that formally starts the applicable insolvency proceedings when the legal requirements are satisfied.
| Factor | Financial Distress | Legal Insolvency |
|---|---|---|
| Definition | A temporary difficulty meeting financial obligations. | Inability to pay debts regularly, or liabilities exceeding assets, in the circumstances defined by law. |
| Legal Nature | A financial condition that does not automatically begin court proceedings. | A financial condition regulated by the Insolvency Law when the requirements for actual or imminent insolvency are met. |
| Duration | May be temporary or short-term. | Continues until addressed through the legally applicable insolvency process, reorganization, or liquidation. |
| Legal Effects | Does not automatically create insolvency-law consequences. | A declaration of insolvency can restrict individual enforcement and affect the management and disposition of the insolvency estate. |
| Competent Authority | Does not by itself require court involvement. | A declaration of insolvency is issued by the competent court. |
| Possible Solutions | May be resolved through refinancing, temporary funding, or debt restructuring. | Handled through the procedures established by Jordan’s Insolvency Law. |
What Happens After a Declaration of Insolvency in Jordan?
Once a court issues a declaration of insolvency, several legal consequences may affect the debtor’s assets, management of the insolvency estate, and relationships with creditors. The precise effects depend on the circumstances and the court’s decisions.
- Suspension of individual enforcement: Creditors generally cannot continue individual enforcement against the debtor’s assets after insolvency is declared, subject to the periods and exceptions provided by law.
- Centralized creditor claims: Creditors submit their claims through the insolvency proceedings rather than continuing separate collection efforts.
- Management of the insolvency estate: The debtor’s authority to manage or dispose of assets may be affected by how the application was filed, the court’s decision, and the powers given to the insolvency agent.
- Interest and late-payment penalties: The calculation of certain interest and late-payment penalties on insolvency debts may stop from the date insolvency is declared, subject to statutory exceptions.
- Possibility of reorganization: If the economic activity remains viable, the case may proceed to reorganization with a plan designed to address the financial difficulties rather than moving directly to liquidation.
Creditor Priority in a Company Insolvency in Jordan
When a company becomes insolvent in Jordan, creditors are not necessarily paid equally. Their rights are ranked according to the priority rules established by the Insolvency Law.
Article 106 provides for priority between different categories of claims. A lower-ranking category is generally not paid until the higher-ranking category has been dealt with according to law. If available funds are insufficient to satisfy all claims within the same category, distribution takes place according to the applicable statutory rules.
Creditor Priority in Jordanian Insolvency Proceedings
| Priority | Type of Claim | Treatment |
|---|---|---|
| Insolvency proceeding claims | Debts arising during the insolvency proceedings | Receive priority treatment under the Insolvency Law, subject to secured creditors’ rights in the proceeds of their collateral. |
| 1 | Secured Claims | Paid from the proceeds of the relevant collateral in accordance with the rules governing secured creditors. |
| 2 | Preferential Claims | Paid according to the priority assigned to them under the Insolvency Law. |
| 3 | Unsecured Claims | Paid after claims enjoying a higher statutory priority. |
| 4 | Subordinated Claims | Considered after claims in the higher-ranking categories have been dealt with. |
In short: Creditor priority in a company insolvency in Jordan does not depend only on when the debt arose. The type of claim, the existence of security, and the statutory priority assigned under the Insolvency Law are also important.
Source: Insolvency Law No. 21 of 2018 – Companies Control Department
Does Jordan Still Have Preventive Composition Against Bankruptcy?
The former preventive composition procedure is no longer part of Jordan’s current bankruptcy framework. Article 140 of Insolvency Law No. 21 of 2018 repealed the bankruptcy and preventive composition provisions formerly contained in Articles 290 to 477 of the Commercial Code.
The current system addresses financially distressed economic activity through insolvency proceedings. Depending on the circumstances, these may move from the preliminary phase to reorganization where continued operation is possible, or to liquidation where the business cannot continue or a reorganization plan cannot be implemented.
Role of Jordanian Courts in Bankruptcy and Insolvency Cases
The competent court considers applications for declarations of insolvency and supervises the proceedings provided for under Jordan’s Insolvency Law, including decisions affecting the insolvency estate and the rights of debtors and creditors.
- Review the application for a declaration of insolvency and determine whether the statutory requirements are met.
- Order precautionary measures where necessary to protect the insolvency estate.
- Appoint an insolvency agent and define that person’s powers in accordance with the law.
- Consider applications and objections arising during the insolvency proceedings.
- Supervise the transition to reorganization or liquidation depending on the development of the case.
Role of an Insolvency Lawyer in Jordan
An insolvency lawyer in Jordan can review the debtor’s financial position, determine whether the circumstances may amount to actual or imminent insolvency, prepare the necessary applications and evidence, and represent either a debtor or creditor during the proceedings.
Legal review may also involve secured and unsecured debts, creditor priorities, enforcement proceedings, business viability, available assets, and whether reorganization or liquidation may be the more appropriate route.
Frequently Asked Questions About Bankruptcy in Jordan
What Is Bankruptcy Under Jordanian Law?
Bankruptcy in Jordan is no longer governed by the traditional bankruptcy rules formerly found in the Commercial Code. Insolvency Law No. 21 of 2018 now provides the main legal framework for insolvency, including declarations of insolvency, business reorganization, liquidation, and creditor rights for persons and businesses within its scope.
Does Jordan Currently Have a Bankruptcy Law?
Jordan no longer has the traditional bankruptcy system that previously existed under the Commercial Code. Insolvency Law No. 21 of 2018 repealed the former bankruptcy and preventive composition provisions and now governs insolvency, reorganization, liquidation, creditor priorities, and the legal effects of a court declaration of insolvency.
How Do You File for Bankruptcy in Jordan?
The current legal procedure is called a declaration of insolvency rather than traditional bankruptcy. An application is submitted to the competent court when the statutory insolvency conditions are met. The court reviews the application and supporting evidence, and if insolvency is declared, the legal procedures governing the debtor’s estate and creditor claims begin.
Who Gets Paid First When a Company Becomes Insolvent in Jordan?
Creditor priority is determined under Jordan’s Insolvency Law. Secured creditors generally have rights in the proceeds of their collateral, followed by preferential claims, unsecured claims, and lower-ranking claims. Separate rules also apply to debts arising during insolvency proceedings and to the distribution of available funds among creditors in the same category.
Does Jordan Still Have Preventive Composition Against Bankruptcy?
No. The former preventive composition procedure is no longer part of Jordan’s current legal framework. Insolvency Law No. 21 of 2018 repealed the old bankruptcy and preventive composition provisions. Financially distressed businesses are now dealt with through insolvency procedures, including reorganization where continued operation of the business remains possible.
What Is the Difference Between Financial Distress and Insolvency in Jordan?
Financial distress may be temporary, such as a short-term cash-flow problem, and does not automatically start court proceedings. Insolvency is a financial condition defined by law. Once insolvency is formally declared by a court, legal rules governing the debtor’s assets, creditor claims, reorganization, and possible liquidation may apply.
Conclusion
Bankruptcy in Jordan is now addressed primarily through Insolvency Law No. 21 of 2018, which replaced the traditional bankruptcy and preventive composition provisions previously found in the Commercial Code.
The Insolvency Law regulates financial distress through formal insolvency proceedings, including the possibility of reorganization where a business remains viable and liquidation where continued operation is no longer possible. It also establishes rules governing creditor priorities and management of the insolvency estate.
The legal outcome therefore depends on the type of debtor, financial position, nature of the debts and security interests, creditor claims, and the stage reached in the insolvency proceedings.
Do you need to understand your rights in an insolvency case in Jordan?
Whether you are a debtor or creditor, the debts, security interests, financial position, and stage of the proceedings can be reviewed to clarify your legal position and available options under Jordan’s Insolvency Law.
Prepared and legally reviewed by Attorney Mohammad Jaser Al-Atassi
The information in this article was reviewed with reference to Jordan’s Insolvency Law, the regulations issued under it, and relevant official sources.
Last legal review: August 29, 2026
Official Legal Sources
This article was prepared with reference to Jordanian legislation and official sources relating to insolvency, including:
- Insolvency Law No. 21 of 2018 – Companies Control Department
- Insolvency Regulation No. 8 of 2019 – Companies Control Department
- Electronic Insolvency Register – Companies Control Department
Legal Disclaimer: This article provides general legal information only. The application of Jordan’s insolvency rules, creditor priorities, and the appropriate procedure depend on the type of debtor, debts, security interests, financial position, and facts of each case.
Mohammad Jaser Al-Atasi is a lawyer and legal consultant based in Amman, Jordan, with over 25 years of experience in litigation and legal advisory services. He holds a Bachelor of Laws and a Master’s degree in Civil Law, in addition to specialized qualifications in Sharia and Arbitration. He is the founder of Al-Atasi Law Firm and Legal Consultations, where he provides legal services to individuals and businesses in civil, commercial, and criminal matters, as well as contract drafting, legal appeals, and representation before Jordanian courts.