With nine votes, the Supreme Federal Court (STF) upheld the prohibition against taxpayers classified as habitual debtors from requesting judicial reorganization or remaining in ongoing proceedings — even opening the possibility of converting the reorganization into bankruptcy. The judgment concluded last Friday (August 21).
The ministers analyzed a lawsuit filed by the Brazilian Bar Association (OAB) against a provision of the Taxpayer Defense Code (LC 225/2026). The legal profession argues that the rule is disproportionate and has a punitive nature, impacting business activity and access to the Judiciary.
The rapporteur's position, Minister Flávio Dino, was unanimously supported. According to him, the provision does not represent a political sanction, but a "legitimate and proportionate restriction" aimed at confronting business structures that "rely on tax evasion as their modus operandi for gaining a competitive advantage.".
According to Dino, the rule implements a reinforcement mechanism within the legal framework designed to protect the market from economic agents who use systematic non-payment of taxes as a competitive advantage, "a practice that harms companies that comply with their obligations.".
According to the rapporteur, the impediment to habitual debtors entering judicial reorganization does not apply in a "broad and generic" way and only affects an "extremely small universe of taxpayers.".
The minister cited data presented in the proceedings by the Attorney General's Office (AGU) showing that the measure is exceptional. According to the information, the universe of taxpayers possibly impacted by the legislation corresponds to approximately 0.081% of the total number of debtors registered as having outstanding debt.
“I therefore reaffirm that the challenged provision does not contemplate a restriction that can be imposed indiscriminately on any and all taxpayers in debt to the tax authorities,” wrote Dino. “It is an exceptional legal measure, specifically directed at the legal figure of the debtor who fulfills all the legal requirements necessary to qualify as a habitual defaulter.”.
Justice Cármen Lúcia did not register a vote.
OAB action
In the lawsuit, the Brazilian Bar Association (OAB) also states that the rule unbalances the insolvency system established in the Bankruptcy and Judicial Reorganization Law (Law 1.101/2005) by allowing an administrative classification to be sufficient to render the company's continued operation unfeasible.
According to the organization, the possibility of declaring bankruptcy without proper judicial review violates due process and can lead to irreversible effects, such as mass layoffs and loss of economic value.
habitual debtor
Enacted in January 2026, the Taxpayer Defense Code defines a habitual defaulter as a debtor whose tax behavior is characterized by repeated, substantial, and unjustified non-payment of taxes.
A debtor who has outstanding tax credits, registered as delinquent debt or established and unpaid, exceeding R$ 15 million and equivalent to more than 100% of their known assets, may be included in this category.
It is also necessary that the maintenance of tax credits in an irregular situation occurs in at least four consecutive assessment periods or in six alternating assessment periods, within a period of 12 months. Another requirement is that there are no objective reasons that would negate the characterization of the default.
Classifying a taxpayer as a habitual debtor requires the initiation of an administrative process that must guarantee the right to a fair hearing and full defense.
Source: JOTA