Bankruptcy of your debtor: what does this mean for you?

The number of bankruptcies this year is high compared to previous years. What should you do as a creditor if the company you have a claim against has gone bankrupt?

Submitting a claim to the trustee

When a company is declared bankrupt, a trustee is appointed. The trustee will make an inventory of the bankrupt company’s assets and liabilities, manage the assets, and sell them in order to pay the creditors.

In short, the trustee will try to recover as much money as possible to pay the company’s debts. You must submit your claim to the trustee. Often, many creditors remain unpaid, particularly unsecured creditors. This is because creditors higher in the ranking are paid first.

Ranking of creditors

There is therefore a ranking order among creditors in bankruptcy. The higher the rank of the creditor, the greater the chance that the creditor will be paid. The ranking order is as follows:

1. Estate creditors → first the trustee and estate costs (e.g., rent after bankruptcy and the costs of continuing business activities by the trustee, including wages of employees after the date of bankruptcy).
2. Separatists → recover separately on their securities (mortgage or pledge).
3. Preferential creditors → tax authorities, UWV, employees who are still owed wages for the period prior to the bankruptcy.
4. Unsecured creditors → other creditors, distribution pro rata.
5. Subordinated creditors → claims that have been agreed to be subordinated are only dealt with last and often receive nothing.

End of bankruptcy

Bankruptcy can end in various ways:

1. Agreement: an agreement can be reached with the creditors on the settlement of the debts.
2. Liquidation: the trustee sells the company’s assets and distributes the proceeds among the creditors.
3. Termination of bankruptcy due to lack of assets: the bankruptcy is terminated if there are no or insufficient assets to distribute.

Not always a clean slate for bankruptcies

If there is not enough money to pay off all the debts, these debts will remain after the bankruptcy has been terminated. A creditor can still come forward in the future and demand payment. This is different if the bankruptcy has ended in an agreement between the creditors or the court (homologation).

Director liability

A director who knew that bankruptcy was imminent may be liable in the following cases, among others:

1. Entering into unenforceable obligations

o Director enters into a contract while bankruptcy is inevitable.

o Example: signing a new lease for business premises while there is already no money to meet current obligations.

2. Selective payment of creditors

o Sometimes permitted (the director may choose who to pay when resources are scarce).

o Not permitted if the director acts in bad faith to favor one party, for example, himself or an affiliated party.

3. Frustrating recovery

o Transferring assets to another company or to private individuals, leaving creditors empty-handed.

4. Failure to fulfill commitments or guarantees

o For example, the director makes a personal commitment (“everything will be fine, payment will definitely follow”), while knowing that this is not true.

Finally

If you would like to investigate whether there could actually be a case of director liability, we will be happy to help you! Contact us by email, phone or fill out the contact form for a confidential and no-obligation initial consultation.