Bankruptcy proceedings: everything about going bankrupt
There are 2 forms of bankruptcy proceedings. A company or entrepreneur can file for bankruptcy for his own company or a creditor can file a bankruptcy petition against a debtor. Bankruptcy proceedings can be started when due and payable debts, including invoices and bills, are not being paid or can no longer be paid, deliberately or otherwise.
A company in financial difficulties can prevent bankruptcy by acting on time. For example, an attempt can be made to enter into a composition with creditors, the company can apply for a suspension of payment or investigate whether a restart via a pre-pack is possible. If it appears that making payment arrangements with creditors or realizing a restart does not promote the viability of a business, filing a petition for bankruptcy is often the only solution that remains. An entrepreneur or company can initiate bankruptcy proceedings itself or be forced to do so by creditors.
Bankruptcy proceedings: filing a petition for bankruptcy
A company or organization can file a petition for bankruptcy when the debtor has at least two outstanding debts with two or more creditors. In that case, the debtor is insolvent. One of these debts must be due and payable. The bankruptcy petition is filed with the court in the company’s place of business, after which the bankruptcy proceedings start. Is a company or entrepreneur filing for bankruptcy itself? In that case, hiring a lawyer is not mandatory. If the petition is submitted by a debtor, bankruptcy proceedings must go through a lawyer.
Liquidation order by the court
After filing the bankruptcy petition, a hearing follows. When filing for bankruptcy of one’s own company, the debtor (or the company director) must be present at this meeting. Is the bankruptcy petitioner a creditor? In that case, the debtor does not have to be present in court. The court decides whether or not the debtor is declared bankrupt during the hearing of the bankruptcy proceedings. Has the liquidation order been issued? The court appoints a bankruptcy trustee to wind up the company.
Bankruptcy appeal and objection
If a company does not agree with the court’s decision and has attended the hearing, an appeal can be lodged. The appeal must be lodged within eight days in order to limit damage, where possible. A quick appeal against bankruptcy also increases the chances of success of that appeal. The appeal must be submitted to the court of appeals by a lawyer. The case comes before the court after about a month. In the meantime, a company is given the option to make arrangements with creditors and an attempt is made to limit the consequences of the bankruptcy by cooperating with the bankruptcy trustee. If a debtor does not attend the hearing of the bankruptcy proceedings, an objection can be lodged against the liquidation order. Note that if an adjudication of bankruptcy is overturned on appeal, the petitioner is liable for all costs. This includes costs incurred by the bankruptcy trustee, as well as for any damage that has arisen.
Bankruptcy cooling-off period
After the bankruptcy has been declared, the court may set a cooling-off period. During this period, a bankruptcy trustee is given the time and space to create an overview of the bankruptcy estate. The bankruptcy trustee examines which property is or is not owned by the bankrupt company and examines whether selling the company in its entirety is a possibility. The cooling-off period in bankruptcy proceedings lasts a maximum of two months when set initially. This period can be extended once by a maximum of two months. During the cooling-off period, third parties and creditors cannot claim property from the bankrupt organization.
What happens if you are declared bankrupt?
Once the bankruptcy order has been issued, you as an entrepreneur no longer have access to your income and assets. If you have a sole proprietorship, you will be personally declared bankrupt. In the case of a private limited company, the company is declared bankrupt. Are you planning to start trading again in the future? Or are you potentially subject to directors’ and officers’ liability due to possible mismanagement surrounding a bankruptcy? Make sure to always be properly informed about the consequences. Would you like to receive more information about bankruptcy proceedings, about what happens if you are declared bankrupt or do you need advice on preventing bankruptcy? The specialists in bankruptcy law at Fruytier Lawyers in Business are ready and waiting to assist you.