Property and bankruptcy
The amendment to Section 61 of the Dutch Bankruptcy Act can have major consequences for you as an entrepreneur. Since January 2018, it has become easier to keep property within the marriage out of the bankruptcy. The rules of evidence for withdrawal by the partner have been simplified. As an entrepreneur, you depend on many external factors for your financial affairs. Bankruptcy cannot be ruled out for anyone, it is a risk inherent to the profession. It is therefore advisable to cover as many risks as possible, by doing business in the form of a private limited company, for example. However, conducting business within a private limited company is not always possible. Perhaps you have been running a general partnership with a number of partners for years or are a sole trader. If things go bad in such a situation, your business can have an adverse effect on all aspects of your life.
The consequences of a personal bankruptcy in particular can be far-reaching. If you have personally committed yourself to debts of your company, you can lose everything you own in an instant. In the past, the shared family home was often claimed by the bankruptcy trustee and auctioned, which meant that the bankrupt entrepreneur and his family ended up on the street. Even entrepreneurs who were married out of community of property and who had the house put in the name of their wife were not immune and, in many cases, the trustee still managed to get his hands on it. The spouse of the bankrupt entrepreneur was left with a concurrent, not claimable claim on the estate.
Rules of evidence
The fact that the bankruptcy trustee could also involve the family home in the bankruptcy was related to the strict rules of evidence included in sub-sections 2 up to and including 5 of Section 61 of the Dutch Bankruptcy Act (hereinafter referred to as the DBA). Section 61 of the DBA contains the right of the spouse of the bankrupt person to take back effects belonging to him or her and hence withdraw them from the estate and thus from the bankrupt person’s creditors. However, the rules of evidence created a situation where the bankrupt person’s spouse had to produce evidence that more than half of the financing for the purchase of the property came from his or her private assets; an almost impossible task. Fortunately, the legislator considered this situation undesirable, which is why it has recently amended this law.
Consequences of 2018 legislative amendment
The amendment of the law means that subsections 2 up to and including 5 have lapsed. This means that the normal rules of evidence for providing proof of ownership apply once again, even in the case of repossession by the partner in a bankruptcy. The method of financing of the property no longer plays a significant role. Even if you have purchased your home together, it will no longer automatically be part of the estate in bankruptcy. The house in your partner’s name is therefore safe. Are you an entrepreneur and do you want to be prepared against the consequences of bankruptcy, however unlikely? Please contact one of our lawyers for an appointment to take stock of your situation. We are happy to help you, so you can do business with complete peace of mind.