The role of the annual accounts in supporting claims

In a petition for bankruptcy, the requirement for multiple creditors plays a central role. This is also known as the plurality requirement. To meet this requirement, the petitioner must, in addition to their own claim, have a so-called supporting claim. In practice, however, it is often difficult to find a second creditor. The question therefore arises as to whether the debtor’s financial statements can serve as a source for a supporting claim.

What is a supporting claim?

A supporting claim is a debt owed by the debtor to a creditor other than the applicant. This second claim is necessary to demonstrate that the debtor has left multiple creditors unpaid.

It is noteworthy that the supporting claim does not need to be proven in detail. It is sufficient that it is ‘evident at a glance’, meaning that a simple and quick assessment by the court is sufficient.

Problem: lack of information

It is often difficult for creditors to gain insight into the debtor’s other debts. After all, they have no access to the debtor’s accounts. Consequently, finding a supporting claim can pose an obstacle when applying for bankruptcy.

This problem has led to a search for alternative sources from which a second debt can be derived.

The annual accounts as a potential source

A possible solution lies in the debtor’s annual accounts. Annual accounts often list various debts, such as long-term debts or debts to suppliers. These items may provide indications that there are multiple creditors.

Although financial statements are not always fully up to date, they can still provide sufficient grounds to establish a plausible case that a claim for support exists. After all, it is not a matter of full proof, but of a summary substantiation.

Limitations and points to consider

The use of financial statements does, however, have limitations. For instance, the information may be out of date or fail to clarify whether a debt still exists. Nor is it always apparent whether a debt is actually being left unpaid.

Furthermore, the court must still be convinced that there is a genuine secondary claim. Financial statements can therefore be helpful, but offer no guarantee that the plurality requirement is met.

Conclusion

In certain cases, financial statements can be a useful tool in substantiating a claim for support. Particularly where other information is lacking, this financial source can provide indications of the existence of multiple creditors.

Nevertheless, caution is advised. The annual accounts are merely an indication and must be assessed in conjunction with other circumstances. Ultimately, the key point is that the court must be able to establish, on a summary basis, that the debtor has left multiple debts unpaid, so that a declaration of bankruptcy can be made.

Questions?

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