Bankruptcy entails losing possession over your belongings and properties in favour of your creditors (someone you owe money to). The right of ownership of such possessims is then transferred to a creditors’ committee, also named the bankruptcy administration.
About a bankruptcy
The bankruptcy administration administers the sale of the estate that can be sold at a profit. After the cost of administering the bankrupt’s estate has been covered, any assets left after the sale will be divided between the creditors. This procedure is known as division of assets. Normally the court appoints a lawyer to be the manager of the bankrupt’s estate. This person is also known as the trustee. The trustee’s responsibility is to carry out the practical administration of the bankruptcy.
The court decides if someone can be declared bankrupt. This is done through a bankruptcy order. Individuals as well as companies that have long lasting payment problems and where the value of the possessions do not cover the debt, may be declared bankrupt. This may be called that the company has to be insolvent to be declared bankrupt.
Who can file a bankruptcy petition?
The creditor may file a bankruptcy petition to the court. It is a condition that the failure to pay is due to a lack of money and not the willingness to pay. For example when the debtor is dissatisfied with work that has been carried out. If the latter is the case, the creditor must file a writ of summons and follow civil case proceedings. A person or a company that is insolvent may also declare himself or herself bankrupt (bankruptcy petition).
Who pays for the bankruptcy administration?
The person or company that claims someone bankrupt has to provide financial security to cover for the expenses of the bankruptcy administration. The court will decide the amount. The bankruptcy assets are always to cover the cost of the administration. If there are no assets or the value of the assets do not cover the cost of the bankruptcy administration, the person or company that claims bankruptcy must pay the costs. This responsibility is (pursuant to the provisions of the Bankruptcy Act) limited to a maximum amount.
Is wage guarantee exempted from this rule?
Matters of wage guarantee are exempted from this rule. If the person that claims somebody bankrupt normally would receive wages or holiday pay, the public wage guarantee fund covers the wage. To be covered by this fund the claim must not be too old. An employee cannot have interests of ownership or be a leader of the company that has been petitioned for bankruptcy. If an individual or a company files a bankruptcy petition to make him/her or the company bankrupt, a demand for advance payment of the bankruptcy administration will not be made.
Where shall the claim be delivered?
The claim of bankruptcy shall be in writing. If the debtor is a private person, the claim shall be delivered to the district court where the debtor lives. If the debtor is a company the claim shall be delivered to the district court in the town or district of the company. If bankruptcy proceedings are taken against you, or you are thinking of making yourself bankrupt, you should seek professional assistance. For example you may make advance contact with the court or a lawyer. If the bankruptcy has been claimed due to an unpaid wage demand, the government service may cover for the necessary lawyer fees related to the petition.
What happens in probate cases?
When the court has received a petition for bankruptcy the debtor is summoned to a meeting. The person filing the petition is also summoned to the meeting. The court decides if the conditions to make a bankruptcy order are met. If the debtor does not attend the meeting the court can call on the police to bring the debtor to court. Alternatively a bankruptcy order can be made without the debtor being present. If the debtor is declared bankrupt the court appoints a lawyer as trustee.
The trustee gives further guidance about the consequences of a bankruptcy, including the duties and compliances to be followed as a bankrupt. The debtor is obliged to attend meetings with the trustee and all meetings of beneficiaries. The court determines at a later time if a creditors’ committee and/or an auditor should be appointed to assess the debtor’s accounts. Creditors who have an interest in being on the creditors’ committee must contact the trustee.