Discharge of bankruptcy

A bankruptcy can be discharged in various ways. For example, by reaching a composition with creditors or successfully challenging a bankruptcy petition in court. In the latter case, the adjudication will be set aside. A bankruptcy trustee can also order the discharge of a bankruptcy on account of insufficient funds to pay the ordinary creditors.

Discharge of bankruptcy: composition with creditors

A bankruptcy is discharged upon reaching a composition with creditors or when all debts have been paid. The court must first approve a composition with creditors before the discharge of bankruptcy is declared. In the absence of a composition with creditors, the court will pronounce insolvency. In that case, a trustee sells all possessions and available assets. The proceeds are divided among the creditors. Depending on the legal form of a company, a bankruptcy trustee can also hold an entrepreneur or director personally liable and claim private property to settle claims.

Bankruptcy distribution list

Upon termination of bankruptcy on account of a composition with creditors and completion of the investigation into directors’ and officers’ liability, the bankruptcy trustee draws up the order of priority among creditors and a distribution list. This list provides an overview of who the creditors are, what they will receive from the bankruptcy estate and in which order claims will be settled. The bankruptcy distribution list is available for inspection at the court ten days after lodging. During this period, creditors can object to the distribution list, if they so wish. If no objections are made, the bankruptcy will be discharged.

Completion of bankruptcy on account of insufficient funds to pay the ordinary creditors

A bankruptcy trustee can request the court to complete the bankruptcy. The most common discharge of liquidation is completion on account of insufficient funds to pay the ordinary creditors. This bankruptcy discharge is chosen when it appears that the debtor has insufficient possessions and assets to cover the bankruptcy costs, let alone indemnify its creditors. This includes the salary of the bankruptcy trustee and estate debts. In this situation, the trustee requests the court to complete the bankruptcy on account of insufficient funds to pay the ordinary creditors. The debts of the bankruptcy estate remain unsettled. Creditors may attempt to recover outstanding claims in the future. The limitation period starts as soon as the bankruptcy has been completed. In that case, a shortened limitation period applies.

Company liquidation: discontinuation of a business

A company with debts can decide to discontinue its operations at any time. However, a business discontinuation, i.e. the liquidation of a company, comes with various rules and obligations attached. In the event of liquidation of the company, the company must notify its customers and suppliers. If a company employs personnel, a dismissal permit must be applied for. All agreements must be cancelled and a decision made by the shareholders to proceed to liquidation and appoint a liquidator. Subsequently, the liquidation must be registered with the Commercial Register of the Chamber of Commerce. The tax authorities must be notified as well. After the final distribution list has been filed and a period of six weeks has passed, the dissolution of the company and discharge of the bankruptcy are a fact.

Director becomes liquidator

Is a company in debt? This situation does not involve a bankruptcy discharge, but liquidation. The company must be registered in the Commercial Register with the annotation ‘in liquidation’. In that case, the director is no longer a director, but is given the title of ‘liquidator’. In this role, his job is to pay outstanding claims through the sale of assets and company property. Once there are no more assets, the company ceases to exist. Are the funds raised insufficient to pay all debts? In that case, the liquidator is still obliged to file a petition for bankruptcy. If the company only has debts and no assets, a so-called expedited liquidation can be decided on. This allows shareholders to proceed to appoint a liquidator who will immediately de-register the company from the Chamber of Commerce.

Reliable advice in challenging times

Is your business experiencing financial difficulties and are you exploring options to prevent bankruptcy? Or do you want bankruptcy proceedings to result in a bankruptcy discharge as quickly and effectively as possible? Our bankruptcy law specialists will be happy to take a closer look at your business situation. With our focused and realistic view, we map out which solution is the most promising and rational for your company. For more information, feel free to contact our lawyers. You are not committed to anything. We will be happy to advise and guide you in making a restart or assist you in the reorganization or restructuring of your company.