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If your company has financial problems and you are no longer able to pay off your debts, you will go bankrupt or be admitted to a debt restructuring arrangement.
What is bankruptcy?Your company is in financial trouble; too little money is coming in, your bank no longer lends you money and you are unable to pay your bills. If you can no longer make payment agreements with creditors yourself, the court can declare you bankrupt. The judge appoints a curator (also known as a receiver), who takes care of all decisions and money matters related to your company.
Bankruptcy petitionYou can file for bankruptcy yourself or your creditors can petition the court for your bankruptcy. If you are a creditor yourself, you can file for your client's bankruptcy. Do you disagree with the court’s judgment? Then you can appeal to the court with the help of a lawyer.
Court proceedingsThe court decides whether the bankruptcy petition is justified. In order to defend yourself in court you need to be present or write a statement of defense. For example, when you want to prove that you can still pay your creditors. Or if you want to apply for debt restructuring. If you have been declared bankrupt, you can no longer claim debt restructuring.
Retention phaseOnce your bankruptcy petition has been approved, no amendments can be made. From now on the curator takes all decisions, checks your administration and checks all your assets.
Waiver due to lack of incomeIf you have insufficient assets to pay your curator and the administration costs for the bankruptcy, the bankruptcy ends here. However, the debts remain. Creditors can still reclaim debts in the future.
The verification stageDuring the verification stage, the curator will check and document your assets. In a verification meeting the curator reviews your debts and makes a proposal to the creditors. The creditors then put the proposal to the vote.
Creditors agree: End of bankruptcy
If the vast majority of creditors agree (bankruptcy agreement) with the curator's proposal, the court must approve this. This is called homologation. If the court approves the proposal, your bankruptcy will end. You pay your debts as agreed by the curator in a so-called ‘distribution list’. Who gets what depends on the ranking of creditors.
Corona crisis: TOA to bridge WHOA gap
If your business is in financial trouble, the Homologation private agreement in bankruptcy Act (WHOA) may help you reach a binding agreement with your creditors more easily. The Act will come into effect on 1 January 2021. Because many businesses may be struggling now and cannot wait until 1 January 2021, the government has announced the Time-Out Arrangement or TOA as a bridging measure. Businesses will be able to reach agreements with their creditors and go into a temporary suspension of business, or time-out, to enable them to find funds to pay off debts and restart their business when circumstances are more favourable. See also Bankruptcy: private agreement to become possible.
Creditors do not agree: Insolvency rulingIf creditors or the court do not agree with the curator's proposal, the court will declare insolvency. This implies that you are unable to pay off your debts. Your assets will be sold to pay your creditors.
If you are declared bankrupt, you may be personally liable for your company debts: this means you will have to pay the (remaining) debts with your private money. Private assets such as your home, estate or car will be seized. Read here when you are personally liable in the event of bankruptcy.