Bankruptcy procedure
If you are no longer able to pay your debts, the court may declare you bankrupt. A trustee will take over the management of your business. A bankruptcy proceedure follows a number of fixed steps. If you cannot make a fresh start, your business will cease to exist.
On this page
- What is bankruptcy?
- What does bankruptcy mean for you?
- How can I prevent bankruptcy?
- When are you officially declared bankrupt?
- What happens in a bankruptcy procedure?
- When does a bankruptcy end?
- Am I liable for debts after bankruptcy?
- Who is involved in a bankruptcy?
- Frequently asked questions about bankruptcy
- Animation: Bankruptcy? Take action
What is bankruptcy?
Bankruptcy means that the court rules that your business is no longer able to pay its debts. It starts with financial difficulties in your business:
- not enough money is coming in
- your bank will no longer lend you money
- you can no longer pay your bills
You can try to avoid bankruptcy, for example by arranging payment plans. If this does not work, one of your creditors may file for your bankruptcy.
There are several stages between the filing of your bankruptcy petition and the conclusion of the bankruptcy proceedings. The rules governing this are set out in the Bankruptcy Act (Faillissementswet).
You may find another solution to save your business in the meantime. If not, your business will cease to exist at the end of the bankruptcy proceedings.
What does bankruptcy mean for you?
If the court declares your business bankrupt, you lose control of your business. A trustee, (also known as a receiver, curator in Dutch) takes over the management of your affairs. In some cases, the trustee may use your personal assets to pay off the debts. This depends on your legal structure. In some cases, you will be debt-free after the bankruptcy. For example:
- if the trustee reaches an agreement with the creditors
- if you apply for debt restructuring
In other cases, your debts will continue to exist even after your bankruptcy.
How can I prevent bankruptcy?
There are several things you can do to prevent bankruptcy:
Do you have problematic debts? Talk about it and take action as soon as possible. Check out the step-by-step guide on KVK.nl for information about solving your debts and where you can find help.
Are you temporarily unable to pay your debts? You can ask the court for a suspension of payment. If the court approves your application, you will be granted a suspension for up to 1.5 years. During that period, you can try to solve your financial problems.
Can you no longer pay your debts? Then you can apply for debt restructuring through the Natural Persons Debt Restructuring Act (Wet schuldsanering natuurlijke personen, Wsnp). Together with a debt counsellor, you make a plan to solve your debts. If you meet the conditions, after 18 months of Wsnp you no longer have any debts. Only natural persons can apply for debt restructuring. So you can apply for this if you have a:
- sole proprietorship (eenmanszaak)
- VOF
- professional partnership (maatschap)
- CV
Are you entering debt restructuring due to personal debts and do you own a BV? If so, you may lose your shares, as these are considered private assets.
Read more about the consequences of debt restructuring by legal structure.
Is your business basically profitable, but you are experiencing payment difficulties and at risk of going bankrupt? If so, you will want to avoid bankruptcy and either wind down your business in an controlled way or make a fresh start. You can use of the Court Approval of a Private Composition (Prevention of Insolvency) Act (WHOA).
- You make agreements with your creditors about a debt settlement.
- You put the agreements in a draft agreement.
- You ask the court to approve this agreement. This does not require all creditors to agree to the debt arrangement.
Read more about how to avoid bankruptcy with the WHOA.
What can I do if I am unable to pay my staff?
You should notify the Netherlands Tax Administration (in Dutch) as soon as possible that you are no longer able to pay your staff. Are you experiencing temporary difficulties? Check whether you can apply for reduced working hours or second your staff to another employer. Are your difficulties long-term and do you want to make staff redundant? There are rules governing this.
Read more about what you can and are allowed to do with staff in the event of financial problems.
When are you officially declared bankrupt?
A business or individual is officially declared bankrupt as soon as the court issues a ruling (court judgement). Before the court decides, an application for bankruptcy must have been made. You can start this procedure yourself, but someone to whom you still owe money can also do so. You can petition for bankruptcy if you:
- have stopped making payments
- and have 2 or more debts owed to 2 or more different creditors
- and 1 of these debts is due and payable (the payment deadline has passed)
What happens in a bankruptcy procedure?
You 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.
Read more about petitioning for bankruptcy
After filing, you will receive a summons from the court to attend your court hearing (sitting). You then have several options to prevent bankruptcy:
- Try to reach agreements with your creditors (in Dutch) before the hearing. The creditors can then withdraw the application for your bankruptcy.
- Apply for debt restructuring (statutory debt restructuring for natural persons: Wsnp). If you are admitted, bankruptcy will not be declared.
- Defend yourself (in Dutch) during the hearing. You can do so if you are present or with a written ‘defence’. For example, you can prove that you can still pay your creditors.
Apply for debt restructuring (Wsnp) on time
Once bankruptcy is declared, it is more difficult to apply for debt restructuring Wsnp (in Dutch). Do you make use of the Wsnp? Then you will be debt-free after the completion of the programme. Creditors can then no longer claim debts from you. In most cases, you will have to end your business.
The judge decides whether the bankruptcy petition is justified. The judge usually delivers the judgement during the hearing. If this is not possible, the judgement is usually delivered within 2 weeks.
Are you declared bankrupt? Then the judge will appoint a trustee (curator) who will take over all decisions and money matters from you.
Bankruptcy is made public
The details of the bankruptcy are entered in the Central Insolvency Register. These include the name of the trustee and the date of the bankruptcy. The bankruptcy is also recorded in KVK’s Business Register.
Appeal
Do you disagree with the court's decision? Then, with the help of a lawyer, you can appeal (hoger beroep, in Dutch) against the bankruptcy. You submit your case to the court for a new hearing. You must do this within 8 days of the ruling. A lawyer must file the appeal.
Once the bankruptcy order has been issued, there is nothing more you can do yourself. From now on the trustee takes all decisions, checks your administration, and documents all your assets. The court can also set a cooling-off period during which creditors may not claim goods or payments.
The trustee has checked and documented your assets. In a verification meeting the trustee reviews your debts and makes a settlement proposal to the creditors. You may only propose a settlement once during the bankruptcy proceedings. The creditors vote on the proposal during the verification meeting.
When does a bankruptcy end?
Do you not have enough assets to pay the costs for a trustee and the administration of the bankruptcy? Then your bankruptcy ends due to lack of assets (in Dutch, bij gebrek aan baten). The trustee in bankrupcy applies for this at court. The end of your bankruptcy will be registered in the Central Insolvency Register (Centraal Insolventieregister, in Dutch) and the KVK Business Register.
Please note: your bankruptcy ends, but your debts remain. Creditors may call on you in the future to claim debts.
Can you pay the trustee in bankruptcy? Then the end of your bankruptcy depends on the creditors:
The trustee's proposal for a settlement (bankruptcy agreement) is accepted if:
- A majority of creditors agree.
- The debts you owe to these creditors, when added together, amount to at least half of your total debts.
The court must then approve the agreement. This is called homologation. If the court approves the agreement, your bankruptcy will end. The end of your bankruptcy will be registered in the Central Insolvency Register and the KVK Business Register.
Does the settlement agreement state that you will pay part of your debts? If so, you will no longer be required to pay the remainder of your debts once the bankruptcy proceedings have ended. So, under a settlement agreement your debts do not remain outstanding.
Distribution list
The trustee draws up a ranking of creditors and a distribution list (uitdelingslijst). Creditors have 10 days to object to this list. If they do not, the distribution list applies and the bankruptcy ends.
Do the creditors or the court not agree with the trustee's proposal? Then the trustee cannot make another proposal. Your business's assets will be sold to pay your creditors. The trustee pays the creditors as much as possible. Who gets what depends on the ranking of creditors.
Do you have a business without legal personality, such as a sole proprietorship, VOF, CV, or professional partnership? Then your personal belongings will also be sold to pay off your creditors.
The bankruptcy ends, but debts you have not yet paid remain. In the future, creditors may still come forward to claim debts.
The end of your bankruptcy will be registered in the Central Insolvency Register (in Dutch) and the KVK Business Register.
Am I liable for debts after bankruptcy?
Your liability for debts depends on the legal structure of your business. Is your business a legal entity, such as a BV or HV? Then you do not have to pay creditors with your own private money. Unless you have co-signed for a debt in a personal capacity. Or if there is mismanagement.
Do you have a business without legal personality, such as a sole proprietorship, VOF, CV, or professional partnership? Then you are privately responsible for the debts of your business. You must pay the debts with your own money.
Read more about when you are liable with your private assets.
New start after bankruptcy
Do you have a business with legal personality? If so, bankruptcy does not have to be the end of your business. Sometimes a restart of your business is possible. You can explore this possibility even before the court declares you bankrupt.
Who is involved in a bankruptcy?
In the event of a bankruptcy, you will have to deal with various parties:
Creditors
They are still owed money by your business. These include:
- suppliers
- landlord
- bank(s)
- Netherlands Tax Administration
Not all creditors are the same. There are legal rules governing the order of priority of creditors.
The court
The court declares whether your business is bankrupt. The court also appoints a trustee and a supervisory judge.
The trustee
The trustee (curator) takes over the management of your business and tries to pay your creditors as much as possible.
The supervisory judge
The supervisory judge oversees the work of the trustee.
You may also have to deal with other parties, such as the municipality if you apply for debt counselling. Or a solicitor. Read more about the parties involved when a business has debts.
Frequently asked questions about bankruptcy
That depends on your situation. On average, bankruptcy proceedings take between 6 months and 3 years.
- yourself
- your creditors
- the Public Prosecutor's Office
- the court
- your shareholders
Read more about petitioning for bankruptcy
The trustee (also known as the receiver) takes over the management of your business and tries to pay your creditors as much as possible. Read more about the role of a trustee during bankruptcy.