Bankruptcy proceedings, within the meaning of the Law on Bankruptcy, shall be insolvency or reorganisation.
Insolvency shall mean creditor satisfaction through the sale of entire assets of the bankruptcy debtor, or the sale of the bankruptcy debtor as a legal entity.
Reorganisation shall mean creditor satisfaction accomplished under the adopted plan of reorganisation by redefining relations between the debtor and the creditor or the debtor’s legal status, or in another manner provided for in the plan.
The aim of the both ways of implementing bankruptcy shall be to ensure the most favourable collective settlement of bankruptcy creditors
According to provisions of the Law on Banckruptcy and the Law on Enforcement and Security Interest the adopted reorganisation plan in bankruptcy procedure, confirmed by a court ruling shall have the force of enforceable document.
Decision Confirming Adoption of Reorganisation Plan and Legal Consequences of Plan Confirmation
At the hearing for consideration of the draft reorganisation plan, the bankruptcy judge shall render a decision either confirming the adoption of the reorganisation plan or noting that the plan has not been adopted. Upon the decision confirming the adoption of the reorganisation plan becoming final, the bankruptcy proceeding shall be suspended.
Upon the decision confirming the adoption of the plan of reorganisation, all claims and rights of the creditors and other parties and obligations of the debtor specified by the plan shall be governed solely by terms stated in the plan. The adopted plan of reorganisation shall have the force of executive title and shall be considered to be a new contract for the satisfaction of claims presented therein.
Any transactions entered into and actions taken by the bankruptcy debtor shall be in compliance with the adopted reorganisation plan. The bankruptcy debtor shall be obliged to take all measures set out in the adopted plan of reorganisation.
With the rendering of the decision confirming the adoption of the reorganisation plan all legal consequences of opening bankruptcy shall terminate, and the designation “in bankruptcy” shall be deleted from the company name of the bankruptcy debtor.
If a nonexisting claim is included in the prepackaged plan of reorganisation or a claim in the amount higher than its realistic value, the bankruptcy debtor and the creditors included in the adopted plan, as well as those whose claims arose before the plan was adopted, but not included therein, may, within one year from the decision confirming the adoption of the prepackaged plan of reorganisation, contest such a claim by filing a claim initiating litigation, a counterclaim or objection in the litigation.
The provisions of the Law on bankruptcy on actions and effects of contestation shall apply accordingly to taking actions of contesting claims referred to in the prepackaged plan of reorganisation and to effects of such contestation.
Enforceable Document – Term and Properties
A judicial decision stating a consideration or act shall become enforceable if it has become final and if the time period for voluntary compliance has expired. The voluntary compliance period runs from the date on which the judicial decision is served on the enforcement debtor, unless otherwise provided for by law.
A judicial decision stipulating a condition for compliance becomes enforceable upon effectuation of such condition.
A judicial decision stating omission or sufferance becomes enforceable when it becomes final, if not stipulated otherwise therein. Writ of execution is also rendered when the judicial decision has not become final, or when administrative decision has not become final, if the law stipulates that an appeal or other legal remedy shall not stay their enforcement.
Enforceable document is suitable for rendering the writ of execution if it contains the information on the enforcement creditor, the enforcement debtor, the subject of the enforcement, the type and scope of fulfillment of the obligation. If the enforcement document does not state a time period for voluntary compliance, it amounts to eight days from the delivery of the enforcement document to the enforcement debtor.
The Reorganisation Plan as the Base for Making a Writ of Execution
The reorganisation plan, whether it is the prepackaged plan of reorganisation or on the reorganisation plan submitted after the opening of bankruptcy proceedings, contains, inter alia, a detailed list of creditors divided into classes, with their claims, the amounts of money or the property which will be used for totally or partially settlement of each class of creditors, including the secured and unsecured creditors, but also the deadlines for the performance of the reorganisation plan.
However the lack of indications of the title or name of the creditors or the type and scope of obligation, makes enforceable document – a plan of reorganisation unsuitable for execution in relation to creditors that were not included in the plan of reorganisation and their claim have arisen before the adoption of the reorganisation plan.
These creditors under the terms of Article 173 of the Law on Bankruptcy can obtain opening of bankruptcy proceedings by insolvency.
Creditors included in an adopted plan, as well as creditors whose claims have arisen before the adoption of the plan but were not included in the plan, may file for bankruptcy even if:
- The reorganisation plan was put into effect in a fraudulent or unlawful manner
- The bankruptcy debtor fails to comply with or acts in contravention of the reorganisation plan, where such actions jeopardise the realisation of the reorganisation plan.
In enforcement proceedings the creditors their money claims can settle primarily from the property that a reorganisation plan for that class of creditors have anticipated.
Writ of execution, which was issued on the basis of a reorganisation plan as an enforceable document, judgment debtor may contest by the objection for all the reasons laid down in the Law on Enforcement and Security Interest. Besides the judgment debtor, the objection in the enforcement proceedings may be filed by a third party. Third party asserting to have a right over the subject of enforcement, which prevents the enforcement, may file an objection to the public enforcement officer requesting to declare the enforcement against such subject illicit. Third party objection may be filed until the completion of the enforcement proceedings.
The Law on Enforcement and Security Interest excludes any possibility of postponement of execution.
If all conditions are met to allow the execution (determine), after the court issues an writ of execution, the execution will be carried out according to the rules of the Law on Enforcement and Security Interest, by a court or public enforcement officer, according to the enforcement motion of judgment creditor.