Bankruptcy procedure
Your business has financial problems. If you can no longer pay your debts, you go bankrupt. Or you will be admitted to debt restructuring. Find out what happens in bankruptcy. And what you can do to avoid bankruptcy.
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.
There are several steps between filing for bankruptcy and the end of your bankruptcy. You may find another solution to save your business in the meantime. If not, your business will cease to exist at the end of bankruptcy.
Preventing 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.
This overview from KVK shows which organisations are there to help you (pdf, in Dutch)
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. In order to avoid bankruptcy.
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 relief worker, you make a plan to solve your debts. Only natural persons can apply for debt restructuring. After 18 months of Wsnp, you no longer have any debts.
Is your business basically profitable, but you can no longer pay your debts? If so, you want to prevent bankruptcy. Preferably, you end your business in a controlled exit or make a restart. You can use the WHOA (Court Approval of a Private Composition (Prevention of Insolvency) Act.
- 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.
When do you go bankrupt?
If you can no longer make payment arrangements with creditors and fail to pay them, the court may declare your business bankrupt. Before the court decides, the court must be petitioned for you bankruptcy. You can start this procedure yourself, but someone who you own money can do so as well.
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.
After filing, you will receive a summons from the court to attend your court hearing. 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.
The judge decides whether the bankruptcy petition is justified. If bankruptcy is declared, the judge will appoint a curator who will take over all decisions and your money matters from you.
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 decision. Then 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.
Read more about appealing a court decision (in Dutch).
Bankruptcy has been declared. You cannot do or decide anything yourself from now on. The judge will appoint a curator (trustee). From now on the curator takes all decisions, checks your administration and all your assets. The court can also set a cooling-off period during which creditors may not claim goods or payments.
The details of the bankruptcy are recorded in the Central Insolvency Register (Centraal Insolventieregister). For example, the name of the curator and the date of the bankruptcy. The bankruptcy will also appear in the KVK Business Register.
During 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.
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.
Ranking of creditors
The curator draws up a distribution list with the ranking of creditors (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 do not agree with the curator's proposal? Then the curator, or trustee cannot make another proposal. Your business's assets will be sold to pay your creditors. The curator 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 or a vof (general 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.
Liability for debts
Your liability for debts depends on the legal structure of your business. Is your business a legal person, such as a bv or nv? 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 or vof (general 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.
Animation: Bankruptcy? Take action
Questions relating to this article?
Please contact the Netherlands Chamber of Commerce, KVK