Ranking of creditors

Money to pay creditors

When declaring bankruptcy, the court appoints a curator (also known as the receiver, liquidator, trustee, or administrator). The curator takes over the management of the company and tries to raise as much money as possible. For example, by selling the bankrupt company's assets and making sure that outstanding bills are paid. With this money, the curator can pay as many creditors as possible.

Curator determines order of payment

The curator determines the order in which the creditors are paid: the ranking of creditors. They do this based on agreements in the Bankruptcy Act (faillissementswet, in Dutch). The ranking depends on the type of debt the creditor claims.

1st rank: estate claims

Claims against the estate (boedelvordeningen) are paid first. These are the debts that arise during the period of the bankruptcy (also called estate debts). For example:

• salary of the curator
• rent starting from the day of the bankruptcy
• employees wages from the day of the bankruptcy

2nd rank: preferential claims

After the estate debts have been paid, creditors with a preferential or priority claim (preferente vordering) will have their turn. Preferred creditors are, for example:

• The Netherlands Tax Administration (payroll tax and turnover tax)
• The Employee Insurance Agency UWV (wage claim)
• Employees owed unpaid wages from before the bankruptcy

The ranking of preferential creditors depends on the type of debt and how and when it arose.

3rd rank: non-preferential claims

Finally, unsecured claims (concurrente vorderingen) will be paid. These are debts that arise after a product or service has been delivered and has not been paid for. For example, outstanding invoices from product suppliers, but also energy suppliers or health insurance companies. If there is not enough money, unsecured creditors will only be paid a percentage of the amount claimed.

Post-competitive and subordinated creditors come last

Post-competitive creditors (such as shareholders) get their money back last. They will only get their deposited money back when other debts are paid and there is still money.

A subordinated creditor is, for example, a lender other than the bank. Such as a family member. The condition of the loan states that other creditors can claim first in the event of bankruptcy. So, the lender takes a risk. In a bankruptcy, this creditor will get money only after all other creditors have been paid and there is money left over.

Special creditors

Separatists

Separatists are creditors with special rights, such as mortgage rights or the right of pledge (pandrecht). A separatist's claim is separate from a bankruptcy. A separatist may claim a debt directly. Without first filing it with the curator. However, the curator may ask the separatist to wait a reasonable time before making the claim.

Separatists are creditors with:

• Mortgage right A mortgage claimant is, for example, the mortgage lender of the commercial or residential property of the bankrupt company. The premises or private house is collateral for the mortgage. The creditor can claim the collateral (and have it auctioned off) if the bankrupt company cannot pay the mortgage.
• Right of pledge A creditor with the right of pledge is, for example, a lender, such as a bank. A condition of the credit may be that the bank has a pledge if the loan is not paid off. The bank can then seize business assets, such as inventory or stock, for example.

Security holders

A creditor who holds security (borgtocht) has an agreement with another party to claim the debt if the bankrupt company cannot pay. The other party is then the guarantor. This security is also called surety in legal terms. In practice, the bankrupt entrepreneur has often put up their private assets as security. But it can also be someone in the family or friends. With security, the creditor has more certainty of being (partially) repaid.

Debts remain

During a bankruptcy, the trustee pays off as many debts as possible. If there is not enough money to pay off all debts, these debts remain. Creditors can still come forward in the future to claim money. Does the bankruptcy end with a creditors' agreement or court approval (homologatie)? Then creditors cannot claim any money after that.