Filing for bankruptcy
Collection by filing for bankruptcy
If a debtor fails to pay your claim, you can choose to file for bankruptcy. A bankruptcy application is a way of trying to secure payment of the claim or a payment arrangement in a quick and relatively cheap way. A bankruptcy will have far-reaching consequences for the debtor. For example, the debtor will lose control over his equity and a bankruptcy trustee will be appointed who will sell off the debtor’s goods in order to divide the proceeds among the creditors. Particularly when faced with reluctance to pay on the part of the debtor, a bankruptcy application can often be an effective means of collection.
Petition for bankruptcy application
An application for bankruptcy is submitted to the court where the debtor lives (in the case of natural persons) or has its registered offices (in the case of legal persons). A bankruptcy application is submitted by a lawyer by means of a petition. The judge then sets a date and time at which the application will be heard. The debtor is then summoned by the court to appear at the hearing. If negotiations are taking place about payment of the claim, for example, the handling of the bankruptcy application can be postponed by up to 8 weeks and can still be withdrawn during the hearing.
Requirements for declaration of bankruptcy
The judge will declare the debtor bankrupt if two requirements have been met. Firstly, the debtor must be in the condition that he has ceased paying. The applicant for bankruptcy only needs to demonstrate in a summary manner that the debtor is not paying his debts. There must be at least two creditors who each have a claim on the debtor (the so-called plurality requirement). In other words, there must be a supporting claim. One of these two claims must be due & payable.
Cost of applying for bankruptcy
The applicant for bankruptcy is required to pay court fees. In addition, drawing up the petition will involve costs. The collection lawyers at AMS offer competitive rates for bankruptcy applications. In the first instance, the costs of applying for bankruptcy fall to the applicant. However, if bankruptcy is declared in response to the application, the applicant can claim some or all of the costs incurred from the debtor. This will be a preference claim in the bankruptcy.
Contact our collection lawyers
Our collection lawyers have years of experience in advising and taking legal action in the area of collection. Our lawyers are closely involved in their clients’ cases, work with short lines of communication and offer competitive rates. If you would like to know more about the collection services which our lawyers can offer you, please contact us free and with no obligation.