Filing for bankruptcy: debt collection lawyer explains how it works

When debtors fail to pay, creditors may consider several options to obtain their money. It usually starts with a reminder or summons. In it, the debtor is given a deadline to still pay. If the debtor then fails to pay, the debtor is in absence. Incidentally, that default may also have occurred earlier, without a demand or summons being required. This is stated in article 6:83 BW.

Forcing debtor to pay with debt collection lawyer

Thereafter, creditors have several options to induce the debtor to proceed with payment. It is important to assess in each concrete case which means is most effective to achieve the goal. Namely, obtaining payment of the claim. In this blog, debt collection attorney discusses Conner Canters How to use filing for bankruptcy as a collection tool.

Filing for bankruptcy as a means of collection

Filing for bankruptcy sounds like a far-reaching means of getting the debtor to make payment. It probably is, but it can be very effective. Filing for bankruptcy is done by filing a petition. The petition must be filed by an attorney. The court will then schedule a bankruptcy hearing. The debtor, whose bankruptcy has been filed, will then be summoned to that hearing. The debtor can then proceed to pay, not respond or respond by defense.

Debtor declared bankrupt by court

If the debtor proceeds to pay, the goal is achieved. The bankruptcy petition can then be withdrawn. In principle, if the debtor does not respond to the bankruptcy petition, the debtor will be declared bankrupt (if the requirements for bankruptcy are met). A trustee will then be appointed to wind up the bankruptcy and distribute the debtor's assets to creditors. Creditors can then submit their claims to the trustee for verification. However, it is uncertain whether the claim will be paid (in full), depending on other creditors and the funds remaining in the bankrupt debtor.

If the debtor does raise defenses, the court will evaluate those defenses at the hearing. The debtor is declared bankrupt if it appears summarily that the requirements for bankruptcy have been met.

Requirements for declaring bankruptcy

There are basically two requirements for declaring bankruptcy. First, the debtor must have stopped paying. This is the case when the debtor fails to pay the outstanding claim. Second, there is the plurality requirement. This means that the debtor must have several creditors, at least two. Thus, there must be a support claim. That plurality requirement is met if it appears summarily that the bankruptcy applicant has at least one other creditor, in addition to the bankruptcy applicant's own claim. But suppose that the creditor is only aware of its own claim against the debtor, what can the creditor do?

Seizure as alternative to filing for bankruptcy

A somewhat less onerous remedy than a bankruptcy filing is the laying of batter. The purpose of an attachment is to secure the claim against the debtor. A petition for garnishment must also be filed by a lawyer. If the court grants leave to make the attachment, the bailiff can be called in to execute the attachment. The most common form of garnishment is garnishment, such as under a bank. If a bank attachment is made, the third party (the bank) will have to issue a statement. This is the so-called third-party statement. If there is a positive balance in the bank account, that balance is ‘frozen’ from the time of the attachment. The creditor then has security (to some extent) that recourse will be provided. If there is a negative balance in the bank account, the garnishment has no effect, since there is no balance to secure.

Bank repossession that doesn't serve a purpose can still be useful

However, the attachment of a negative bank balance need not be useless. In fact, a negative bank balance means that the bank has a claim against the debtor. This claim of the bank can be used as a support claim in a bankruptcy petition, which means that the garnishment of a negative bank balance can still be usable.

Collection lawyer when filing for bankruptcy

It is advisable to seek expert advice before taking legal action. At Lexys, you have come to the right place for that. At Lexys, we like an efficient approach, where the client's goal should be achieved in the most effective way. Do you have a debtor who fails to pay and would like advice on your options? If so, please contact up with the debt collection lawyer From Lexys.