Bankruptcy

If your business cannot pay its debts and will not be able to pay them for a long time, it must be declared bankrupt. Bankruptcy is dealt with by a district court.

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To be declared bankruptcy involves taking charge of and using the company's assets to pay all its debts. A company that has been declared bankrupt is referred to as the debtor, while a party which has a claim on the bankrupt company is called the creditor.

The district court makes a decision about the bankruptcy and appoints a receiver. The receiver's responsibilities include taking charge of the debtor's property and insolvency assets, compiling a list of the debtor's assets and liabilities and drawing up an estate inventory.

During the bankruptcy process, the debtor's property is sold and the proceeds are distributed to the creditors in accordance with a certain system, to the extent possible after payment of bankruptcy costs.

Creditors do not normally need to inform the district court that they have receivables. It is part of the receiver's duty to find out who the company owes money to.

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