Bankruptcy

Bankruptcy is a collective enforcement procedure liquidating the debtor's entire attachable estate for the satisfaction of all creditors together. Unlike attachment, which serves a single claim, it embraces every creditor and the whole estate.

As a rule, merchants are subject to bankruptcy. In enforcement-based bankruptcy, the creditor asks the commercial court to declare bankruptcy after the debtor fails to pay despite the payment order; direct bankruptcy without prior enforcement is possible in cases listed by statute. For capital companies, balance-sheet insolvency obliges management to notify the court.

The judgment creates the bankruptcy estate: the debtor's power of disposal passes to it, individual proceedings are in principle stayed and creditors register their claims. The bankruptcy administration conducts the liquidation and distributes proceeds by rank. Certain rights of the bankrupt are restricted, and rehabilitation may be sought upon payment of the debts or with the creditors' consent.