Filing bankruptcy chapter -What happens when you file bankruptcy?
What happens when you file bankruptcy?
Filing bankruptcy at https://bankruptcy-basics.org/filing-bankruptcy/ is an important step in the collective procedure. It is in the form of a declaration of cessation of payments at the initiative of the manager. The respect of the rules enacted by the code of commerce will allow in the end not to be confronted with personal sanctions.
The cessation of payments is defined as the impossibility for the debtor (merchant, craftsman, farmer, independent professional or any form of company) to face the liabilities payable (its debts) with its available assets. The entrepreneur then has to make a declaration of cessation of payments (called “bankruptcy filing”) with the Commercial Court or the Tribunal de Grande Instance, which is the filing of a bankruptcy.
The asset includes all the debtor ‘s liquid assets: provisional credit balances of bank accounts, immediately realizable values, opening of credit.
The liability , on the other hand, is composed of all the debts due before the opening judgment, which are not settled and whose creditors can demand the payment immediately. Therefore, the debt must be certain, liquid and exigible.
Credit reserve or moratorium: a debtor who has a credit reserve or moratorium from his creditors that allows him to meet his due liabilities is not in a state of cessation of payments.
The cessation of payments does not exclude prevention and vice versa
The cessation of payments logically leads to judicial reorganization or liquidation.
Attention: the state of cessation of payments is not an obstacle to apply for a preventive procedure: indeed, the conciliation can be requested by the officer in cessation of payments for less than 45 days .
And, it is no longer a necessary condition for the opening of a judicial procedure: the safeguard , procedure largely modeled on the judicial reorganization, can be requested by the companies which, without being in state of cessation of the payments, are confronted to difficulties that they are unable to overcome.
Thus, the cessation of payments loses its determining character in the choice of procedures and the practical articulation of the preventive and judicial procedures.
When to make a declaration of cessation of payments?
The collective procedure must be opened no later than 45 days after the cessation of payments if, within this period, the opening of a conciliation procedure has not been requested.
Who must file the declaration of cessation of payments?
This is the company manager to make the declaration. In the absence of a declaration within 45 days, the manager may be sentenced for lack of management, which may lead to his personal conviction to fill the insufficiency of assets and professional sanctions such as personal bankruptcy (set of forfeitures and prohibitions) or prohibition to manage.
The author of the statement varies according to the social form of the company. This prerogative belongs to the entrepreneur if the activity is carried out as a sole proprietorship. The representative of the company is competent to file the declaration of cessation of payments of an LLC. In SA, the CEO must perform this task. In the case of co-management, the declaration must be signed and dated by at least one of the co-managers.
However, the leader may delegate this task to any authorized person with special powers to perform this formality.
What are the formalities?
The declaration must be made in a declaration of cessation of payments form which contains the essential points of the business: identification, liabilities, assets. The declaration must be accompanied by a copy of the supporting documents requested.
The declaration of cessation of payments and the supporting documents must be filed with the registry of the court of the registered office of the company. The commercial court is competent if the debtor natural or legal person carries on a commercial or craft activity and the court of first instance for the other cases.
What happens after the filing of the declaration of cessation of payments?
Within 15 days following the filing of the declaration, the court shall summon the officer and, where applicable, the employee representative, to deliver the opening judgment. The officer may be accompanied by a lawyer and / or an accountant.
The court finds that the conditions of opening are met, pronounces the appropriate procedure : safeguard, judicial reorganization or judicial liquidation. This judgment is published in the Trade and Companies Register (RCS), the BODACC (official bulletin of civil and commercial announcements) and in a legal publication newspaper. It entails the termination of individual proceedings for all creditors whose claims arose before the opening judgment.
The decision must also fix the date of cessation of payments . But the court has the option of not doing so and, failing that, it is deemed to have intervened on the date of the opening judgment. This date sets the beginning of the suspicious period that ends with the opening of the insolvency proceedings and allows for the annulment of the acts performed by the officer suspected of having organized his insolvency or of having favored a creditor.