A Q&A overview about Croatian bankruptcy and insolvency law, including processes and procedures, rights and obligations, useful advice for all parties involved.
− in case a debtor failed to pay three consecutive salaries to an employee.
Over-indebtedness exists in case in case assets of a legal entity are lower than existing liabilities.
Motion for initiation of bankruptcy proceedings may be filed by creditors, debtor and FINA.
How long does it take to process a petition for bankruptcy in Croatia?
A person legally authorized to represent the debtor is legally required to file a motion for initiation of bankruptcy proceedings no later than 21 days from the date of occurrence for a reason for bankruptcy. Financial agency is under obligation to file a motion for initiation of bankruptcy proceedings in case a legal entity has registered payment orders in the Registry of payment orders during an uninterrupted period of 120 days, within eight days from the date of expiry of such period. Motion is filed to the court and shall be published on web site e-court notice-board within three days from the date of submission of a completed motion.
In case of initiation of preliminary proceedings, the court shall summon a hearing in order to discuss conditions for initiation of bankruptcy proceedings, no later than 60 days from the date of submission of motion for initiation of bankruptcy proceedings. In case preliminary proceedings were not initiated, the court shall summon a hearing in order to discuss conditions for initiation of bankruptcy proceedings, no later than 30 days from the date of submission of motion for initiation of bankruptcy proceedings.
At the hearing and in any case not later than three days from closing of hearing the court shall pass a resolution on initiation of bankruptcy proceedings or rejection of motion for initiation of bankruptcy proceedings.
Resolution on initiation of bankruptcy proceedings may be appealed by person legally authorized to represent the debtor and individual debtor. Resolution on rejection of motion for initiation of bankruptcy proceedings may be appealed by submitter of the motion.
What happens if you are declared bankrupt in Croatia?
On the date of initiation of bankruptcy proceedings the court shall appoint a bankruptcy administrator. Bankruptcy administrator shall represent the company with all rights and obligations of bodies of debtor – legal entity. Rights of persons who were authorized to dispose of assets on debtor’s accounts cease to exist. After initiation of bankruptcy proceedings indication »in bankruptcy« is added to debtor’s memoranda and debtor’s new transaction accounts are listed. Bankruptcy proceedings are being performed for purpose of joint settlement of debtor’s creditors, sale of its assets and distribution of collected funds to creditors. However, after initiation of bankruptcy proceedings it is permitted to draft a bankruptcy plan that may deviate from legal provisions on collection and distribution of bankruptcy assets.
Bankruptcy administrator shall diligently give care to completion of initiated and unfinished debtor’s affairs and transactions necessary in order to prevent damages to debtor’s assets, take care on collection of debtor’s claims, i.e. collect debtor’s assets and rights that are included in the bankruptcy assets, prepare payments to creditors and after approvals make such payments, provide the board of creditors with final accounts, make subsequent payments to creditors and, after completion of bankruptcy proceedings, represent bankruptcy assets in accordance with the Bankruptcy Law.
After submission of motion for initiation of bankruptcy proceedings the debtor is under obligation to provide bankruptcy bodies, upon their request, with all necessary information and notices. Upon request, debtor shall provide the court with written report on financial-economic situation of the debtor.
Every bankruptcy order or proceeding is published by the court and is open for public. You can find the insolvency register on web site e-court notice-board.
Each bankruptcy is different. Low does not stipulate the time limit in which a bankruptcy must be completed. Proceedings may last from several months up to several years.
There is also a summary bankruptcy proceeding. In case persons legally authorized to represent the debtor fail to submit list of assets and liabilities of the debtor within 15 days or this list shows that debtor has assets that are insufficient to pay foreseeable bankruptcy expenses and in case within 45 days no creditor requests initiation of bankruptcy proceedings and advances funds to pay for expenses of such proceedings, it shall be considered that debtor is unable to make payments. In such case the court shall officially pass a resolution on initiation and completion of summary bankruptcy proceedings.
During the bankruptcy process arrangements between the debtor and the creditor are not possible.
Bankruptcy administrator files claims for debtor’s current and former employees.Claims of current and former employees arising from employment that occurred prior to initiation of bankruptcy proceedings are listed as first senior priority claims. These claims are paid in accordance with special regulations governing payment of salary, contributions for mandatory insurances and appropriate taxes and surtaxes.
Protection of material rights of employees in case of bankruptcy is implemented by insurance and payment of part of bankruptcy claims from assets of Agency for insurance of employee claims in case of bankruptcy of employer. Employees may realize their stipulated rights in case of bankruptcy in case they file appropriate motions for insurance of their claims.
In case of impeding bankruptcy, persons authorized to represent the debtor should attempt to negotiate with creditors on possible restructuring of debts in order to avoid bankruptcy proceedings. In case this is not possible, it is necessary to collect documentation necessary for filing of motion for initiation of bankruptcy proceedings, taking into consideration that such persons are liable for damages cause to creditors by omission of their duty to initiate bankruptcy proceedings.
The Republic of Croatia applies Law on Bankruptcy of Consumers. It is intended for physical persons who are unable to pay their due monetary obligations.Proceedings of bankruptcy of consumers may be initiated only in case a consumer is unable to make payments. A consumer is unable to make payments in case he/she may not pay one or more due monetary obligations in the period of at least 90 days consecutively and in total amount exceeding HRK 30,000.00. Goal is to above diligent consumers from liabilities that remain after collection of assets and distribution of collected assets to creditors.
An extra judiciary proceeding in order to enter into extra judiciary agreement between a consumer and creditors is performed prior to initiation of proceedings of bankruptcy of such consumer. In case extra judiciary agreement is entered into between such consumer and creditors, it has the effect of an extrajudicial settlement and it represents an enforceable document.
Corporate and Personal legal services Q&A: Bankruptcy and insolvency for Bankruptcy and insolvency in Croatia.
Published on 21 October 2018 by Joint Law Office Baburak, Brezak, Grabas.