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Overview of insolvency regulations: part two

The previous issue of the Polish international briefing devoted to insolvency regulations presented the legal grounds for bankruptcy, types of bankruptcy proceedings and consequences of bankruptcy as regards the debtor's (bankrupt's) right to manage its business. This issue lays out the ramifications of bankruptcy on the obligations of, and proceedings involving, the bankrupt.

The consequences of declaration of a debtor's bankruptcy differ significantly depending on the type of bankruptcy proceedings declared by the court.

Namely, in liquidation bankruptcy, all pecuniary obligations of the bankrupt become due and payable upon the declaration of bankruptcy; non-pecuniary property obligations are transformed into pecuniary obligations and also become due payable.

Their satisfaction (discharge) may then only be effected in accordance with applicable regulations of the Polish Bankruptcy Law. Court and administrative proceedings commenced against the bankrupt before the declaration of bankruptcy in respect of a receivable which falls into the bankruptcy estate (with only certain assets, such as household or food items, of the debtor being excluded from the estate) should be stayed or, insofar as civil law matters are concerned, dismissed. Other court and administrative proceedings may be commenced and continued only by the court receiver or against it.

Finally, enforcement proceedings commenced against the bankrupt before the declaration of bankruptcy in respect of a receivable which falls into the bankruptcy estate are stayed by operation of the law on the day of declaration of bankruptcy; they are discontinued by operation of the law after the decision on the declaration of bankruptcy has become legally final.

In turn, in arrangement bankruptcy, as from the day of the declaration of bankruptcy, neither the debtor nor the administrator may make any performances in relation to the obligations of the bankrupt, which are by operation of law subject to the arrangement. (The arrangement covers, by operation of law, all receivables against the debtor (bankrupt), which arose before the day of the declaration of bankruptcy; only some receivables are excluded.)

These obligations are then satisfied in accordance with the terms and conditions of the arrangement. Court and administrative proceedings commenced against the bankrupt before the declaration of bankruptcy in respect of a receivable which falls into the bankruptcy estate may be continued; other court and administrative proceedings may also be commenced and continued.

Enforcement proceedings commenced against the bankrupt before the declaration of bankruptcy in respect of a receivable, which is by operation of law subject to the arrangement, are stayed by operation of the law on the day of declaration of bankruptcy; they are discontinued if the arrangement has been approved.

In the interim period between submission of the bankruptcy petition and the declaration of bankruptcy by the court, the estate of the debtor may be subject to a so-called court security by virtue of which the debtor may be, for example, prohibited to sell or otherwise dispose of any of its assets.

Borys D Sawicki

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