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Insolvency - Netherlands

1. What different types and targets of bankruptcy proceedings do exist?

The bankruptcy rules (Faillissementswet, Fw) recognizes three types of court bankruptcy proceedings: bankruptcy, conciliation (settlement), redemption.

All three types were accepted for Netherlands in the Amendments A, B and C to the Declaration (EC) No. 1346/2000 according to proposal from May 29, 2000 on bankruptcy proceedings, ABl. L 160 from June 30, 2000 (amended in January 2005, KOM (2004) 827).


The bankruptcy is at disposal after the debtor (company or private person) has stopped the payments. (Article 1, Bankruptcy Rules (Fw)).

In case of settlement, the debtor must be evidently unable to carry out further on his due payment obligations (Article 214 Fw). The settlement proceedings (conciliation) is executed only for the purpose of businessman.

In case of redemption law for natural persons - see the Article 284, The Bankruptcy Rules (Fw)-

  • It is either the sufficient stimulus to accept, that the said person is unable to carry out his/her due payment obligations,
  • or the said person has already stopped the payments.


The exclusive target of bankruptcy proceedings rests in liquidation of existing property to satisfy the creditor.

The settlement proceedings (conciliation) is realized for purpose of sanation and not liquidation, which shall be averted thereby.

The realization of the by court confirmed payment of debts pursues a double purpose: the liquidation of existing property and the sanation of actual indebtedness.

2. What conditions must be completed to start the bankruptcy proceeding itself?


  • Bankruptcy: debtor must stop the payments. It means, that the cause of summons is minimum one unpaid, due payment obligation (Article 6, Fw).

In compliance with the bankruptcy rules, neither any legal proceedings or extrajudicial pre-trial is required for both the bankruptcy proceedings and the settlement proceedings. However, the court requires the reasonable appeal.

  • In case of settlement, the debtor must be visibly unable to carry out further on his due payment obligations (Article 214, Fw)
  • In case of law on payment of debts for the natural persons, more criteria are valid.

According to law, prior the court regulation on redemption has been applied, the extrajudicial conciliation proceedings is necessary to be performed. According to issued exemplary declaration of municipal administration it must be documented, that the efforts to realized the friendly redemption were done, and why these efforts were useless. The organized advisory on the local level performs the accessory support in this so called conciliation effort.

To realize the redemption the following is applicable:

  1. The debts must be unredeemable, it means, that no perspective to pay the debt exists.
  2. The debtor must fill in the application to redemption issued by the local self-government and the confirmation signed by it, and thereto, according to Article 285 Fw, to file a complete application to a court.
  3. The indebtedness had to arise in good faith or it shall not be paid ex past facto. This identification of subject-matter is explained by a court. The indebtedness of penalization proceedings is not regarded to arise in a good faith. According to judgement of the highest Court of Justice (hoge Raad) and the directives for the judiciary practice still remain in relevance, that no efforts to damage the creditor were done, that the indebtedness has not arose a very short time ago or it has not been paid ex past facto, and that anywhere possible, the partial payments were realized within the framework of redemption of instalments, it means, that the indebtedness has not bee done from habit without the provable improvement happened.

For whom?

  • The bankruptcy is available both for the natural persons and the legal entities.
  • The settlement neither applies for natural persons acting as a free lancers or as a self-employed traders, nor for the insurance companies.
  • The redemption is permitted only for the legal entities.

It means, that principally the private persons cannot make an application, as well as the companies without legal form of legal entity, as e.g. the single proprietorship.

  • The declaration of bankruptcy can be applied by a debtor itself (the own declaration of bankruptcy) or by a creditor, or also by a state public prosecutor for reasons of public interest.
  • The application for settlement can be applied by a debtor, if he/she does not act as a legal entity. Thus the creditor can not apply for settlement.
  • The legal entity being in such indebtedness can apply for redemption providing there is no chance of paying the debt, and if you apply the complete redemption application at a court, it is necessary to start from the statement of a court that it was acted bona fide. Therefore, the creditor can not apply for redemption.

A number of important information and data from a court ruling, which started the bankruptcy or the settlement proceedings, or the proceedings regarding the payment of debts, is published in the official publication by the court office representative. Besides this, these official publications open for public include the information about name, address and residence of debtor, as well as the name of related bankruptcy judge and the name of appointed bankruptcy trustee or settlement trustee, or the representative.

3. What is the role of individual participants in each proceedings?

In the bankruptcy proceedings and in the redemption rules the court proceeds by a large-reaching decisions, as e.g. on approval or rejection of proceedings, on granting the remission in case of paying of debts, on recall or suspension of bankrupt or on further temporary termination of paying of debts. The court can also release the bankruptcy trustee, or the representative, when he/she ignores his/her legal obligations.

For numerous quantity of decisions regarding the administration of these matters and supervision thereon, the court nominates the entrusted bankruptcy judge among its own circle for the duration of the proceedings. This individual judge governs the bankruptcy trustees and the settlement trustees, or the representatives, allows a certain procedural action and decides on further claims of participants.

Immediately after opening the bankruptcy proceedings by a court, this one will nominate both the bankruptcy judge and the bankruptcy trustee (for the bankruptcy proceedings) or the settlement trustee, or the representative (for the settlement proceedings or for the redemption). The role of the bankruptcy or the settlement trustee, or the representative are defined by a law as follows: the supervision upon the debtor to meet his/her legal obligations, the administration and the liquidation of assets. These tasks are valid irrespective of the fact, that the debtor is a private person or a company.

In the settlement proceedings, the settlement trustee must assume the assets together with the debtor.

  • Sometimes the bankruptcy is independently required by a debtor, but usually the creditor is the initiator. If the appeal on bankruptcy is rejected, the creditor has available the recourse of objection against it; if the appeal is approved, so this recourse is available for the debtor. On behalf of creditor, the bankruptcy trustee can cancel certain legal acts, which were created by a debtor in course of one year prior to start of bankruptcy and which led to infringement of creditor, as e.g. sale of precious just value of property deep under the market price. Within the test period, the creditors are in a position to thresh out the bankruptcy requirements. The creditor can object at the bankruptcy judge and make a complaint against the bankruptcy trustee (Article 69 Fw).

The duty to take the encumbrance in case of redemption: the debtor, who has enabled the redemption of his/her debts, has to make an extra effort during the period of following three years, in the interest of his/her creditor, to repay as much money as possible. In course of these three years the debtor must rise his/her capacities in repayments up to the level of 95 per cent of valid limit of support in the creditor´s favour.

The duty to declare in case of bankruptcy and redemption of debts: the bankruptcy trustee, or the representative is informed about anything by a debtor and he/she should know, that the regular agenda is of great importance, all the reports should be complete and exact.

  • The creditor is not allowed to use the recourse of objection against court decisions to enable the redemption to a debtor. However, he can address the court with this matter to achieve the temporary termination of redemption of debts (Article 350 Fw), when e.g. during the maturity period of redemption he/she makes a new encumbrance, or when therefore some signs exist, that the debtor tries to injure his/her creditor. Also he/she can thresh these matters in test period or at the entrusted judge to file an appeal to the course of the matter. The creditor can in the same way to lodge an appeal against decision, of which the debtor has been notified in course of repayment the debt, that he/she can start with repayment in a new way (Article 355 Fw). The decision as to the redemption is valid inspite that the creditor has not participated in proceedings on redemption of a debt (Article 358 Fw).

4. What are the effects of the initiation of proceedings?

The bankruptcy estate included in the Article 20 and 295 Fw represents the total property of debtor on the date of decision, using which the present rule has been approved, as well as all the asset values, which he/she has acquired still during bankruptcy or realization of redemption of debts. The bankruptcy estate does not include the proprietary subjects necessary for living and other proprietary values mentioned in the Article 21 and in the Article 295 paragraph 4 Fw.

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The principle of so called confiscation is valid both for the bankruptcy and the redemption of debts. By opening the bankruptcy or the settlement/redemption of debts, any legal relations listed in the estate of bankruptcy underlie to the open custody.

In the decision, according to which the the bankruptcy proceedings or the proceedings on redemption of debts of a debtor are approved, he/she losses the rights, according to the law, to represent his/her property or to dispose therewith: since this moment these assets belong to the bankruptcy estate, which is represented through bankruptcy trustee, or representative. Also he/she losses the right to realize and to permit the effective legal acts regarding the property value. On request of a bankruptcy trustee, or of a representative, he/she is liable to issue the entire property value belonging to the bankruptcy estate. For certain legal acts, as e.g. termination of credit transaction, the debtor needs the approval of his/her bankruptcy trustee, or the representative.

The creditor is not liable to notify all the requirements at the bankruptcy trustee, or the representative. However, who would like to take into consideration the division of revenues according to so called classification of revenue division and to divide to the known creditors, he/she makes it correct when notifies his/her requirement.

If the debtor finds out after the redemption of debts has been terminated, that he can start in a new way without indebtedness ("remission"), so it is applicable for all creditors, also for those, who did not notified their requirements at the representative. However, one important limitation does exist here: the regulation of debt redemption develops its effect only in relation to the requirements, which exist at the moment of court decision, and by which the debtor was authorized to the regulation of debt redemption (Article 299 Fw, the principle of confiscation). The requirements arosen after the atest period, are the new ones and therefore they do not come under the debt redemption; they can not become a subject of debt remission.

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The authorized bankruptcy judge can order, in the bankruptcy, on request of any participated party, through the judgement summons, that no particular right should not be executed to satisfy the third party for maximum one-month period, prolongable by maximum one another month: so called: "cooling period". The bankruptcy trustee can make a picture of bankrupt´s estate. So this rule of cooling can touch also the mortgagee, the pledgor or the authorized person with reserved property right.

The temporary approval of debt redemption can done till definitive court ruling. This legal possibility is executed by courts only seldom and in necessary acute cases, e.g. when there is a thread to empty the dwelling place or the business facilities.

Before the redemption of debts has been declared to be preliminary or definitive, the unlimited moratorium is declared in relation to the creditor´s excercise of his/her rights. The crrently performed execution measures and the security measures will weaken and the currently started executive measures are rendered. Since that moment the legal or contractual interests are stopped. Even at the redemption of debts the authorized judge can enact through the judgement summons the "period of cooling" upon requested by any of participated party.

All running bankruptcy proceedings (insolvency proceedings) are recored in the headquarters of the Insolvency Registry (Centraal Insolventie Register, CIR), in the Office for Legal Custody (Raad voor de Rechtspraak) in Haag; this provision is addressable at the Dutch page:

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5. Which unusual rules are valid for individual kinds of requirements?

* The property value, which is a reserve of property right, does not fall under the bankruptcy estate or under the redemption estate of debts, see the Article 20 and 295 Fw; however it can be harmed by other judgement summons, which ordered the cooling period, see below.
* The bankruptcy judge, upon so requested by any of the participants, can order, through the judgement summons, the cooling period, which is applied for any rights of a third person belonging to the assets value for special satisfaction.
* Principally, the companies without legal form of legal entity can have allowed the sanation of redemption of debts. Such a company will be always liquidated according to court praxis as to the redemption of debts. In redemption of debts it does not occur so quick, that the voluntary activity or undertaking will be operated further as excepted in the Article 311 Fw. In respect to the risks of many indebtednesses, the bankruptcy trustee, or the representative notifies any standard measures like all running labour contracts in the debtor´s company.
As to the rights of creditor, see the answer to the question 2.
* The hierarchy of creditor with claim to the preferred satisfaction (based on privilleged requirements) against competitive creditors differs in the redemption of debts when compared with the bankruptcy; according to the Article 349 paragraph 2 Fw they stand in the ratio 2:1. Thereby, the privileged creditor is better off. Within the rules for redemption of debts, there are no specific divisions in respect to the hierarchy within the category of privileged and competitive creditors as it is in case of a bankruptcy.

In principle, the regulation of debt redemption does not work for the claims, which are secured by the bankruptcy rights or mortgage; even in case of bankruptcy, the bankruptcy creditor or the mortgage creditor can behave so as if it were no bankruptcy (regarding the bankruptcy, see the Article 57, 58 and 59 Fw, which are used analogous for the redemption of debts).

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6. What rules are valid for the harmful behaviour?

If prior to bankruptcy or debt redemption the debtor made some certain voluntary legal acts , he knew or could know, that these will be harmful for the creditor, then he/she can use the bankruptcy trustee or the representative and these legal acts avert in the interest of the bankruptcy estate: Article 42 and 43 Fw.

The debtor (but also the creditor or the representative) can bring at a court the matter of sanation, to achieve a temporary termination of paying of debts. The conditions are based on the Article 350 Fw. The most often is the temporary termination due to reason, that the new indebtedness of the estate arose, that the debtor tried to harm his/her creditor, or that he/she ordered something to his/her representative inaccurately or incompletely. The legal effect thereof is that the debtor immediately occurs in the legal situation.

The duration of bankruptcy is not specified by a law. The majority of bankrupts develops over the one and half a year, in generally due to lack of assets and mostly based on simplified acting without test period. The complicated big bankruptcies often last longer. The authorized bankruptcy judge controls the progress of bankruptcy trustee, the development connected therewith, as required by EVRM to continue in reasonable period of time.

Generally the debt redemption lasts 3 years. This period can be also longer in unusual cases, however sometimes not more than 5 years. In ususual cases the period for debt redemption can be also reduced, i.e. for the minimum period of one year, when the court does not see any reason to realize the test period. This reduced proceeding is indentified also as the simplified paying of debts and is limited on cases, in which it is defined, that in the foreseeable future the creditor will not reacquire anything from its claim.

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7. Which conditions apply for notification and determination of claim?

* The court office representative notifies the court decision, by which starts the bankruptcy proceedings or the proceedings on paying of debts, also he notifies together with the name of bankruptcy trustee, or the representative, the debtor and the authorized judge also the period for test period in the official publication.
* For each running bankruptcy proceedings and the settlement proceedings, or the proceedings on debt redemption, a whole range of key data is filed in the public register. This register (Centraal Insolventieregister, CIR, und Landelijk Register Schuldsanering, LRS) can be seen, i.e. on bankruptcies in the Dutch website, and on debt redemption at the Office for legal aid (Raad voor Rechtsbijstand) in the town Bosh on the Dutch website
* The test period is not always discussed about in the bankruptcy proceedings, or the debt redemption proceedings. The court appreciate mostly, on request of the bankruptcy trustee, or the representative, whether in respect to the estate status the proceedings of such a kind is worth to be executed, or whether it will not be better to perform the simplified development. For next details, see the answer to the question No. 5.
* If the test period is planned, the bankruptcy trustee, or the representative notifies it to all known creditors. The creditors can then notify their claims together with relevant evidences. The test of all claims proceeds exactly how in case of bankruptcy according to the Article 110 inclusive 116 Fw. The creditors, the ground and amount of claims were determined, are listed in the statement of insolvency of ascertained claims.
* For the regulation as to the debt redemption it differs between the privileged and competitive claims. No hierargy exists within these two categories, as it is in case of bankruptcy. (Article 349 paragraph 2 Fw).

8. What rules apply for the sanation proceedings?

Within the framework of bankruptcy proceedings it is possible to start with a new business. The bankruptcy trustee notices the labour relations (Article 40 Fw), thus the foundation on indebtedness must be as far as limited and because - in contrast to the settlement proceedings - during the transition to the business in the bankruptcy, the protection against notice is not usual. The bankruptcy trustee can control the company, which went under the bankruptcy, providing, that it is in the interest of the estate.

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The purpose is similar in the conciliation/settlement proceedings, so to sanitate the company, i.e. to sanitate finantially. The period of maximum one and half a year is available for it, and this period can be also prolonged. The debtor needs the authorization issued by the conciliation trustee to perform the administrative procedure or the business. The debtor can not be forced to pay his/her debts during the settlement proceedigs. All the execution and security measures are not weaken to the preferred claims. The settlement proceedings does not work efficiently in relation to the preferred claims.

The complete sanation of existing debtor´s indebtedness is essential in the regulation of debt redemption, when this debtor is a natural person. The court decision on approval of debt redemption contains, that the creditors in realization of their rights are offered with stoppage. The performed execution and security measures are weaken and started enforcement measures are interrupted (Article 301 Fw). The statutory or contractual interests are stopped since that moment (Article 303 Fw). If, according to a rule, the debtor passes through three-years´ phase of settlement and pays as much as the greatest part of his/her debt, the remaining debt can be changed through a court decision to the bonds (Article 358 Fw). It means, that the remaining part of a debt for the creditor is not more actionable and executable.

The bankruptcy trustee conducts the sanation and new beginning in the bankruptcy proceedings. In the conciliation proceedings is this done by a debtor and the conciliation trustee together. The duration of bankruptcy proceedings is specified by a law, whilst the conciliation proceedings takes basically till one and half year. The sanation in the bankruptcy proceedings has generally bigger chances to suceed, therefore the legal protection against notice is not included here, whilst in the conciliation proceedigs it is applied. In all cases the sanation plan is permitted by a court.

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The debt redemption has the period of repayment within three years, which are fixed in the sanation plan (Article 343 Fw). This is fixed by a court upon a proposal, in theory by using of the elaborated proposal of a debtor, and it contains the liabilities, which must be met by a debtor. In praxis, the majority of debt repayments is performed without such a plan, because it makes the whole procedure difficult. Also in this point a change of a law is expected (the bill 29 942), i.e. the sanation plan will not create a part of proceedings any more.
9. What regulations are applied for the liquidation proceedings?

Both the bankruptcy proceedings and the proceedings on debt redemption are aimed to the liquidation of existing estate. The conciliation proceedings stays on the contrary thereto clearly for maintaining of assets and serves in principles to vault the temporary problems with payment of the company.

In the bankruptcy proceedings, the bankruptcy trustee can order an adequate period in compliance with the execution law or the mortgagee, whereby he can do his rights only after its expiration.

The rule in the bankruptcy proceedings is alwasy the auction, which is permitted by a judge authorized thereto for free sale (Article 176 Fw). The bankruptcy trustee has the right to realize the liquidation (Article 68 Fw). On the contrary thereto, in the debt redemption the representative needs essentially the authorization issued by an authorized judge to be able to perform the liquidation, but on the contrary the auction is not necessary basically. The liquidation of existing assets can be realized in a form of bankruptcy proceedings or the proceedings on debt redemption.

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Generally the bankruptcy trustee, or the representative, performs only a lump-sum distribution of yields to the creditor in the end of proceedings. The debt redemption and the bankruptcy end formally, when the valid distribution list is binding. The bankruptcy trustee, or the representative, notifies a creditor thereof. The creditors can contest this list with appeal (to remonstrate).

The simplified proceedings is performed both in the bankruptcy and the debt redemption. Therewith it is going about the proceedings without test period. In the bankruptcy it is required, that the existing assets are not enough to satisfy the competitive claim.
10. What conditions apply to the termination of proceedings?

The essential difference between the bankruptcy proceedings and the proceedings on debt redemption consists in the fact, that the unsatisfied claims can be revived again after the termination of bankruptcy proceedings and therefore they are again revocable and executable for creditors (Article 195 Fw). This can be done within the period, when the definitive list of distribution is binding, and when the creditor can not more lodge objections against it. The bankruptcy terminates by the way of settlement, simplified execution (interruption due to lack of assets) or the division of yields to the creditors according to their claims.

The settlement proceedings/conciliation terminates either through withdrawing of debtor´s appeal or through settlement approved by a court.

The debt redemption terminates with positive or negative result:

*If the debtor meets his/her debt redemption obligations properly (in which the representative orders to make reserves of money as much as possible in the period of three years), so he/she is brought to court and the final judgement determines, that he/she can start a new business without debts ("remission"). It means (see the Article 358 Fw), that the remaining debt for the creditor is not more enforceable and revocable.
* If the debtor fails to comply with his/her obligations from repayment of a debt, the debt redemption may be temporary terminated without being brought to court, that he/she can start new business without debts. The debtor is positioned now according to a law in the legal position of bankruptcy (see the Article 350 Fw). This can happend in a case, that during the term of payment of his/her debt redemption a new indebtedness was created, or when he/she tried to harm his/her creditor.

The fact, that somebody was afflicted by the bankruptcy, the settlement of the debt redemption, remains for a certain period on the Credit Registration Office (Bureau Krediet Registratie, BKR) in Tiel and in the Central Insolvency Register (Centraal Insolventie Register, CIR) on the Office for Legal Care in Haag ( Nederlands). Since this represents a risk factor for a creditor. No obstacles are standing against a new start in business activity. After successfull termination of debt redemption, the private persons have available new prospects to the financial future providing their indebtedness was forgiven.

The businessman, who apparently contributed to the bankruptcy by his/her improper management of the company, can be hold responsible by the bankruptcy trustee upon the Civil Code. The Criminal Code contains the enforcement provision in relation to the cheating bankruptcy. For the businessman/injudicial person, who did not met the oblidation of debt redemption, no specific penalties exist.

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