According to the Hungarian laws, specifically the Bankruptcy Code renewed in 2009, bankruptcy is a procedure that enables a debtor to benefit from a temporary stay period in which the debtor can agree with the creditor or creditors on the solvency of the debtor’s company in Hungary. The usual stay period is 90 days if certain requirements are met. In Hungary both debtor and creditor are allowed to start bankruptcy procedures.
In Hungary the debtor can initiate the bankruptcy procedure if no other bankruptcy or liquidation action has been initiated. Once the court has taken notice of the bankruptcy application, the debtor will benefit from 120 days as grace period that can be extended. The application for the bankruptcy procedure must be submitted with the competent court. Then the court will assign a trustee that will monitor and approve the commercial activities of the debtor.
Creditors will claim their debt to both debtor and trustee and will gain voting rights for the registered claims. Part of the voting rights will be required for the extension of the 120 days moratorium that can be expanded to 240 or 365 days, or the bankruptcy agreement will be signed. During this moratorium the debtor and the creditor must reach an agreement for the debt recovery or the debtor must meet the creditor’s demands.
If the bankruptcy agreement meets the requirements of the law, the creditors agree with the votes and the trustee will sign the agreement, the court will rule in favor of the bankruptcy agreement and all procedures are closed. The agreement must be completed by the creditors also in order to be effective, and in case a bankruptcy agreement has not been reached, the court will rule for liquidation of the debtor.
In Hungary the liquidation procedure will only begin if the debtor is insolvent and if the creditor or the liquidator requires the proceeding. A debtor is also entitled to ask for liquidation if he or she cannot or does not want to start a bankruptcy proceeding. In case de debtor requested the liquidation he or she must provide the name of the financial institutions in charge with the bookkeeping and the names of the accounts.
If the creditor initiates the liquidation the debt, the due date and the cause the debtor is insolvent must be provided. The creditor is also entitled to ask the court that a trustee is appointed in order to oversee the debtor’s activities.
If the court decides for liquidation, a liquidator will be assigned. The liquidator will evaluate the financial situation of the debtor and the demands of the creditor and then dispose the distribution of assets and a balance sheet for the liquidation. Based on the liquidator’s reports, the court will rule over who will support the costs, how creditors will receive their demands, the liquidation of the bank accounts, the fulfillment of the liquidation and the termination of the company.
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