Montag, 14. Oktober 2019

The Different Kinds Of Creditors In German Bankruptcies

Some creditors are created more equal than others in German bankruptcies.
Creditors are differentiated between preferential creditors, unsecured creditors and secured creditors. 
I. Preferential Claims
Preferential claims are claims that arise after the debtor has filed for bankruptcy. They are fees for the court, the administrator, the creditors' committee and basically every contract that administrator enters into for the company after bankruptcy. Preferential claims have the highest priority, meaning they are paid first buy whatever money is available. This might seem unfair for other creditors who have had claims outstanding for several years. And it is. But the reason is that if this was not the case the debtor would basically say: "Do business with us now although we are in bankruptcy and guarantee you that you will only get back 5% of your money." Noone would do that, the company could not continue to operate in the market and would have to be liquidated. That is why the law basically states that everyone who does business with the debtor after the formal bankruptcy filing will be paid business as usual after he has sent his invoice.

As a rule of thumb: Claims that arise after the filing of bankruptcy, but before proceedings are formally openend are not preferential claims. Of course, every file is different. If the court orders that the preliminary administrator may make preferential claims – he can do just that.
II. Unsecured Claims

Regular (unsecured) claims are those claims that arose before the company entered into formal bankruptcy proceedings. These creditors must must file their claims for registration with the administrator, who either rejects the claim or registers it with the bankruptcy schedule. In case of a rejection the creditor must bring a legal action to enforce the acceptance of the claim. If he does not, his claim is not filed with the schedule and will not be considered for any payments.

 III. Secured Claims
Secured creditors are legally not bankruptcy creditors, because they have a direct claim against the estate to surrender their collateral or payment of the proceeds thereof. To the extent the security was not sufficient to cover the total amount of the secured claim, the remaining claim will be treated as an unsecured bankruptcy claim.

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