Bankruptcy Proceedings – How to Effectively Pursue Claims?

Bankruptcy proceedings are a complex process aimed at settling the debts of an insolvent debtor towards their creditors. Creditors—individuals or institutions to whom the debtor owes money—have specific rights designed to protect their interests and enable them to recover part of the amounts owed. In this article, we explain what rights creditors have during bankruptcy proceedings, how they can pursue their claims, and what the order of creditors’ satisfaction looks like.

Who is a Creditor?

A creditor is a natural person, legal entity, or other organizational unit entitled to demand that the debtor fulfill a specific obligation—usually of a financial nature. In bankruptcy proceedings, creditors are those with outstanding claims against the debtor, such as for unpaid goods, services, or loans.

What Rights Do Creditors Have in Bankruptcy Proceedings?

Creditors have a number of rights that enable them to pursue their claims and recover at least a portion of the debt in bankruptcy proceedings. The most important of these include:

Right to File a Claim

One of the basic rights of creditors is the ability to file their claims. This is a formal confirmation that the debtor owes money to the creditor. The claim must be submitted within a specified deadline to the bankruptcy trustee (syndyk) managing the estate.

The claim should include:

• The creditor’s full name or business name, PESEL or KRS number (or other identifying information if unavailable);

• A description of the claim, including any interest or incidental amounts, and the value of non-monetary claims;

• Evidence supporting the existence of the claim;

• The category of priority for the claim;

• Security interests related to the claim (e.g., guarantees);

• If the debtor is not personally liable, the asset securing the claim (e.g., property under a mortgage);

• Information on any pending court, administrative, or arbitration proceedings related to the claim;

• The creditor’s bank account number, if available.

Right to Participate in Creditors’ Meetings

The creditors’ meeting is a key component of bankruptcy proceedings, allowing creditors to directly influence the process. Every creditor has the right to attend such meetings convened by the supervising judge.

By law, the creditors’ meeting must vote on decisions including:

• Exclusion of assets from the bankruptcy estate;

• Obligation for creditors to make advance payments for procedural costs;

• Approval of restructuring plans.

Right to Access Case Files

Creditors have the right to review case files and documents, particularly those related to the trustee’s actions. This allows them to monitor the proceedings and ensure everything complies with the law and serves their interests.

In consumer bankruptcies, if irregularities are found in the trustee’s actions, the creditor may file a complaint.

Right to Appeal Decisions

If a creditor believes a court decision violates their interests or legal rights, they have the right to appeal. Depending on the nature of the decision, they may file a complaint, objection, or appeal.

Right to Submit a Restructuring Plan

In proceedings involving a repayment arrangement, creditors may submit their own proposals regarding how the debtor will repay debts. These may include reductions in the debt amount, extended repayment deadlines, or conversion of debt into company shares. The plan must be approved by the creditors’ meeting.

Right to Appoint a Creditors’ Committee

In certain cases, the supervising judge may appoint a creditors’ committee to oversee the trustee’s actions. This committee typically includes representatives of the largest creditors and plays a supervisory role.

The committee may monitor the process, give opinions on key decisions such as asset sales, and participate in the distribution of funds.

Order of Creditors’ Satisfaction

One of the most crucial aspects of bankruptcy is understanding the order in which creditors are paid. Since the debtor’s estate may not cover all obligations, the law sets out a hierarchy for distributing the available funds fairly.

This general hierarchy may vary depending on the type of bankrupt entity (e.g., a bank).

For more details, see the article on the Repayment Plan for Creditors.

1. “Zero” Category

This group has absolute priority and includes:

• Bankruptcy proceeding costs;

• Post-bankruptcy child support obligations;

• Debts incurred by the estate after the bankruptcy declaration, if funds allow.

2. First Category

Next in line are:

• Employee wage claims prior to bankruptcy (with exceptions);

• Farmers’ claims for deliveries from their own farms;

• Child support claims;

• Annuities for injury-related disabilities or death, and lifetime annuities replacing property rights;

• Social security contributions due for the three years preceding bankruptcy.

3. Second Category

The second category (which in fact is third in order of satisfaction) includes other claims not covered by the previous categories. This group consists primarily of taxes, other public levies, and remaining social security contributions not listed earlier.

4. Third Category

Next in line are interest payments on claims classified in higher categories, in the order corresponding to the principal claims. This category also includes court and administrative fines, as well as claims arising from donations and bequests.

5. Fourth Category

How Can Creditors Pursue Their Claims in Bankruptcy?

Although bankruptcy proceedings are complex, creditors have several ways to enforce their claims effectively:

Timely Filing of Claims

Timely submission of claims to the trustee is crucial. Failure to do so may result in the claim being excluded from asset distribution, significantly reducing recovery prospects.

Creditors should actively monitor the case and ensure all documents are submitted correctly and on time. If in doubt, it is advisable to consult a lawyer to avoid formal errors.

Active Participation in Creditors’ Meetings

Creditors should engage in creditors’ meetings to influence the process and vote on critical decisions. Active participation provides greater control and protects the creditor’s interests.

Legal Assistance

Given the complexity of bankruptcy law, legal representation is highly recommended. A legal advisor can help file claims properly, monitor the case, and advocate for the creditor’s position. Professional legal support increases the likelihood of successful recovery.

Challenging Decisions

If a decision is unfavorable or legally questionable, the creditor should file an appropriate appeal. This can relate to the trustee’s actions, court rulings, or the judge’s decisions.

Summary

Creditors have numerous rights enabling them to assert their claims during bankruptcy proceedings. Key steps include timely claim submission, active involvement in the process, and seeking legal counsel. The order of creditor satisfaction plays a pivotal role in debt recovery, making it essential to be well-prepared at every stage.

If you are a creditor and have questions about your rights in bankruptcy, consult a legal advisor. Our law firm provides full legal support throughout the bankruptcy process, helping protect your interests and guide your case to a fair resolution. Contact us to receive expert assistance and ensure your rights are safeguarded.