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Contracts in Germany
2018-12-05
English

The legal handling of a bankrupt debtor in Germany

The first step for a bankrupt debtor who wishes to make a composition or scheme of arrangement of his affairs is to apply to the German court for an interim order. This order has the effect of preventing a bankruptcy petition from being presented. In his application the debtor must state that he proposes to make a voluntary arrangement and must name a local lawyer in Germany as insolvency practitioner .
Within 14 days the latter must submit a report to the court stating whether a meeting of the debtor's and creditors should be called to consider the proposal. Upon receipt of this report, if satisfied that such a meeting should be held, the court will direct that the interim order be extended for a specified period. Thereafter the nominee must summon the meeting. The chairman of the meeting must report its deliberations to the court and, assuming that the court approves the proposal, every debtor or creditor who had notice of the meeting and was entitled to vote is bound by the arrangement whether or not he attended the meeting or voted in favour of the proposal. After the report to the court the interim order continues in being for a further 28 days. This is to allow the arrangement to be challenged by the debtor in Germany, any foreign creditor entitled to vote, the nominee, or (where the debtor is a bankrupt) the trustee of his estate or the official receiver.
The payment:
After the 28 days no challenge is allowed. If the challenge is successful the period of the interim order will be extended. If there is no payment, or the challenge is unsuccessful, after the 28 days the arrangement becomes binding and it is then for the nominee (thereafter known as a 'supervisor') to assume responsibility for the implementation of the arrangement by billing the debt.
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