Bankruptcy proceedings are a legal process in which a company or individual that can no longer meet its financial obligations is placed under the administration of the bankruptcy court. The aim is to ensure an orderly liquidation of the debtor's assets for the benefit of creditors.
When insolvency becomes permanent - not just temporary payment difficulties - a bankruptcy petition can be filed. This can be done by the debtor himself (self-petition) or by a creditor.
When can bankruptcy proceedings be considered?
At the heart of bankruptcy proceedings is insolvency. This means that the debtor is unable to pay their obligations as they fall due - and that the situation is not simply due to a temporary crisis or unwillingness to pay.
Before an actual bankruptcy can be initiated, it is necessary for the bankruptcy court to receive a bankruptcy petition. The court then assesses whether the conditions for opening bankruptcy proceedings are met - including whether the debtor is actually insolvent.
Who can file for bankruptcy?
It is possible for both companies and private individuals to file for bankruptcy. The petition can come from:
- Debtor himself (self-petition)
- A creditor who has a financial claim
- A debt collection agency or lawyer representing the creditor
The bankruptcy court in the jurisdiction where the debtor belongs will hear the case and decide whether bankruptcy proceedings can be initiated.
What happens during bankruptcy proceedings?
When the court accepts a case, a trustee is appointed - typically a lawyer specializing in insolvency. The trustee's role is to get an overview of the debtor's finances: assets, income and expenses.
The trustee will attempt to realize (sell) the debtor's assets in order to cover all or part of the claims raised by the creditors. In the case of private individuals, certain restrictions apply, for example, possessions necessary for a modest private life may not be confiscated.
Financial costs of bankruptcy
A bankruptcy petition generally costs a court fee of DKK 1,500 (figures from 2024). If the petition is filed against a company, security must also be provided for legal costs - typically around DKK 30,000.
If the debtor chooses to file for bankruptcy themselves, the court fee is in practice waived.
Bankruptcy and relation to debt collection
In some cases, bankruptcy can be the last step in a longer process of debt recovery - e.g. via debt collection or other forms of legal proceedings. However, bankruptcy is rarely chosen as the first step, but can become relevant if the debtor does not respond to reminders, collection efforts or other recovery attempts, and it is also assessed that there is value to be found in a bankruptcy estate.
At Qatchr, we work with prevention - e.g. through credit information, continuous monitoring and data-driven analysis - that can minimize the credit risk of insolvency and poor payment ability.
