Table of Contents:
- Obligation to File a Bankruptcy Petition for an Entrepreneur
- Conclusion of Bankruptcy Proceedings for an Entrepreneur
- Debt Relief for an Individual Entrepreneur
Obligation to File a Bankruptcy Petition for an Entrepreneur
Entities conducting business activities are legally required to file a bankruptcy petition within 30 days from the date when grounds for declaring bankruptcy due to insolvency arise.
If the entrepreneur is an individual conducting business activities, this obligation falls on that individual.
If the entrepreneur is, to simplify, a legal entity or another organizational unit, the obligation lies with anyone who, based on the law, the company’s articles of association, or the statute, has the right to manage the entrepreneur’s affairs and represent them, either independently or jointly with others, such as a member of the management board of a capital company or a partner authorized to represent a partnership.
Polish bankruptcy law also allows for consumer bankruptcy. Consumers have the option, but not the obligation, to file for consumer bankruptcy. The benefit they can gain from bankruptcy proceedings is debt relief, either through the execution of an established repayment plan or even without a repayment plan in the most justified cases.
However, considering the goal of bankruptcy proceedings articulated in Article 2(2) of the Bankruptcy Law (p.u.), which states that bankruptcy proceedings for individuals should also aim to enable the discharge of the debtor’s liabilities that were not satisfied in the bankruptcy proceedings, it is reasonable to ask: can an individual entrepreneur also obtain debt relief as a result of bankruptcy proceedings?
Conclusion of Bankruptcy Proceedings for an Entrepreneur
In the case of insolvent collective entities, such as commercial companies, bankruptcy proceedings involve the liquidation of the bankruptcy estate and the allocation of the funds obtained to cover the costs of the bankruptcy proceedings and to satisfy the creditors participating in the bankruptcy proceedings.
If the plan for the distribution of funds provided for the full satisfaction of creditors (which is very rare), the entity could continue to operate after the conclusion of the bankruptcy proceedings.
However, if the distribution plan did not provide for the full satisfaction of creditors (e.g., due to insufficient assets of the bankrupt entrepreneur), after the execution of the distribution plan, the bankruptcy proceedings would be concluded, and the entity would be removed from the appropriate register. Creditors would then consider pursuing the unsatisfied portion of their claims, for example, from the representatives of the bankrupt entity.
The situation is different for the conclusion of bankruptcy proceedings for an individual entrepreneur. In this case, even if not all creditors are satisfied, the bankrupt individual continues to exist, as they are a person whose life goes on after the bankruptcy proceedings. Mechanisms must be in place to enable the debt relief of such an entrepreneur, allowing them to continue functioning in the market.
Debt Relief for an Individual Entrepreneur
According to Article 368 of the Bankruptcy Law (p.u.), the court declares the conclusion of the bankruptcy proceedings after the final distribution plan is executed. This plan may not provide for the full satisfaction of creditors due to insufficient funds in the bankruptcy estate.
The court also declares the conclusion of the proceedings if all creditors have been satisfied during the proceedings. However, there may be creditors who did not participate in the bankruptcy proceedings, and theoretically, their claims should still be satisfied.
To release an individual from the remaining debt and enable the entrepreneur to obtain debt relief, the legislator, in Article 369(1) and (1a) of the Bankruptcy Law, provides that within thirty days from the date of the announcement of the decision concluding the bankruptcy proceedings, the bankrupt individual can file an application for a repayment plan for creditors and the discharge of the remaining unsatisfied liabilities. Within this period, the bankrupt individual can also apply for the discharge of liabilities without a repayment plan if their personal situation clearly indicates that they are permanently unable to make any payments under the repayment plan.
It is crucial to meet the thirty-day deadline for filing the application. The application is submitted through the KRZ system.
The possible court decisions regarding the entrepreneur’s application will be discussed in subsequent articles, as the scope of this topic exceeds the limits of this entry.
