Where a debtor is insolvent, bankruptcy proceedings may be initiated by an application to the court. Bankruptcy is a judicial process in which the courts pass all the assets of the bankrupt to an official called the trustee in bankruptcy. The trustee collects the bankrupt’s assets and, if available, sells them so that the proceeds can be distributed amount the creditors.
Bankruptcy proceedings are available to both companies and individuals. For a company bankruptcy generally leads to its dissolution and the end of its existence as a legal entity. An individual, on the other hand, will generally be discharged from almost all debts and can make a fresh start. An application for bankruptcy may be filed either by the debtor or a creditor. However, a creditor must establish prima facie case that the debtor is insolvent and pay a substantial deposit to cover the trustee’s expenses, in addition to court fees. Consequently, bankruptcy applications by creditors are not common.
Where a debtor files for bankruptcy during our engagement to recover a debt on behalf of a creditor, we offer representation in bankruptcy proceedings, including attendance at creditors’ meetings, on a fixed fee basis. Although unsecured creditors are unlikely to receive little or nothing, some clients seek documentary evidence to support tax deductions for bad debts, while others value the information that can be obtained at creditors’ meetings.
To find out how to get started with our debt recovery services, please see How do I get started? on our Debt Collection in Japan page.