The matter in brief
How it went
Situation. The client’s counterparty entered bankruptcy proceedings without having paid under a supply contract. The lawyers who had previously advised the client rated the prospects of recovery as nil because the debtor had no assets.
What we did. We filed the claim in the register of creditors’ claims, analysed the debtor’s transactions for the three years before bankruptcy, and found and challenged a transaction that had moved the main asset to an affiliated company.
Result. The challenged asset was returned to the bankruptcy estate and the client’s claims were satisfied in proportion to its share in the register, a result initially considered unattainable.
Legal framework
Federal Law No. 127-FZ. The procedure for including claims in the register of creditors is governed by the Insolvency (Bankruptcy) Law: Article 71 for the observation procedure and Article 100 for bankruptcy proceedings. A claim enters the register only on the basis of a commercial court ruling, not on a creditor’s application alone.
Chapter III.1: challenging the debtor’s transactions. This chapter of the law makes it possible to challenge transactions made by the debtor before bankruptcy: suspicious transactions (Article 61.2), if concluded within one year (where the consideration received was unequal) or three years (where the aim was to harm creditors) before the court accepted the bankruptcy petition, and preferential transactions (Article 61.3), which have a shorter suspect period.
Order of priority. Article 134 of the law sets the order of payment: first current payments and claims for compensation for harm to life and health, then wage arrears, and only after that the claims of third-priority creditors, which usually include ordinary contractual debts.
Key deadlines and thresholds
General procedural benchmarks for this category of case, set by the Insolvency (Bankruptcy) Law.
How the court considers a claim
The general procedure for this category of dispute. The specific timeframes in your own case are best confirmed at a consultation.
Filing the petition
The creditor sends the commercial court handling the bankruptcy case an application for inclusion of the claim, with supporting documents.
Objections from other parties
The insolvency practitioner and other creditors are entitled to submit objections as to the validity and amount of the claim.
Court hearing
The court examines the merits of the claim at a hearing, reviewing the documents submitted and the parties’ arguments on the objections.
Court ruling
Finally, the court issues a ruling including the claim in the register, in whole or in part, or refusing inclusion; the ruling can be appealed.
Common misconceptions about a counterparty’s bankruptcy
“A debt can be written off as hopeless and forgotten.” Formally writing off a debt in the accounts does not mean actually giving up the claim: even where the debtor apparently has no assets, the creditor is entitled to join the register and trigger a review of transactions from previous years.
“If the debtor has no property on its balance sheet, there is nothing to recover.” Financial statements often do not reflect the real position: an asset may have been moved to third parties shortly before bankruptcy and can be returned to the bankruptcy estate by challenging the transaction.
“Challenging a debtor’s transaction is practically impossible.” It requires proving the grounds set out in the law, and the result is indeed not guaranteed, but where there are signs of an undervalued price, affiliation between the parties or the former owner keeping actual control of the asset, the chances are usually better than is commonly believed.
How we handle cases like this
We look beyond the debtor’s balance sheet. When securing inclusion in the register, we separately analyse the debtor’s transactions in the period before bankruptcy. This often achieves more than formal participation in the register with zero assets on the balance sheet.
We assess how realistic recovery is before starting. Before taking on a case, we look at the ranking of the claim, the make-up of the other creditors and the likelihood of finding challengeable transactions. This lets us set out a realistic scenario in advance instead of promising the impossible.
We see the procedure through to the end. We attend creditors’ meetings, deal with the insolvency practitioner and, where necessary, challenge their actions. Inclusion in the register is rarely a one-off step; it usually means support throughout the whole bankruptcy procedure.
A similar situation? Let us discuss the details at a consultation.
Frequently asked questions
Can I file a cassation appeal after losing on appeal?+
Yes, this is the standard route of challenge. The key is to meet the procedural deadline and to prepare an appeal with new arguments that were not raised before.
How can an international arbitration award be recognised in another country?+
Through recognition and enforcement proceedings under the 1958 New York Convention, to which most countries are party.
Is this a real case or a generalised example?+
It is a real matter from the firm’s practice. We publish it without company names or the names of the participants, as every client agreement includes a non-disclosure clause.