When a company falls into financial difficulties and can no longer meet its obligations to creditors, employees, or the state, bankruptcy proceedings come into play. This is a legally regulated mechanism that serves a dual purpose: to protect the interests of creditors through fair collection and to give the debtor a chance to preserve viable parts of the business through reorganization.
Initiating bankruptcy is not just a matter of economic necessity but also a legal procedure with clearly defined steps and deadlines. It is therefore important to understand when insolvency occurs, who can file for bankruptcy, and what consequences this procedure brings for all parties involved.
In the following sections, we will address key questions: when a company enters bankruptcy, who can initiate the procedure, after how many days of account blockage bankruptcy can follow, how creditors collect claims from a bankrupt company, what rights employees have, and what role lawyers play in protecting interests.
What are bankruptcy proceedings?
Unlike regular civil or enforcement procedures, bankruptcy has a collective nature — it includes all creditors and all claims within a single proceeding. This guarantees equal treatment for participants and prevents individual creditors from being favored to the detriment of others.
Bankruptcy does not always mean the end of business operations. If the court determines that the company is capable of recovery, a reorganization plan may be implemented to stabilize and continue operations while ensuring the gradual repayment of creditors. Otherwise, if reorganization is not feasible, liquidation bankruptcy will take place, which involves selling off the company’s assets and removing the company from the business register.
Types of bankruptcy
In practice, there are two main types of bankruptcy proceedings, and the difference between them lies in the objective of the process:
Bankruptcy (liquidation)
This form of bankruptcy leads to the closure of the company. The debtor’s assets are liquidated and used to settle creditors’ claims according to a legally defined order of priority. Once the process is completed, the company ceases to exist and is removed from the business register. Bankruptcy is the most common outcome when a company is permanently unable to operate and has no realistic prospects for recovery.
Reorganization
Unlike bankruptcy, reorganization aims to preserve the business and jobs. The court may approve a reorganization plan that outlines measures for financial and operational recovery, such as partial debt write-offs, debt rescheduling, recapitalization, or the sale of specific assets. Reorganization is applied when there is a realistic chance that the company can continue its operations and meet its obligations in the future.
In this way, bankruptcy proceedings serve a dual purpose — they can lead to the liquidation and distribution of assets, but they can also enable the survival of a company through a legally structured recovery process.
When does a company go into bankruptcy?
A company enters bankruptcy proceedings when it meets the legal conditions that indicate permanent inability to conduct business. The most common situations include:
Inability to pay
If the debtor is unable to settle its due obligations to creditors, employees, or the state over a longer period, this is considered insolvency. Insolvency is the primary reason for initiating bankruptcy proceedings.
Over-indebtedness
Bankruptcy may also be initiated when the company’s liabilities exceed the value of its assets, regardless of its current liquidity. Over-indebtedness means that the company has no realistic basis for continuing its operations.
Non-compliance with a reorganization plan
If a reorganization plan has previously been approved but the company fails to implement it in accordance with court decisions, this represents an additional ground for opening bankruptcy proceedings and moving toward liquidation.
In practice, the question of when a company goes into bankruptcy is most often associated with prolonged bank account blockages and the inability to normalize business operations, which also triggers legally prescribed deadlines that will be discussed in the following sections.
Who can initiate bankruptcy proceedings?
Bankruptcy proceedings are not initiated automatically — a petition must be submitted to the competent commercial court. The following parties have the right to file such a petition:
The debtor
The company itself can file for bankruptcy. This often happens when management determines that there is no way to restore liquidity and that the only viable solution is to resolve over-indebtedness through a legal procedure.
Creditors
Any creditor — whether a bank, supplier, or other business partner — may file for bankruptcy if the debtor fails to settle due obligations. This allows creditors to protect their rights and seek repayment from the company’s assets.
The liquidation administrator
If the company is already undergoing liquidation but it becomes evident during the process that there are insufficient assets to settle all creditor claims, the liquidation administrator is obligated to file a petition to initiate bankruptcy proceedings.
Regardless of who initiates the procedure, the final decision to open bankruptcy proceedings is made by the court, which examines whether the legal conditions for initiating bankruptcy have been met.
After how many days of account blockage does a company go into bankruptcy?
One of the most common practical questions is how long a company can remain under account blockage before bankruptcy proceedings are initiated. The law clearly defines the deadlines:
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If a company’s account is continuously blocked for more than 30 days, a creditor may file a petition for bankruptcy.
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If the blockage lasts longer than 45 days, the Business Registers Agency (APR) is obligated to notify the competent court that the legal conditions for initiating bankruptcy have been met.
These deadlines were introduced to prevent prolonged uncertainty for both creditors and employees. An account blockage lasting more than a month is a clear indication that the company is unable to meet its obligations and that there is a real risk for all parties doing business with it.
For this reason, it is crucial to monitor the duration of the blockage and take timely action — either by filing a bankruptcy petition for the company or by initiating other legal collection mechanisms.
What does the bankruptcy procedure look like?
Bankruptcy proceedings take place before the competent commercial court and go through several phases, with clearly defined roles for the court, the bankruptcy administrator, and the participants in the procedure.
Preliminary procedure
After the court receives the bankruptcy petition, it examines whether the legal conditions for opening the procedure are met. At this stage, the court may:
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Appoint a temporary bankruptcy administrator
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Order measures to secure the debtor’s assets
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Schedule a hearing to assess the validity of the petition
If it determines that the conditions (insolvency or over-indebtedness) are fulfilled, the court issues a decision to open bankruptcy proceedings.
Main procedure
Once bankruptcy is opened, the company’s management loses its authority, and the bankruptcy administrator takes over operations. The administrator prepares a report on the company’s assets and liabilities, invites creditors to file their claims, and begins liquidating the assets.
The court supervises the administrator’s work and rules on any disputed matters, while creditors participate through the creditors’ assembly and creditors’ committee.
Completion of the procedure
After the assets have been liquidated and distributed to creditors or a reorganization plan has been implemented, the court issues a decision to close the bankruptcy proceedings. In the case of liquidation bankruptcy, the company is then removed from the business register.
In this way, the procedure combines the function of protecting creditors’ rights with the controlled winding-up or potential recovery of the company.
Collection of claims from a bankrupt company
Once bankruptcy proceedings are initiated, creditors can no longer pursue individual enforcement actions — their rights must be exercised exclusively through filing claims within the bankruptcy procedure. This ensures fairness and equal treatment for all participants.
Order of creditor repayment
The law establishes a clear priority order:
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Bankruptcy costs – including the remuneration and expenses of the bankruptcy administrator, court costs, and other necessary expenses.
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Employee claims – unpaid wages, social contributions, and other employment-related rights.
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State obligations – taxes, contributions, and other public dues.
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Secured creditors – those holding mortgages, pledges, or other forms of security.
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Unsecured creditors – all remaining creditors whose claims are not backed by collateral.
Filing claims
Creditors are required to file their claims with the court and the bankruptcy administrator within the legally prescribed deadline. Failure to do so may result in the loss of the right to repayment. Once the claims are verified, the debtor’s assets are liquidated and distributed according to the priority order.
For creditors, it is crucial to submit their claims accurately and on time, along with documentation proving the legal basis and amount of the claim. Because of the complexity of the procedure, it is strongly recommended in practice to engage an experienced lawyer to ensure legal protection and maximize the chances of recovery.
Employee rights in bankruptcy
When bankruptcy proceedings are initiated, the protection of employees becomes a particularly important issue, as they are often among the most vulnerable parties when a company ceases operations. The law recognizes their priority status and provides specific protection mechanisms.
Priority in payment
Salaries, compensation, and mandatory social insurance contributions are classified as top-priority claims to be settled from the bankruptcy estate. This ensures that employees receive at least part of their outstanding wages before other creditors.
Employee claims guarantee fund
In cases where the bankruptcy estate lacks sufficient assets, the Guarantee Fund for the Payment of Employee Claims in the Event of Bankruptcy is activated. Through this fund, workers are paid minimum wages and contributions to a certain extent, helping to mitigate the consequences of job loss.
Termination of employment contracts
The opening of bankruptcy proceedings usually terminates employment relationships, except in cases of reorganization—then employees may continue working for the employer that carries on the business. Even in such cases, all rights accrued before the bankruptcy remain part of the proceedings and are treated as priority claims.
For employees, the most important steps are to monitor the deadlines for filing their claims and to gather proper documentation (employment contracts, payroll calculations, and termination decisions).
How to put a company into bankruptcy?
Initiating bankruptcy proceedings is a legally regulated process conducted before the competent commercial court. In order to place a company into bankruptcy, certain conditions must be met and the appropriate documentation must be prepared.
Legal basis
Bankruptcy can be initiated if the company is permanently unable to meet its obligations or is over-indebted. These circumstances represent legal grounds for opening bankruptcy proceedings and must be proven in the petition.
Filing the petition with the court
A petition to open bankruptcy proceedings is submitted to the court in written form. The petition must be accompanied by financial documentation—such as balance sheets, business reports, and evidence of outstanding debts. The petition may be filed by the company itself (as the debtor), by creditors, or by the liquidation administrator.
Documentation and procedure
Along with the petition, information about the company’s assets, employees, and liabilities must be submitted. Upon receiving the petition, the court initiates a preliminary procedure to verify whether the legal conditions for opening bankruptcy are met. If they are, the court issues a decision to open bankruptcy proceedings and appoints a bankruptcy administrator.
Legal assistance
Due to the complexity of the procedure and the serious consequences that arise from opening bankruptcy proceedings, in practice it is almost always necessary to engage an attorney to prepare the petition and represent the interests of the company or its creditors.
What are the consequences of bankruptcy?
The opening of bankruptcy proceedings has a series of legal and economic consequences that affect the debtor, creditors, and third parties.
Consequences for the debtor
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Termination of management authority – the company’s management bodies lose the right to represent and conduct business. All such powers are transferred to the bankruptcy administrator.
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Restrictions on disposing of assets – all assets become part of the bankruptcy estate and can be used exclusively for settling creditors’ claims.
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Deletion from the register – in the case of liquidation bankruptcy, once the proceedings are concluded, the company is deleted from the business register and ceases to exist.
Consequences for creditors
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All individual enforcement actions and lawsuits against the company are suspended, and claims can only be pursued within the bankruptcy proceedings.
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Creditors must file their claims within the statutory deadline to participate in the distribution of the bankruptcy estate.
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The priority order of payment determines how much and in what order their claims will be settled.
Consequences for the company’s legal transactions
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Legal acts through which the debtor tried to harm creditors’ interests shortly before the opening of bankruptcy (e.g., transferring assets without compensation or under unreasonable terms) are rendered null and void.
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All contracts and obligations are reviewed during the proceedings, and any harmful actions may be annulled at the request of the bankruptcy administrator or creditors.
In this way, bankruptcy does not only signify the cessation of business operations but also regulates all legal and financial relationships to ensure fairness and legal security for all parties involved.
The role of a lawyer
In a complex and strictly regulated procedure such as bankruptcy, the role of a lawyer is of crucial importance. Legal support is necessary for both debtors and creditors, as any mistake during the filing phase or throughout the proceedings can lead to serious consequences.
For the debtor
A lawyer advises on the optimal timing for initiating bankruptcy, prepares all necessary documentation, and represents the company before the court. This reduces the risk of personal liability for management and ensures that the procedure is conducted in accordance with the law.
For creditors
Without professional assistance, creditors often fail to fully exercise their rights. A lawyer monitors deadlines, submits proper claims, participates in creditors’ meetings, and challenges irregularities in the bankruptcy administrator’s work. This gives creditors greater legal security and a better chance of maximizing their recovery.
Procedure oversight
Lawyers also act as “guardians of legality” — they monitor every stage of the process, point out irregularities, and file legal remedies when necessary. Their involvement contributes to transparency and balances the interests of all parties involved.
For these reasons, hiring an experienced bankruptcy lawyer is a key step for any company or creditor facing bankruptcy proceedings.
Conclusion
Bankruptcy proceedings are one of the most important legal mechanisms when a company can no longer operate in a sustainable way. They ensure fairness among creditors, regulate the position of employees, and determine the future of the company itself.
For the debtor, bankruptcy can mean the end of operations through liquidation, but it can also provide a new opportunity through reorganization. For creditors, it is the only legal path to enforce their rights and collect outstanding claims, while for employees, it offers the possibility of priority payment and protection through a special fund.
However, due to the complexity of the procedure, various deadlines, and significant legal consequences, the decision to initiate or participate in bankruptcy proceedings should not be made without professional support. Hiring an experienced bankruptcy lawyer provides security, protects interests, and helps achieve the most favorable outcome for the client.
FAQ – Frequently Asked Questions About Bankruptcy Proceedings
What is bankruptcy and when is it initiated?
Bankruptcy is a court procedure initiated when a company becomes permanently unable to meet its obligations or when it is over-indebted. The process begins with a petition submitted to the competent commercial court. Its goal is the fair distribution of the debtor’s assets among creditors and, when possible, the reorganization of the business.
Who can file a bankruptcy petition?
A petition can be filed by the debtor (the company itself), any creditor, or the liquidation administrator if it is determined during liquidation that there are not enough funds to settle creditors’ claims.
After how many days of account blockage does bankruptcy start?
If a company’s account has been blocked for more than 30 days, a creditor may file a bankruptcy petition. If the blockage lasts for 45 days, the Business Registers Agency is obligated to notify the court, which then decides whether to initiate bankruptcy proceedings.
How can creditors collect their claims from a bankrupt company?
Creditors must file their claims with the bankruptcy court and administrator within the statutory deadline. Claims are settled from the bankruptcy estate in a legally defined order: first, procedural costs are covered, then employee wages, public dues, followed by secured and unsecured creditors.
What rights do employees have when a company goes bankrupt?
Employees have priority when it comes to claim payments, including unpaid wages and social contributions. If the bankruptcy estate lacks sufficient funds, payments are made through the Solidarity Fund. Employment contracts are usually terminated upon bankruptcy opening, except in cases of reorganization when the business continues to operate.
Is bankruptcy the same as liquidation?
No. Liquidation is a procedure carried out when a company is voluntarily closed by its founders and has enough assets to pay off its obligations. Bankruptcy is initiated when the company cannot pay its debts and serves to collectively settle creditors’ claims, with the possibility of reorganization.
Can a lawyer help speed up the process and protect creditors’ interests?
Yes. Hiring a lawyer is crucial. A lawyer ensures timely and proper filing of claims, represents creditors or the debtor before the court, and monitors the legality of the proceedings. This increases the security and efficiency of the entire process.