Secured creditors are neither bankruptcy creditors nor preferential creditors. These are entities that do not have a monetary claim against the bankrupt debtor but rather against a third party, with their claim secured by a pledge established on the property or rights of the bankrupt debtor that are registered in public books or registries. For example, if a person has a claim against another person and, to secure that claim, a mortgage is established on real estate owned by the bankrupt debtor, the holder of such a claim may acquire the status of a secured creditor and a party to the bankruptcy proceedings, provided that they notify the court within the legally prescribed deadline and submit the necessary evidence and documentation.
Secured creditors do not file a claim in the bankruptcy proceeding because they do not have any claim against the bankrupt debtor. However, within the same deadline in which other creditors must submit their claims, secured creditors are required to notify the court of their pledge. Along with such notification, secured creditors must submit proof of the existence of the pledge and a statement indicating the amount of the monetary claim against the third party that was secured by the pledge as of the date the bankruptcy proceedings were initiated. Upon submitting this information, the secured creditor obtains the status of a party in the bankruptcy proceedings.
This duty to notify is established in the interest of secured creditors. In other words, a secured creditor may notify the court of the pledge even after the deadline has passed and still obtain the status of a secured creditor. However, if the notification is submitted too late, they may not be able to exercise their rights—for instance, if a bankruptcy ruling has already been issued, the property subject to the pledge has been sold, and all encumbrances on such property have been removed. Therefore, if the secured creditor fails to notify the court of their right by that point—despite it being registered in public books—they lose their secured creditor status and cannot enforce their rights.
Since secured creditors do not have a monetary claim against the bankrupt debtor and are not considered creditors in the strict legal sense, they cannot be elected to the creditors’ committee or general assembly, nor do they have voting rights in the selection of other committee members.
The general rule is that from the day the bankruptcy proceedings are initiated, no enforcement or execution measures may be initiated or carried out against the bankrupt debtor or their property, except for executions relating to the obligations of the bankruptcy estate and the costs of the bankruptcy proceedings. However, a secured creditor may request that such a ban be lifted if they prove that the secured claim is due, in whole or in part. This request may also be submitted by the bankruptcy administrator, and the decision is made by the bankruptcy judge, who may lift the ban on enforcement and settlement with respect to the pledged property if:
- The property is not adequately protected and its security is at risk; and
- The value of the property is diminishing, and there are no other means to provide adequate and effective protection against its depreciation.
Instead of lifting the enforcement ban, the bankruptcy judge may impose other measures that achieve the same objectives.
If the property is not essential for the reorganization or for the sale of the bankrupt debtor as a legal entity, the bankruptcy judge may lift the enforcement and settlement ban for a period of 9 months, with the possibility of extending it for an additional 3 months. Such a decision is made upon the request of the bankruptcy administrator or the secured creditor, who must prove that the secured claim is due in whole or in part, and must also submit a valuation of the pledged property that is no more than 12 months old.
The ban will be lifted if the value of the pledged property is less than the amount of the secured claim. If the secured creditor does not realize (i.e., sell or otherwise monetize) the pledged property within the 9-month period, the bankruptcy judge will officially reinstate the enforcement and settlement ban by court order.
The bankruptcy administrator’s right to lease pledged property is also limited. If the administrator wishes to lease such property, they must obtain the consent of the secured creditor. It is considered that consent is granted if the secured creditor does not inform the court in writing within 8 days.