Creditor’s position in insolvency proceedings

Typically, enforcement proceedings, which are initiated by creditors, are used to recover debts. In the case of insolvency proceedings, the roles are at first sight reversed and the debtor takes more activity, but this does not mean that the creditor’s role is passive. What is the procedure in insolvency proceedings and what is the position of the creditor?

věřitel, postavení věřitele
7 minutes of reading

Chapters of the article

Initiation of insolvency proceedings

Insolvency proceedings may be opened either on the debtor’s or the creditor’s motion. However, if only an impending (i.e. not existing) insolvency is at stake, only the debtor may file an insolvency petition. The court shall announce this fact by means of a notice of commencement of insolvency proceedings, which must be published in the Insolvency Register within 2 hours of receipt of the petition. The commencement of insolvency proceedings does not therefore require a court decision and the effects of the commencement of insolvency proceedings begin as soon as the notice is published.

If the debtor is a natural or legal person in business, it is legally obliged to file an insolvency petition as soon as it becomes aware of its insolvency. Otherwise, he would be liable to creditors for damages.

A petition for the commencement of insolvency proceedings can be filed with the court when the debtor has debts with at least two creditors that are more than 30 days overdue. At the same time, he is unable to pay them.

Once the proceedings have been initiated, the debtor must subsequently submit to the court all the facts relating to his assets and income.

Tip: You are in complete control of your financial situation, you are not in debt and if you are, you are paying properly. The insolvency record is therefore something you don’t care about at all. But maybe it should. It is a very practical tool that can be useful to you. In our article, we’ve summarised the reasons why you should be interested in it, what you can find in it and how to search it.

Are you trying in vain to recover your debt?

In the case of debt collection by the creditor itself, many debtors, for example, play on existing good (family, friend or business) relationships and believe that they will get away with endlessly repeating their promise to pay. The moment you start communicating with the debtor through a law firm, the helpfulness of the debtor will increase manifold, as will the speed of resolving their obligation. Often there may not even be any court proceedings.

Effects of the opening of insolvency proceedings

After the insolvency proceedings have been opened, the debtor is protected from possible execution and can apply to the court for a debt relief order. Claims against the debtor cannot be litigated if the claim can be filed here.

It is therefore now crucial for a potential creditor to file its claims. If he fails to do so within 30 days (within 2 months if the insolvency is to be resolved by way of bankruptcy or reorganisation) of the decision on insolvency, his claims will no longer be taken into account.

Thedebtor may continue to dispose of his assets only in a limited manner, in particular he should not do anything that will reduce their value.

The bankruptcy decision

The bankruptcy decision is the last step in the first phase of the insolvency proceedings. The court issues this decision if it concludes that the debtor is indeed insolvent.

An important effect of this decision is that contractual interest, interest on late payments, contractual penalties, etc. no longer accrue.

Forms of insolvency resolution

The law provides for three forms of bankruptcy resolution, namely reorganisation in the case of large companies, bankruptcy, where the debtor’s assets are monetised and sold, and insolvency. The latter is the most interesting form in terms of possible results of insolvency proceedings for non-business debtors.


Its condition is the ability of unsecured creditors (i.e. those whose claims are not secured in some form provided for by law) to pay at least 30% of their claims within five years at the latest.

Whether a creditor is secured or not is crucial at this stage, as each creditor has a different position.

Asecured creditor is a creditor whose claim is secured by property belonging to the estate by way of a pledge, lien, restriction on the transfer of immovable property, security interest or assignment of the secured claim (or similar right under foreign law).

The secured creditor (who has timely asserted its claim) is entitled to satisfaction only from the proceeds of the realisation of the collateral (immovable property, movable property or assigned claim, as the case may be) under the arrangement. He therefore receives no part of the proceeds of the insolvency proceedings intended for unsecured creditors. The time of creation of the pledge or the time of creation of other collateral is decisive for the order of their satisfaction, unless the secured creditors agree otherwise in writing.

The decision on the arrangement shall be taken at a meeting of creditors convened by the court. The creditors who have lodged their claims shall be invited to the meeting. They can then vote on whether the insolvency is to take the form of a repayment plan or the sale of assets from the estate. The court will also take into account the insolvency administrator’s comments on the appropriateness of the insolvency solution.


Another option for resolving insolvency is bankruptcy, whereby, in the case of a natural person, the community property of the spouses is dissolved and all the debtor’s assets are monetised. Importantly, creditors’ claims are extinguished only to the extent that they have been satisfied in the bankruptcy. However, they are not extinguished to the remaining extent.

For the debtor, the most desirable option for resolving his situation is usually a repayment plan. This is a long-term and rather harsh process for the debtor, who is primarily obliged to work and not to refuse a viable opportunity to earn an income. The extra assets that he acquires (for example, inheritance or lottery winnings) must be monetised and used for extraordinary repayments beyond the repayment plan.

The debtor shall also provide the court and the insolvency administrator and the creditors’ committee with a summary of his income. At all times, he must act in such a way as not to incur unenforceable obligations and not to favour any creditor.

A breach of the debtor’s obligations may lead to the annulment of the approved arrangement and the declaration of bankruptcy. After all, the debtor himself may at some point propose this. However, this rarely happens.

Tip: If a debtor acts in the insolvency proceedings in such a way as to endanger the position of a creditor, he or she may commit one of the crimes against property regulated by the Criminal Code. In our mini-series we will discuss the status of creditors in Czech law. In our article we described these crimes and explained their nature.

Insolvency administrator

The court appoints the insolvency administrator. His or her task is primarily to deal with the estate, to try to satisfy creditors’ claims and, in the event of bankruptcy, to deal with the monetisation of the debtor’s assets.

Monetization of secured assets listed in the inventory is carried out by the insolvency administrator on the instructions of the secured creditor or secured creditors if their right to the same assets is vested.

Termination of the arrangement

After a period of five years, the court may decide to exempt the debtor from paying the outstanding claims included in the arrangement (this also applies to claims of creditors who have not submitted their claims at all or in time). The condition is that the debtor has faithfully complied with the plan and the repayment schedule and, above all, that he has paidat least 30 % of the claims of unsecured creditors.

There is no exemption for secured creditors. Their claim is secured in one of the ways mentioned above. Such persons shall be satisfied in full from that security.

Five years after the end of the arrangement, the insolvency court shall remove the debtor from the insolvency register.

Are you solving a similar problem?

Dostupný advokát team of online lawyers will solve it for you.

Debt recovery

Collecting a debt through our service will usually guarantee you a faster, more efficient and significantly cheaper solution. You’ll save yourself weeks or months of pleas and reminders to pay, and usually save on costly court settlements.

Preset Prices
All services pre-priced for no surprises.
We Do Everything Online
Save time, money and the hassle of travel.
We Work Fast
90 % of issues get solved by the following day.
Experienced Team
We have specialists for every field of law.

Has this content helped you? Give it a rating

No rating yet. Be first to rate and help others.

Author of the article

JUDr. Ondřej Preuss, Ph.D.

Ondřej is the attorney who came up with the idea of providing legal services online. He's been earning his living through legal services for more than 10 years. He especially likes to help clients who may have given up hope in solving their legal issues at work, for example with real estate transfers or copyright licenses.

  • Law, Ph.D, Pf UK in Prague
  • Law, L’université Nancy-II, Nancy
  • Law, Master’s degree (Mgr.), Pf UK in Prague
  • International Territorial Studies (Bc.), FSV UK in Prague

Reviews of the Dostupný advokát service

Recenze služby

Monika Holcátová, Prague

before 3 years

Your reputation is well deserved. All our contracts were done quickly and accurately. In addition, Dostupný advokát explained the legal regulations for our property easement, which I found critical to our success because as a layman I had no idea what problems that could cause us. I have no suggestions for improving your service, because (zobrazit více) I am completely satisfied.

Recenze služby

Ing. Jana Žáčková, Prague

before 3 years

My boyfriend and I had the lease contract for our first apartment checked by Dostupný advokát and were glad to learn about our rights, and all the steps we needed to take.

Recenze služby

Zuzana Marková, Prague

before 4 years

We had terms and conditions drafted for our gym, and now we are very glad that we did so. Clear relationship rules are the basis for lasting friendships, and never more so than in the business world!

View All Testimonials

You could also be interested in

About us in public media
Logo Česká advokátní komora Logo Advokátní kancelář roku 2023 a 2024
Follow the news
Facebook Dostupný advokát Twitter / X Dostupný advokát