You have exhausted all amicable routes, sent formal demand letters, perhaps even obtained a court judgment, and the debtor still does not pay. In this situation, filing for insolvency proceedings can be the most effective instrument available to you as a creditor.
But insolvency is not a decision to be taken impulsively. It is a complex procedure with strict rules and significant consequences, for both the debtor and you as a creditor. This guide explains when an insolvency application is justified, how to file it correctly, and what happens after the court admits it.
What is insolvency and when does it apply
Insolvency proceedings in Romania are governed by Law 85/2014 on insolvency prevention and insolvency procedures. They apply to professionals, traders, commercial companies, sole traders, who are in a state of insolvency.
The state of insolvency is legally defined as the condition of the debtor’s estate characterised by insufficient liquid funds to pay certain, liquid, and due debts. The presumption of insolvency arises when the debtor has not paid the creditor’s debt for 60 days after it fell due.
Insolvency proceedings can take two forms:
General procedure: passes through the observation period, judicial reorganisation, and, if reorganisation fails or is not possible, bankruptcy.
Simplified procedure: applies to debtors with no assets or whose activity has ceased, and enters directly into bankruptcy without the reorganisation stage.
When is an insolvency application justified as a recovery tool
An insolvency application is not always the best recovery strategy. Before filing one, assess the following.
When an insolvency application is recommended
The debtor has significant debts to multiple creditors and can no longer meet its current payment obligations. The debtor has real assets, real estate, equipment, stock, receivables, that can be realised in the proceedings. There are indications that the debtor has made preferential or fraudulent transfers that can be annulled in insolvency. You want to prevent the debtor from continuing to accumulate debts and diminish assets. Your claim is large enough to justify the costs of the procedure.
When an insolvency application is not recommended
The debtor has no real assets, an insolvency procedure without assets will not bring you any recovery and will generate costs. Your claim is the debtor’s only debt and there are realistic prospects of recovery through direct enforcement. The debtor is an individual without commercial activity, personal insolvency follows different rules. The commercial relationship with the debtor is important and you want to preserve it, insolvency typically destroys the commercial relationship permanently.
Conditions for filing an insolvency application as a creditor
Under Law 85/2014, a creditor may file an insolvency application if three conditions are cumulatively met.
Condition 1: Minimum claim of RON 50,000 The value of your claim against the debtor must be at least RON 50,000. This is the statutory minimum threshold and cannot be circumvented by aggregating multiple claims from different legal relationships against the same debtor, unless they are combined in the same application.
Condition 2 : Certain, liquid, and due claim The claim must be certain, its existence is beyond doubt, liquid, the amount is determined, and due, the payment deadline has passed. A claim seriously disputed by the debtor does not meet the certainty condition and may lead to the application being dismissed.
Condition 3: At least 60 days overdue The claim must have been unpaid for at least 60 days from its due date. The period is calculated from the payment date specified in the contract or invoice, not from the date of the demand letter.
How to file the insolvency application
Competent court
The insolvency application is filed with the tribunal in whose territorial jurisdiction the debtor has its registered office. In Bucharest, insolvency applications are handled by the specialised section of the Bucharest Tribunal.
Content of the application
The insolvency application must include the following mandatory elements. Identification details of both the creditor and the debtor. The amount and legal basis of the claim, the contract, invoices, enforceable title if one exists. Evidence that the claim has been overdue for at least 60 days. Evidence that the claim exceeds the minimum threshold of RON 50,000. A declaration by the creditor regarding the existence or absence of any preferential right, mortgages, pledges. A statement regarding any other insolvency applications filed by other creditors against the same debtor, if known to the applicant creditor.
Documents to be attached
The commercial contract underlying the claim. The unpaid invoices. Relevant commercial correspondence. Demand letters sent and proof of their delivery. An enforceable title, if the claim has already been established by court judgment. Any other documents evidencing the existence and due date of the claim.
Court stamp duty
The insolvency application is subject to a fixed court stamp duty of RON 200, regardless of the value of the claim.
What happens after the application is filed
Summoning the debtor
After the application is registered, the tribunal summons the debtor to give them the opportunity to file a challenge or to file their own insolvency application if they acknowledge the state of insolvency.
The court’s possible decisions
The court may issue one of the following decisions.
Admitting the application and opening proceedings: if the legal conditions are met and the debtor does not prove that it is not insolvent. The decision appoints a provisional judicial administrator and sets the initial procedural deadlines.
Dismissing the application: if the legal conditions are not met, if the claim is seriously disputed by the debtor, or if the debtor proves that the debt has been paid or that it is not insolvent.
Staying the proceedings: in certain special procedural circumstances.
Time to resolution
Insolvency applications are heard on an urgent basis. In practice, the first hearing is typically scheduled 2 to 6 weeks after the application is filed.
Your rights as a creditor after proceedings are opened
The opening of insolvency proceedings does not mean you will automatically recover your claim. Actual recovery depends on the debtor’s assets and on how actively you follow the proceedings.
Filing your proof of claim
Immediately after proceedings are opened, the judicial administrator publishes a deadline for filing proofs of claim in the Insolvency Proceedings Bulletin. This deadline is typically 30 to 60 days from the opening of proceedings.
Failure to file within the deadline results in forfeiture: you lose the right to participate in any distribution in the proceedings, regardless of the value of your claim.
Participating in the creditors’ assembly
As a creditor registered in the final table of claims, you have the right to participate in the creditors’ assembly, vote on the reorganisation plan or liquidation, and oversee the judicial administrator’s activity.
Your voting power is proportional to the value of your claim relative to the total registered claims.
Challenging the table of claims
If other claims registered in the table appear unjustified or inflated, you can challenge them. Reducing other creditors’ claims increases your voting proportion and your share of distributions.
Risks of a creditor-initiated insolvency application
A creditor insolvency application is not without risks and must be filed carefully.
Risk of dismissal — if the application is dismissed, you lose the stamp duty and legal costs and may be ordered to pay the debtor’s costs if they claim them.
Risk of a premature application — an application filed before the legal conditions are met will be dismissed and will alert the debtor to take asset protection measures.
Risk of no recovery — if the debtor has no real assets, the insolvency proceedings will close without any distributions and your claim remains unrecovered.
Risk of conflict with other creditors — in insolvency proceedings, creditors compete for the same assets. Secured creditors — with mortgages or pledges — have priority over unsecured creditors.
Optimal strategy — insolvency as leverage, not as an end in itself
One of the most effective ways to use an insolvency application is as a pressure instrument before actually filing it. Formally announcing the intention to file for insolvency — through a lawyer’s demand letter explicitly mentioning this intention — often prompts the debtor to pay immediately, to avoid the devastating consequences of insolvency proceedings on their reputation and business operations.
This strategy works best when the debtor has an active business they want to protect, when they have commercial partners or lenders for whom an insolvency filing would create immediate problems, and when the debt is real and undisputable.
Frequently Asked Questions
Can I file for insolvency against a debtor if my claim is below RON 50,000? Not directly, as the sole creditor. The minimum threshold of RON 50,000 is a mandatory statutory condition. If your claim is below this threshold, you can attempt to join with other creditors to file a joint application that exceeds the threshold — if multiple creditors are in the same position against the same debtor.
The debtor made a partial payment after I filed the application. What happens? If the partial payment reduces the claim below RON 50,000, your application may be dismissed. If the claim remains above the threshold but the debt is not fully paid, proceedings continue. Full payment of the debt owed to you after filing leads to your application being dismissed, but the court may open proceedings of its own motion if other creditors exist.
How long do insolvency proceedings take once opened? It depends on the type of procedure and the complexity of the case. A simplified bankruptcy procedure can last 6 to 18 months. A judicial reorganisation lasts up to 3 years, with possible extension. A general procedure passing through observation, failed reorganisation, and bankruptcy can take 4 to 7 years.
Can I withdraw the insolvency application if the debtor pays? Yes. If the debtor pays the claim in full before the opening judgment is delivered, you can request discontinuation or withdrawal of the application. If payment comes after proceedings are opened, the situation is more complex — proceedings may continue at the request of other creditors or of the court’s own motion.
What happens to ongoing contracts with the debtor after insolvency is opened? The judicial administrator may decide to maintain or terminate ongoing contracts, depending on the interests of the proceedings. If the contract is maintained, you are entitled to payment for post-opening performance as a current debt — with priority over pre-opening claims.
I already have a court judgment against the debtor. Can I still file for insolvency? Yes. A final court judgment constitutes perfect evidence of your certain, liquid, and due claim and significantly simplifies the insolvency application procedure. It is one of the strongest possible bases for an insolvency application.
Do you have a debtor who refuses to pay and want to know whether an insolvency application is the right strategy in your specific situation?
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