Services / Bankruptcy and rehabilitation
Bankruptcy petitions and the three limbs
A bankruptcy petition is not a shortcut for debt collection. The statute sets three limbs and all must be met; fall short on one and the petition is dismissed, with the time and cost spent for nothing.
The three limbs
Section 9 of the Bankruptcy Act B.E. 2483 (1940) provides that a creditor may petition only where, first, the debtor is insolvent; second, an individual debtor owes the petitioning creditor or creditors not less than one million baht, or a juristic person not less than two million; and third, the debt is of an amount capable of being ascertained, whether payable immediately or in future.
What insolvency means here
The first limb has to be proved and is not read off the size of the debt alone. The statute therefore supplies presumptions a creditor can rely on, drawn from conduct such as transferring assets away from creditors, shutting up shop and disappearing, or failing to pay after a demand made in the form the law requires. Preparing the case starts with bringing the evidence within one of those presumptions, and only then with the figures.
Secured creditors have an extra condition
Section 10 provides that, subject to section 9, a secured creditor may petition only if it is not barred from enforcing against the debtor's property beyond the security itself, and only if the petition states either that it will surrender the security for the benefit of creditors generally should bankruptcy follow, or a valuation of the security which, set against the debt, leaves a shortfall meeting the same thresholds as section 9.
Think first about what the petition achieves
A bankruptcy does not put the petitioning creditor at the front of the queue. Once a receivership order is made the assets are collected and distributed among creditors generally through the process. A creditor whose object is actually to be paid should therefore always weigh it against ordinary execution on the judgment, and ask which serves better on the facts.
PREPARE
What to bring
- Documents establishing the debt and the outstanding balance
- The judgment and the result of any execution
- Demands sent, with proof of service
- What is known of the debtor's assets
- The company certificate, where the debtor is a company
QUESTIONS
Questions this raises
The debt is eight hundred thousand baht. Can I petition?
Section 9(2) sets one million baht for an individual debtor, but the statute allows the debts of one or several petitioning creditors to be counted together. Creditors in the same position may therefore join as petitioners. The other limbs must still be satisfied.
Does bankruptcy wipe the debt out?
Bankruptcy has its own stages: collecting the estate, proving debts, and discharge. The effect on any particular debt is not uniform, and the law treats certain categories separately. This has to be looked at case by case rather than answered in one line.
LAW
The legislation
- Bankruptcy Act B.E. 2483 (1940), sections 9 and 10
ENQUIRIES
