Today, I don’t want to get into an analysis of what percentage of people deliberately incurred their debts or how many loan sharks deserve to lose their money. I would like to point out that you can easily put yourself in the position of a lender without investing for a living as well. In that case, you will be forced to interact with the courts and insolvency practitioners. Today, I would like to focus on their role in the context of one particular case that caught my attention.
A story from life
Imagine that a friend or client comes to you and says that they are in debt and need to borrow money. He has a lien on his property that he is not paying and is facing foreclosure/debt. Having been educated by the tabloid press, you of course know that lending to a person in debt is risky, so you wonder how to secure the money. If you want to help him, you can either pay his debt, but then you have no liability whatsoever. Or the better option is to buy the debt from the lender (bank, non-bank, private person) and this gives you time to sort out the whole case and you also step into the role of a lender with a charge on the property.
But what if the person in question stops communicating with you? It does happen. Then suddenly you are faced with a decision as a real estate agent with a worthless exclusive brokerage agreement (expiring) about what to do next. You were expecting the property to sell and you collect money back for your help. But the owner suddenly finds he has nowhere to go and cannot sell the property. He stops answering your calls and a few days later you find out that he has filed for bankruptcy.
Well, now comes the clash with reality – or rather, the insolvency proceedings, which are run by the insolvency practitioner. According to Singapore QVCredit, it is quite common for every trustee to have established procedures and pre-arranged cooperation with their own partners. Suddenly you start to feel that it is “about you, without you” and you pray that there is enough money left at the end to pay your claim.
Whose side is the insolvency practitioner actually on? What are his/her rights and obligations in relation to the parties to such proceedings?
First of all, I would like to remind you that insolvencies are dealt with in the Act on Insolvency and Methods of its Resolution (Insolvency Act) No. 182/2006 Coll. For example, on the principles of insolvency proceedings in §5 it says that:
(a) insolvency proceedings must be conducted in such a way that none of the parties is unfairly prejudiced or unduly favoured and that the prompt, economical and maximum satisfaction of creditors is achieved;
The insolvency of the debtor in insolvency proceedings is resolved according to §4 either by bankruptcy, reorganisation, insolvency arrangement or special insolvency resolution procedures (exceptionally). In the above example, insolvency was granted and the insolvency court decided that the debt would be settled by the sale of the debtor’s real estate.
An insolvency practitioner is an entrepreneur (company) who must have the appropriate licence, liability insurance, be registered in the list of insolvency practitioners, etc. In the insolvency process, he acts as a procedural entity, which, according to Art:
An insolvency administrator shall act conscientiously and with professional care in the performance of his duties; he shall make all efforts that may fairly be required of him to ensure that creditors are satisfied to the fullest extent possible. In the exercise of his functions he shall put the common interest of creditors before his own interests and those of others.
The insolvency practitioner is appointed by the insolvency court and this was the case here.