Forfeited penalty payment can serve as a support claim
A creditor can proceed to file for the bankruptcy of a debtor. To do this, an application must be filed with the court. To do so successfully, hoForfeited penalty payment can serve as a support claim weaver, the creditor must make it plausible that the debtor is in a state of cessation of payments. This always requires another claim (a support claim) in addition to the claimant’s claim. The Supreme Court recently handed down a judgment on whether a claim in respect of a forfeited penalty payment can serve as a support claim.
The penalty payment in bankruptcy
Creditors of the bankrupt can submit their claim to the trustee for verification. The trustee places the claim on the list of creditors. If sufficient estate assets are realised, a distribution can be made to the creditors.
The legislator has stipulated that penalty payments may not participate in bankruptcy (Art. 611e Code of Civil Procedure). A penalty payment cannot be forfeited during bankruptcy. And penalties forfeited before the declaration of bankruptcy may not be included in the liabilities of the bankruptcy. So this means that this claim cannot be included in the list of recognised creditors.
In 1996, the Supreme Court issued a judgment in which it held that a bankruptcy petition cannot be based solely on a claim for payment of forfeited penalties. The idea is that that creditor has no reasonable interest in the bankruptcy. After all, that creditor cannot expect payment from the bankruptcy.
If a claim in respect of penalty payments may not participate in bankruptcy, can it serve as a claim in support of the bankruptcy petition? This is in fact the question the Supreme Court addressed in the recent judgment.
Support claim in bankruptcy petition
The Supreme Court has always strictly adhered to the requirement of a support claim. In 2017, the Supreme Court issued a judgment on the situation where the bankruptcy petitioner had a claim against the debtor of €2.1 million, but there was no support claim. The Supreme Court ruled that the bankruptcy petition was rightly rejected by the court and the court of appeal. It pointed out that the purpose of bankruptcy is to distribute the debtor’s assets to its joint creditors. With that purpose, declaring bankruptcy of a debtor who has only one creditor is contrary. The Supreme Court saw no reason to go back on established case law.
No high requirements are imposed on the support claim itself. If the bankruptcy petitioner has a claim due and payable, the support claim does not have to be a claim due and payable. Of course, it does always apply that the court will have to assess whether there is a state of cessation of payments. In the 2015 Berzona judgment, the Supreme Court ruled that for a support claim to be valid, it is sufficient that it is a claim that can be submitted for verification in bankruptcy.
Forfeited penalty payment as maintenance claim?
Now back to the recent Supreme Court judgment. The bankruptcy applicant in that case had a money claim and also argued that the Flemish government had a claim against the debtor (of no less than €260,000) for forfeited penalty payments. The court declared the debtor bankrupt and, on appeal, the Court of Appeal upheld this judgment. The Court of Appeal ruled that while it may be the case that a penalty payment may not participate in the bankruptcy, it can be used as a basis for claiming that the debtor is in bankruptcy.
The debtor also argued that in the Berzona judgment, the Supreme Court held that a support claim must always be a claim that can be submitted for verification.
However, according to the Supreme Court, this is not how the Berzona judgment intended. In short, the Supreme Court indicated that Section 611 e Rv. does not prevent a third-party claim in respect of forfeited penalty payments from being used as a support claim by the applicant.
Conclusion
The Supreme Court has clarified that a forfeited penalty payment can serve as a support claim in a bankruptcy petition.
A bankruptcy petition can be a good lever to force payment by a debtor. As lawyers, we assist both parties seeking to file for a debtor’s bankruptcy and parties seeking to defend against a bankruptcy filing. If you have any questions on this topic, please contact Peter de Graaf.
