Bankruptcy: Game Over or Restart? Everything You Need to Know!

Bankruptcy is a legal procedure that allows over-indebted individuals or legal entities to write off or restructure their debts under the supervision of the court. It is a solution of necessity, but also a restart tool, giving the debtor the chance to recover financially and gradually return to the market.

At Lawful.gr, we break down the bankruptcy procedure, its consequences and the steps a debtor should follow to protect their interests.

What is bankruptcy and when is it declared?

Bankruptcy is a legal procedure that applies to individuals and businesses unable to repay their obligations. It is declared when the debtor is in cessation of payments — that is, unable to meet their overdue debts.

Bankruptcy may be initiated either by the debtor themselves or by a creditor, provided the conditions of the Insolvency Code are met.

The main stages of the bankruptcy procedure

1. Bankruptcy petition

The debtor, or one of their creditors, files a bankruptcy petition with the competent Court of First Instance.

2. Court decision

The court examines the petition and, if cessation of payments is established, issues a bankruptcy declaration.

3. Appointment of a trustee

Upon the declaration of bankruptcy, a bankruptcy trustee is appointed to manage the debtor's estate with a view to distributing it among the creditors.

4. Restructuring or liquidation of assets

Depending on the debtor's financial situation, a rehabilitation plan may be implemented or the debtor's assets may be liquidated.

5. Discharge of debts

Under certain conditions, the debtor may be discharged from their debts once the bankruptcy procedure is completed, receiving a second chance at financial recovery.

The consequences of bankruptcy

Bankruptcy carries significant legal and financial consequences for the debtor, such as:

• Loss of control over their assets, as these pass to the trustee.
• Commitments and restrictions, such as a ban on conducting business activity without approval.
• Registration in the Insolvency Register, which may affect their creditworthiness.
• Potential criminal liability, if fraudulent conduct or opaque transactions before the bankruptcy are proven.

However, if the procedure is completed properly, it can offer a fresh financial start, free from the burden of previous debts.

Bankruptcy and the alternatives

Bankruptcy is not the only option for over-indebted debtors. Alternatives include:

• The Out-of-Court Debt Settlement Mechanism
• Negotiating a debt settlement directly with creditors
• The Second Chance Law, which provides pathways back into the financial system.

Depending on the specific case, choosing the right option can lead to more sustainable debt arrangements without going through the arduous process of bankruptcy.

Conclusion

Bankruptcy is a difficult, yet often necessary, procedure for those unable to service their debts. Despite its consequences, it can mark a new beginning for individuals and businesses alike.

If you are facing financial difficulties, it is important to know your rights and choose the best legal strategy. At Lawful.gr, we can guide you through the legal process, securing the best possible outcome for your case.