Our customer has failed to pay for a long time. Can we file a bankruptcy petition against them to make them finally pay?

A customer has not paid for months, ignores demands for payment, and the creditor is considering a bankruptcy petition. However, the law makes a creditor’s petition conditional on the debtor’s insolvency, rather than merely an unpaid invoice. The petitioner must substantiate the requirements with documents, pay an advance or deposit and, if the petition fails, bear the risk of liability for damages. Slovak and Czech rules differ in significant respects.

What a creditor must substantiate in Slovakia

A creditor may file a petition only against a legal entity or an individual carrying on business (Section 11(1) of Act No. 7/2005 Z. z. on Bankruptcy and Restructuring). The creditor must have reasonable grounds to presume that the debtor is unable to pay their debts:

The following quotation is reproduced in its original language:

[…] Platobnú neschopnosť dlžníka možno odôvodnene predpokladať vtedy, ak je dlžník viac ako 90 dní v omeškaní s plnením aspoň dvoch peňažných záväzkov viac ako jednému veriteľovi a bol jedným z týchto veriteľov písomne vyzvaný na zaplatenie.

§ 11 ods. 3 zákona č. 7/2005 Z. z.

The petition must state the facts supporting a presumption that the debtor is unable to pay their debts and identify both the petitioner’s own claim and another creditor with a claim, both 90 days overdue. An ordinary trade creditor must substantiate their claim with one of the following documents (Section 12(2), letters a) to c)):

• a written acknowledgment by the debtor bearing the debtor’s officially certified signature,
• an enforceable decision or another instrument on the basis of which enforcement may be carried out,
• where the debtor is a legal entity, confirmation from an auditor, insolvency administrator or court expert that you record the claim in accordance with accounting regulations.

An invoice or an acknowledgment without a certified signature is therefore not sufficient on its own. An exception applies where the debtor is presumed insolvent because a notice under special legislation has been published in the Commercial Bulletin, for example a notice terminating enforcement against a legal entity for lack of assets. In that case, the creditor need not provide these documents or identify another creditor (Section 11(3) and Section 12(3)). Before filing the petition, an advance towards the provisional insolvency administrator’s remuneration and expenses must be paid into the court’s account (Section 13(1)).

What happens after a petition is filed in Slovakia

Once bankruptcy proceedings commence, the debtor must restrict their actions to ordinary legal transactions, and enforcement proceedings against their assets are stayed (Section 14(5)). The court then calls on the debtor to establish their ability to pay and, if they fail to do so, declares bankruptcy (Section 19(1)). If, before bankruptcy is declared, the debtor proves that all due claims held by creditors who are parties to the proceedings have been extinguished, the court discontinues the proceedings (Section 17(1)).

If the court discontinues the proceedings because the debtor has established their ability to pay, the creditor is liable to the debtor and other persons for damage caused by the effects of commencing the proceedings, unless the creditor proves that they acted with professional care. The member of the statutory governing body who decided to file the petition is liable on the same basis (Section 11(4)). If the debtor’s assets are insufficient even to cover the costs of bankruptcy, the court discontinues the proceedings unless a party pays an advance towards those costs (Section 20(1) and (2)). Once bankruptcy has been declared, the claim must be lodged by filing a proof of claim (Section 28(1)), as explained in the question on how and by when to lodge a claim in bankruptcy.

An insolvency petition in Czechia

The Czech Insolvency Act (Act No. 182/2006 Sb.) treats a debtor as insolvent if they have multiple creditors, monetary debts more than 30 days overdue and are unable to pay those debts (Section 3(1)). A debtor who is a legal entity or carries on business is also insolvent if they are over-indebted (Section 3(4)).

The creditor must substantiate a due claim and attach a proof of claim to the petition. If the debtor is a legal entity and the creditor keeps accounts or tax records, the creditor must substantiate the claim with one of the documents specified by law, for example an acknowledgment by the debtor bearing a certified signature, an enforceable decision, or confirmation from an auditor, court expert or tax adviser that the creditor records the claim in their accounts (Section 105(1) of Act No. 182/2006 Sb.). The court dismisses the petition if it has not been established that both the petitioner and at least one other person hold due claims. A person to whom the petitioner transferred the claim or part of it in the last 6 months before filing the petition or after the proceedings commenced does not qualify as that other person (Section 143(2)).

A petition against a legal entity carrying on business must be accompanied by a deposit towards the costs of the proceedings of 50 000 Kč; for a petition against an individual or a legal entity that does not carry on business, the deposit is 10 000 Kč (Section 108(1)).

The court rejects a manifestly unfounded petition, for example where the petitioner is clearly seeking to abuse their rights to the debtor’s detriment. It may impose a fine of up to 500 000 Kč, and a new petition against the same debtor may not be filed until 6 months after the rejection becomes final, unless the petition was rejected solely because the deposit was not paid (Section 128a of Act No. 182/2006 Sb.). If the petition was rejected or the proceedings were discontinued through the petitioner’s fault, the petitioner is liable for damage or other harm caused by the commencement of the proceedings, and their fault is presumed in cases of doubt. A claim for compensation may also arise where the petition is dismissed, but not where it was dismissed, for example, because the debtor paid after it was filed or reached an agreement with the creditors. Where the petitioner is a legal entity, members of its statutory governing body generally also bear liability as guarantors for the petitioner’s obligations (Section 147(1) to (3)).

How we can help

We will assess the supporting documents and recommend whether to file a bankruptcy petition or pursue a civil action, a payment order or enforcement. We will propose a course of action through our debt recovery service or, for a Czech debtor, our debt recovery in the Czech Republic service. Send us the invoices, demands for payment and everything you know about the debtor’s other creditors.