The status of debtors and the restrictions on their rights of disposal depend on the insolvency method.
In bankruptcy proceedings, debtors lose the authority to dispose of their estate, to exercise other rights and to discharge obligations related to the estate. This authority passes to the insolvency practitioner. By law, legal acts executed by debtors in these matters after authority to dispose of the estate has passed to the insolvency practitioner are ineffective against creditors.
In reorganisation procedure, the debtor remains in possession of the estate, subject to restrictions. Legal acts of fundamental relevance to the disposal of the insolvency estate are executed by a debtor in possession only with the consent of the creditors’ committee. A debtor who breaches this obligation is liable for damage or any other loss thereby caused to creditors or third parties. The members of the debtor’s statutory body are held liable for such damage or other loss jointly and severally. ‘Legal acts of fundamental relevance’ are taken to mean acts significantly changing the value of the estate, the creditors’ standing, or the level of creditor satisfaction. The powers of the debtor’s general meeting or members’ meeting pass to insolvency practitioners.
In debt relief procedure, the debtor also remains in possession of the estate, subject to restrictions. The debtor is supervised by the insolvency court, the insolvency practitioner and creditors.read more
Reference to legal acts
Sections 109 to 111 and Section 229 of Act No 182/2006 on bankruptcy and the management thereof (the Insolvency Act), as amended
Responsible Public Authority
Ministry of Justice of the Czech Republic
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