Introduction

Preventive settlement stands as the foremost measure among bankruptcy procedures, offering significant benefits to debtors. It facilitates reaching an agreement with creditors to settle debts while retaining control over business operations. This procedure's importance merits a detailed exploration of its implementation steps.

Preparing for a Preventive Settlement Application

The initial step for a debtor involves preparing to submit a preventive settlement request. This preparation includes reviewing the bankruptcy procedures guide available on the Bankruptcy Committee's website, selecting the most suitable procedure, and preparing the proposal with necessary information and documents. A summary of the debtor's financial position, the economic impact, creditor classification, and obtaining the bankruptcy trustee's approval for the proposal are essential elements.

Submitting the Request

The established procedure for submitting a preventive settlement request begins with the debtor presenting the application to the court, accompanied by the trustee-endorsed proposal and related documents. The debtor can also request the suspension of claims, which the court may grant for up to 90 days, extendable by 30 days upon the debtor's request but not exceeding 180 days in total. Immediate notification of the suspension to the creditors is mandated.

The Court's Role in Opening Procedures

Upon receiving the preventive settlement request, the court schedules a hearing within 40 days to consider the application, issuing a decision to initiate the procedure and setting a date for creditors to vote on the proposal. The debtor must inform the creditors about the court's decision and invite them to vote, providing a copy of the proposal.

Approving the Preventive Settlement Proposal

The approval process involves owners affected by the proposal voting on it, followed by creditor classification-based voting. The debtor then informs creditors and the court about the voting outcome. Debtors can employ an expert to assess contested claims and have the right to propose modifications to the court for further creditor voting.

Execution and Conclusion of Preventive Settlement

The debtor executes the court-approved proposal, which binds creditors and owners. The procedure concludes when the debtor notifies creditors of the completion of the proposal's execution, allowing for objections before the court decides to end the procedure based on various criteria, including complete proposal execution or the impossibility of continuing business operations.

Final Thoughts on Preventive Settlement

Preventive settlement offers an excellent solution for debtors to pay off debts without declaring bankruptcy and losing business control. Understanding this procedure's mechanisms, implementation steps, and conclusion is crucial for effectively navigating through financial difficulties.

 

This structured approach to discussing preventive settlement in bankruptcy highlights its benefits, procedural steps, and the critical role of court approval and execution, providing a comprehensive overview for individuals facing financial challenges.