Dutch Supreme Court allows debtor's appeal to enter debt restructuring in proceedings opposing a bankruptcy order

Until recently, an appeal to enter debt restructuring in proceedings opposing a bankruptcy order was not allowed by the Dutch lower courts. In a ground-breaking ruling on 26 March 2021, the Dutch Supreme Court (ECLI:NL:HR:2021:460) put an end to this practice.

The case

The debtor (a natural person) was declared bankrupt in his absence at a hearing of the bankruptcy petition. As he did not attend the hearing, the debtor was able to object to the bankruptcy order and defend his interest in court. However, according to rulings of the District Court and the Court of Appeal, it was no longer possible for the debtor to be admitted to debt restructuring. The Supreme Court, however, did not agree.

The decision

The Supreme Court held that a debtor must be able to appeal to enter debt restructuring in opposition proceedings, because:

• by lodging an objection, the case is reopened (in this case, before the court of first instance), and the proceedings or hearing of the petition for bankruptcy continued
• the debtor has the right to defend themselves again in full, and
• allowing an appeal to debt restructuring is consistent with the principle that the bankruptcy of a natural person should be avoided if possible.

The upshot of this is that it will contribute to the further reduction in the bankruptcies of natural persons with an undertaking.

Find out more

To discuss the issues raised in this article in more detail, please reach out to a member of our Restructuring & Insolvency team.