Debt arrangements and bankruptcy proceedings

By way of debt ad­just­ment, an in­sol­vent in­di­vid­ual heav­ily in debt may work to rem­edy his or her fi­nan­cial sit­u­a­tion. The applicant for debt adjustment should first contact the financial and debt counselling services at a legal aid office.

Debt adjustment of a private person

Once the debtor has repaid the debts to the extent prescribed in the payment schedule, he or she is released from liability regarding the remainder of the debts.

The payment schedule may be altered upon application, if the circumstances of the debtor undergo essential changes while the schedule is in effect. If the income of the debtor increases or his or her payment capability is otherwise improved, he or she must increase the amount by which the debts are paid, as prescribed in the payment schedule. If the debtor fails to follow the payment schedule, it may be declared lapsed.

Bankruptcy

Bank­ruptcy is a pro­ce­dure where the as­sets of the debtor are used all at once in or­der to cover his or her debts, in pro­por­tion to the amounts of the in­di­vid­ual debts.

The District Court may declare the debtor bankrupt when the debtor is other than temporarily unable to pay his or her debts when they fall due. The debtor may be a natural person, an estate, a company or a corporation.

The bankruptcy application may be filed by the debtor or by a creditor. The application is generally filed with the District Court in whose jurisdiction the effective management of the debtor’s operations is located.

When bankruptcy proceedings are initiated, the District Court appoints an administrator to administer the settlement of the estate. The administrator is normally an advocate specialising in bankruptcy matters. The administrator takes over the estate and its debts. The administrator draws up an estate inventory and a written account of the debtor’s economic activity before the bankruptcy and the reasons for the bankruptcy. The debtor must attest to the correctness of the estate inventory.

If the assets of the estate are sufficient for the payment of its debts, the administrator sets a date by which the creditors must file their claims. This procedure is called securing of claims in bankruptcy. If the creditor fails to secure its claim within the time limit, the creditor generally forfeits the right to payment.

The administrator also has the duty to settle ambiguities and disputes relating to the claims. When necessary, the disputes may be settled in court. The administrator draws up a distribution list, which is examined and confirmed by the district court. The list defines how the assets of the estate are distributed among the creditors.

If the assets of the estate are not sufficient for the payment of the costs of the proceedings or if the payments to the creditors would be insignificant, the district court may order the bankruptcy to lapse. In this case, the remaining assets of the estate are surrendered to the enforcement authority.

The court may on the recommendation of the Bankruptcy Ombudsman order that the bankruptcy procedure continues as public receivership, if the bankruptcy estate lacks sufficient assets or if there are other special grounds to continue the settlement of the activities of the debtor or the bankruptcy estate. The public receivership is carried out by a public receiver appointed by the Bankruptcy Ombudsman.

The debtor is not released from liability through bankruptcy, but is liable for pre-bankruptcy debts also with any assets received after the bankruptcy, if the company continues its operations. However, if a company is declared bankrupt, it in most cases ceases to exist.

The Bankruptcy Ombudsman monitors that the administrators of bankruptcy estates act in accordance with the law and good administrative practice. The Bankruptcy Ombudsman is assisted by the Consultative Committee on Bankruptcy Matters, whose recommendations are a significant form of development of good administrative practice.

Appeals in enforcement matters

The main rem­edy against en­force­ment pro­ceed­ings is fil­ing an enforcement appeal to a dis­trict court. Debtors, creditors and other parties whose interests are affected by distraint or a decision by the enforcement officer, may file an enforcement appeal.

An appeal against the decision of the enforcement officer shall be lodged with the district court in whose jurisdiction the enforcement measure has been carried out.

Corporate restructuring

Restructuring proceedings may be undertaken in order to rehabilitate a distressed debtor’s viable business, to ensure its continued viability and to achieve debt arrangements. In the proceedings, a court may approve a restructuring programme with instructions regarding measures on the activities, assets and liabilities of the debtor.

Matters concerning restructuring proceedings shall be considered by the court in whose district the general administration of the debtor is located. Matters concerning the restructuring of a subsidiary company in a group of companies shall, however, be considered by the court in which restructuring proceedings concerning the parent company are pending

Matters concerning restructuring proceedings are not heard by all district courts, which means that the judicial district in corporate restructuring matters is determined differently than in other matters

Judicial districts in corporate restructurings 1.1.2019

1. The judicial district of the District Court of Åland comprises the judicial district of the Åland District Court;
2. The judicial district of the District Court of Helsinki comprises the judicial district of the District Court of Helsinki;
3. The judicial district of the District Court of Länsi-Uusimaa comprises the judicial districts of the District Courts of Länsi-Uusimaa and Itä-Uusimaa;
4. The judicial district of the District Court of Oulu comprises the judicial districts of the District Courts of Kainuu, Lapland and Oulu;
5. The judicial district of the District Court of Pirkanmaa comprises the judicial districts of the District Courts of Kanta-Häme and Pirkanmaa;
6. The judicial district of the District Court of Pohjanmaa comprises the judicial districts of the District Courts of Etelä-Pohjanmaa, Keski-Suomi, Pohjanmaa and Satakunta;
7. The judicial district of the District Court of Pohjois-Savo comprises the judicial districts of the District Courts of Etelä-Savo, Pohjois-Karjala and Pohjois-Savo;
8. The judicial district of the District Court of Päijät-Häme comprises the judicial districts of the District Courts of Etelä-Karjala, Kymenlaakso and Päijät-Häme;
9. The judicial district of the District Court of Varsinais-Suomi comprises the judicial district of the District Court of Varsinais-Suomi.