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Can secured debts be settled after initiating the bankruptcy procedure? If possible, what are the conditions for settlement?

(i) After bankruptcy procedure initiation, the asset management officer or asset management and liquidation enterprise shall propose to the Judge the settlement of secured debts which have been temporarily suspended under Article 41.3 of the 2014 Law on Bankruptcy. The Judge will consider the following:

    • If collateral is used for carrying out procedures for the restoration of business operations, secured assets shall be handled according to the resolution of the creditors’ meeting;
    • In the event that there is not a procedure for the restoration of business operations or collateral is not necessary for carrying out a procedure for restoration of business operations, secured debts shall be handled within the time limits stated in the contracts, for the secured contracts that have become due. For secured contracts that have not become due, before declaring the enterprise bankrupt the People’s Court shall terminate the performance of these contracts and settle secured debts.

(ii) In the event the collateral is in danger of being destroyed or has its value significantly decreased, the asset management officer or asset management and liquidation enterprise shall request the Judge to immediately handle such collateral.

(iii) The handling of collateral shall be conducted as follows:

    • Secured debts arising before the People’s Court accepted the petition for bankruptcy procedure initiation are paid with the corresponding collateral.
    • Should the collateral be insufficient to pay the full debt, unpaid amounts shall be paid during the liquidation procedure of assets of the enterprise; if the value of the collateral is larger than the debt, the difference will be added to the value of the assets of the enterprise.

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