It is always possible that a debtor company may file for bankruptcy if confronted with a debt that it cannot pay. However, this does not necessarily mean that the creditor will not be able to collect at lease part of the debt. A creditor should be given proper notice before the start of a bankruptcy hearing and will have a chance to claim part of the bankrupt debtor’s assets.
The Japanese the Commercial Code specifies a statutory interest rate of 6% annual to be applied between merchants when no interest rate is specified in the contract. If two business partners agree to a loan in their contract, but neglect to specify an interest rate, the court will automatically set the rate at 6%.
Compulsory execution allows a court to exercise control over an individual’s assets and forcibly transfer them from one party to another, providing a powerful tool to force debtors to pay off an outstanding debt. However, in situations where it is used unjustly, it can cause great harm to innocent parties. Therefore, in order to prevent this from happening, compulsory execution orders may be appealed by the defending party.
Once a bankruptcy case starts, creditors of the bankrupt party lose all rights to pursue payment of any debts outside of the bankruptcy proceedings. If one creditor were to settle with the debtor outside of the bankruptcy court it would unfairly prejudice the remaining creditors so the bankruptcy law specifically prohibits creditors from privately pursuing their claims.