bankruptcy

In Japan, bankruptcy petitions can be brought by a variety of parties.  The most common situation is for the debtor to file for bankruptcy personally as a way to escape payment, but this does not always happen.  When a debtor refuses to file bankruptcy, it is often left to the creditor to file for bankruptcy on behalf of the debtor and submit evidence of unpaid debt as proof that the debtor can no longer make payments on debts.

For individuals, bankruptcy starts when the person is unable to pay a debt and the time for payment has lapsed.  For corporations the standard is a little different.  Corporations may file for bankruptcy when they are unable to pay, similar to a normal person, or when they are in a state of “balance sheet insolvency.”  Balance sheet insolvency is when the corporation is unable to make payments even by selling its assets.

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.

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.