A company contracted to perform an obligation for another company that enters bankruptcy usually has the option to unilaterally cancel the contract. Since the bankrupt company may not be able to pay the contracting company for the work it completes, it would be unfair to keep the contractor strictly bound to the terms of the agreement.
When a trustee creates a plan for reorganization of a corporation, he or she does not need to follow the absolute priority rule. Instead, the trustee can create plan that allows the priority and the junior creditor to recoup a portion of their losses, as long as the junior creditor is not repaid on terms that are the same or better than the priority creditor. For example, a plan might call for the priority creditor to receive 90% of his or her debt while the rest of the company’s assets are used to satisfy the debts of the junior creditors.
When someone owes a tax burden in Japan, the government will first issue a series of warning letters. If the debtor ignores these letters and continues to neglect payment, the tax authorities will issue another warning letter stating that, if payment is not made, they will forcibly collect the debt through compulsory execution. At this point, if the debtor still does not pay, the government can claim his or her assets in Japan through compulsory execution. These assets can include bank accounts or real property in Japan.