The distribution of the insolvency estate according to Bulgarian insolvency law
The procedure of the distribution of insolvency estate is regulated in Article 722 of the Commercial Code and contains a legally defined order of the insolvency creditors. The insolvency administrator, the insolvency creditors and the insolvency debtor participate in the exploitation procedure. It is supervised by the competent insolvency court. The basis of the distribution procedure is the exploitation account created by the insolvency administrator. Condition for the execution of the exploitation is that the insolvency estate is sufficient. The insolvency account is drafted by the insolvency administrator and contains information regarding the present assets and the insolvency creditors that will benefit from the distribution. The account is subject to a confirmation by the court. Each party that participates in the exploitation procedure is entitled to contest this account. The exploited assets are distributed between the creditors according to a legally defined order.
The insolvency creditors are satisfied as follows:
- Claims that are secured by pledge or mortgage, prohibition or freeze, recorded according to the order of the registered lien: by the proceeds of the exploitation of the security;
- Claims that provide a right of retention: by the value of the remaining immovable assets;
- Expenses created due to the insolvency;
- Claims that derive from employment relationships and that existed before the court ordered the opening of insolvency proceedings;
- The financial support to third parties prescribed by law;
- Public claims of the State such as taxes, customs duties, fees, binding social security contributions etc that existed before the court ordered the opening of insolvency proceedings;
- Claims that derive from the continuation of the bankrupt’s company that existed before the court ordered the opening of insolvency proceedings and that have not been satisfied at due date;
- Other unsecured claims that existed before the court ordered the opening of insolvency proceedings;
- Claims that derive from legally or contractually agreed interest regarding unsecured claims which become due after the court ordered the opening of insolvency proceedings;
- Claims that derive from loans that one of the partners/shareholders granted the insolvency debtor;
- Claims that derived from gratuitous legal transactions;
- Claims that were created due to the expenses the insolvency creditors had as a consequence of the insolvency proceedings.