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Declaration in insolvency in Bulgaria

The insolvency is declared by the competent insolvency court if one of the following conditions is present:

  • If no restructuring plan has been adopted in due time;
  • If the restructuring plan has not been approved or confirmed;
  • If it is obvious that the continuation of business activities would affect the insolvency estate;
  • If the assets are not sufficient to cover the insolvency costs;
  • If the insolvency debtor does not comply with the agreement according to Article 740 of the Commercial Act.

The court declares the insolvency by a court order. With this,

  • the court declares the debtor insolvent and orders the dissolution of the company and its activities;
  • the court orders a general seizure and the freezing of the insolvency debtor’s assets;
  • it annuls the competence of the bodies of the insolvency debtor;
  • it seizes the insolvency debtor’s rights on administrating and disposing of the assets that are part of the insolvency estate;
  • it orders the sale of the insolvency estate and the distribution of the sum between the creditors.

The court order for the declaration of insolvency is effective towards everyone and shall be enforced immediately. The order has a declaring and a constitutive effect. By this time, all obligations and liabilities of the debtor become due. All rights of the insolvency debtor regarding the assets in the insolvency estate and regarding the company are removed.

After the transformation of the insolvency estate into money, the insolvency administrator begins with its distribution. The distribution is supervised by the court. One condition for the execution of the distribution is that there are sufficient resources in the insolvency estate. This must be assessed on the basis of a balance sheet created by the insolvency administrator which is subject to confirmation by the court. The insolvency creditors’ claims are to be satisfied according to the respective categories of creditors.