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15 April 2011
A debtor that has been declared bankrupt is obliged to cooperate and disclose information so that the administrator of the bankruptcy estate can discharge its duties and the bankruptcy proceedings can be concluded in an appropriate manner. The debtor's general obligations to cooperate and disclose information remain in effect until the bankruptcy is finalised. The debtor is also obliged to attest to the estate inventory by signature.
The Bankruptcy Act (120/2004) regulates enforcement measures against debtors that have been declared bankrupt. The enforcement measures may be brought into effect on the bankruptcy administrator's own initiative if the debtor fails to carry out its duty to cooperate or provide information.
This update examines debtor obligations and the enforcement measures which may be taken against debtors, as well as the circumstances under which enforcement measures may be brought into effect.
General obligations of debtor
The general debtor's cooperation obligation covers all actions which are required in order to enable the administrator of the bankruptcy estate to discharge its duties so that the bankruptcy proceedings can be concluded in an appropriate manner. Specifically, the debtor is obliged to:
In order to fulfil its general obligations, the debtor must provide the estate administrator with the relevant contact details and be contactable by the administrator when necessary. A representative of the debtor is also obliged to travel to either the administrator's premises or the debtor's own premises when required in order to fulfil the general cooperation obligation.
The debtor's obligations take effect when the court issues a bankruptcy order relating to the debtor. The obligations remain valid even if an appeal is filed against the order. When the debtor which has been declared bankrupt is a corporation, the debtor's obligations apply to persons who are personally liable for the commitments of the corporation. The debtor's obligations also apply to managers, directors and administrator of the corporation, as well as persons who have held such positions in the corporation. Further, enforcement measures may be imposed on the aforementioned representatives of the debtor.
Attestation of estate inventory
The debtor must attest the estate inventory by signature. By doing so, the debtor confirms that the information in the estate inventory regarding the assets of the bankruptcy estate and the claims in bankruptcy is correct. If the debtor does not agree to the content of the estate inventory as it is, the debtor must make additions, corrections and other remarks that it deems necessary. The debtor may not refuse to attest the estate inventory by signature, even if it does not agree with the content of the estate inventory; the debtor must either amend the inventory or sign it as it is.
At the request of the administrator, the court may order that instead of signing the estate inventory, the debtor is obliged to appear in court and attest to the estate inventory under oath or solemn affirmation. The debtor may also be compelled to provide information for the estate inventory.
The continuation of bankruptcy must not be affected by the estate inventory remaining unattested owing to the absence of the debtor or some other reason.
The enforcement measures which may be brought against debtors are fines and imprisonment. Such measures may be imposed if the debtor fails to discharge the duty of cooperation or information, with the result that the administrator of the bankruptcy estate cannot discharge his or her duties in an appropriate manner. Such measures may also be imposed if the debtor refuses to attest the estate inventory by signature or if the debtor refuses to provide information for the estate inventory. All enforcement measures are determined and imposed by the court at the request of the estate administrator.
The primary enforcement measure is to impose the threat of a fine. If the debtor continues not to fulfil its obligations under threat of a fine, the threat will be carried out. If the debtor still does not fulfil its obligations regardless of the threat of a fine, at the request of the administrator the court may order that the debtor be imprisoned. Where it is evident that the debtor intends to continue to disregard its obligations regardless of the threat of a fine, the debtor may be imprisoned without the imposition or enforcement of the threat of a fine.
The maximum term of imprisonment for a debtor is six months. If the debtor agrees to fulfil his or her obligations during his or her imprisonment, the court will order the debtor to be released.
The general provisions on offences by a debtor in Finnish legislation are the provisions of the Criminal Code (39/1889) relating to dishonesty, fraud and favouring a creditor.
The relevant section on fraud prohibits the debtor from attesting the estate inventory if it contains false or misleading information and from providing other false or misleading information. The penalties for fraud are a fine or imprisonment of up to two years.
For further information on this topic please contact Juho Lenni-Taattola or Klaus Majamäki at Hammarström Puhakka Partners, Attorneys Ltd by telephone (+358 9 474 21), fax (+358 9 474 2222) or email (email@example.com or firstname.lastname@example.org).
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