The debtor’s attendance at the meeting is mandatory. At the start of the meeting, the registrar’s representative – who is akin to a judge at the Enforcement Bureau – will explain to the parties the debtor’s rights and obligations. The registrar’s representative formulates the arrangement at the meeting, according to the debtor’s consent and based on his assets, ability to work, salary, and family status. If all the creditors agree to the proposed arrangement, the arrangement becomes binding, and the Enforcement Bureau will oversee its fulfillment.
If not all creditors agree, the registrar’s representative can pass on the proposal for approval even without the creditors’ consent, provided that the debtor agrees to the proposed arrangement, and additionally – the arrangement does not apply to secured debts – which are debts that have collateral for payment. For example, an asset that has a lien – the mortgage debt is a secured debt, for which the house serves as collateral. If these conditions are met, the arrangement will be forwarded to the enforcement registrar.
The enforcement registrar will convene a creditors’ meeting in order to approve the proposal, if he believes there is a chance it will be approved in a creditors’ arrangement. This arrangement does not require all creditors’ consent, and therefore has a better chance of approval.
The creditors required to agree to the proposal in such a case are:
a. All creditors who have not yet opened a file at the Enforcement Bureau
b. The majority of creditors who have a debt at the Enforcement Bureau – counting only those creditors who voted among them.
For example: If someone has 10 creditors, two of them have not yet opened enforcement files, and eight have opened enforcement files against the debtor. Of the eight creditors with open files at enforcement, The meeting is held after the insolvent individual, called the “debtor”, has submitted a proposed arrangement.
There are many procedural rules for the meeting, which can ultimately lead to receiving a discharge order and debt cancellation. Therefore, it is very important to understand the procedure involved in this meeting. In this article we will try to explain the legal rules of the meeting and of the proposal brought before it.
only three chose to vote and respond regarding the creditors’ arrangement.
In order for the arrangement to be approved in a creditors’ arrangement, the two creditors without open files must agree to the proposal, without exception. Additionally, two of the creditors who voted must also agree to the proposal.
Another example: Someone has five creditors, one without an enforcement file and four with files against him. All four with enforcement files voted and agreed, however the creditor without an open file did not agree. The proposal will not be considered approved.
Therefore, if the creditors’ arrangement raises an approved proposal, the enforcement registrar will approve it and give it binding force, so that it is also binding on creditors who did not agree. However, the enforcement registrar is not obligated to approve the agreement, and he can make it contingent on various conditions – for example: requiring the debtor undergo financial management training for proper future conduct. He can also refuse to approve the arrangement if he believes one of the creditors who did not agree to the arrangement would receive much less in payment than he would have received in a long, regular insolvency proceeding.
If you would like to consult an attorney regarding insolvency proceedings, or if you are interested in representation at a creditors’ meeting, contact our firm which specializes in insolvency and economic rehabilitation proceedings.