When debts pile up and the income is simply no longer sufficient to meet all payment obligations, it is not uncommon for fines to remain unpaid. Mostly these are traffic offenses, such as speed violations or parking tickets, which have been punished with fines. But what will happen to the fines if you will decide to justify yourself through the proceedings of bankruptcy?
First of all, it should be noted that fines based on administrative offenses that were committed before the opening of bankruptcy proceedings constitute bankruptcy claims; Considered more precisely, the administrative authorities that imposed the fines belong to the subordinate bankruptcy creditors. The subordinated bankruptcy creditors only come into play in the distribution of the insolvency assets if the non-subordinated insolvency creditors were fully satisfied. In addition, it should be noted that fines are among those claims that are not subject to the discharge of residual debt according to Section 302 and, therefore, still have to be paid by the debtor even after the “successful” termination of the bankruptcy proceedings.
During the bankruptcy proceedings, however, the same rules apply to the subordinate bankruptcy creditors as to the non-subordinate bankruptcy creditors, in particular the prohibition on enforcement, i.e., that bankruptcy creditors of any rank may not proceed against the debtor by way of foreclosure.
However, if one reads the instructions that the administrative authorities attach to the fines, one finds that the debtor is also threatened with enforcement detention, if the fine is not compensated in due time. Coercive detention does not exempt the debtor from the obligation to pay the fine, but is a means of preventing payment. So to a certain extent it is an instrument for the enforcement of fines. Can compulsory detention also be ordered after insolvency proceedings have been opened? People debated on this question for years.
In view of the foregoing, the imposition of compulsory detention for fines that arose before bankruptcy commenced should be inadmissible. The regional courts of various states come to this point of view, which see enforcement detention as a measure of enforcement of fines.
But not all courts take this view. For example, the district courts did not consider the order of enforcement detention as a measure of enforcement at all or were based on the fact that the debtor can be expected to pay the fine at least in installments from the non-attachable part of his income and also point out that the enforcement of fines is part of the administration of criminal justice and that postponing enforcement until after the remaining debt has been discharged is not appropriate due to the purpose of the sanction of the fine.
This disagreement between the courts about the treatment of compulsory detention in insolvency proceedings ultimately means that no general recommendation on how to proceed in the event of impending compulsory detention can be made. Rather, it must be checked in each individual case which legal view the competent court represents. This is the only way to determine whether it makes sense to appeal against the imposition of compulsory detention or whether it would be better to pay off the fine in installments in order to avoid compulsory detention.
Risks for the managing director despite the suspension of the obligation to file for insolvency due to COVID-19
The legislature has again extended the suspension of the obligation to file for insolvency for corporations under certain conditions until April 30, 2021. However, the managing director of a GmbH must be aware that the extension only applies under certain conditions!
Requirements for the suspension of the obligation to file for insolvency for corporations:
- The bankruptcy, i.e. insolvency or over-indebtedness, must be due to the pandemic. Under no circumstances should the bankruptcy be already in place on December 31, 2019. There is a presumption that the bankruptcy is due to the pandemic. However, this assumption can of course also be refuted.
- In the period from November 1, 2020 to February 28, 2021, the managing director must have submitted an application for financial assistance as part of government aid programs to alleviate the COVID-19 pandemic consequences.
- Obtaining help must not be obviously hopeless.
- The assistance obtained must not be insufficient for the elimination of the bankruptcy status. This means that, despite this state aid, there can no longer be any grounds for insolvency.
If even one of the above requirements is not met, this can have serious consequences for the managing director:
- The managing director is liable to prosecution for delaying bankruptcy. The obligation to file for insolvency is 3 weeks in the case of insolvency and 6 weeks in the case of over-indebtedness. A prison sentence can be imposed.
- The managing director is individually responsible for payments that he has made after the bankruptcy has reached maturity. As a rule, this can be destructive to the existence of the managing director.
- There may also be an obligation to pay compensation to the company’s creditors.
- A personal liability also arises for the unpaid wage tax of the employees.
- Failure to pay social security contributions also results in the manager being liable. The non-payment of employee contributions to social security is particularly dangerous, as there is a risk of criminal law consequences in addition to the civil law liability of the managing director.
- A criminal liability can also arise if, in the event of bankruptcy, the balance sheet for the previous year is not submitted by June 30 has been created.
- The risk of fraudulent entry against creditors is also an issue.
Therefore, it is quite deceptive to rely on the suspension of the obligation to file for bankruptcy. The consequences for the managing director can be fatal and destructive under criminal and civil law.
Advice on bankruptcy law from a bankruptcy attorney who specializes in bankruptcy law is advisable. The lawyers of Attorney Debt Fighters have the necessary expertise. Therefore, you don’t need to worry about crucial situation when it comes to bankruptcy. Give us a call and we will be right there to assist you.
The post WHAT HAPPENS TO FINES IN BANKRUPTCY PROCEEDINGS – AM I THREATENED WITH COMPULSORY DETENTION? appeared first on Evertise.
