In Japan, if a debtor (an individual or a company) files a petition for commencement of bankruptcy proceedings to the court, and the court confirms that the requirements for commencement of bankruptcy proceedings under the Bankruptcy Act (Act No.75 of 2004) are all satisfied, the court issues the commencement order of bankruptcy proceedings of the debtor. A bankruptcy trustee (“hasan-kanzainin”) is appointed by the court upon the issuance of the commencement order. The bankruptcy trustee, who is selected by the court among private practice lawyers, is the person who implements the bankruptcy proceedings from a fair and independent perspective through the administration and realization of the debtor’s assets, the investigation of the creditors and their claims to the debtor, and the distribution of liquidated assets of the debtor to the extend the debtor’s assets are secured.
As the effect of the commencement order, generally, assets of the debtor at the time of the order constitutes the bankruptcy estate under the Bankruptcy Act, and the power to administer/dispose of the bankruptcy estate is deprived of the debtor and exclusively vested in the bankruptcy trustee instead.
Any compulsory enforcement made by creditors against the bankruptcy estate is generally restricted under Japanese laws, however an owner of the assets which are held by the bankruptcy trustee has the right to reclaim the assets, and the creditors whose claims to the debtor are secured by certain security interest (e.g., real estate mortgages and pledges) have the right to exercise such security interests outside of the bankruptcy proceedings.
After the investigation by the bankruptcy trustee of the bankruptcy estate, the assets of the bankruptcy estate will be liquidated into cash for distribution to the creditors. In order for creditors of the debtor to receive the distributed cash, each creditor must file a proof of its claim with the court. The creditor’s name, address, and amount of its claim are required to be included in the proof of claim for the creditor to participate in the bankruptcy proceedings.
In addition, in the bankruptcy proceedings, creditors’ meetings are held for the purpose of reporting the accounts. At the creditors’ meeting, the bankruptcy trustee reports, among others, background of the bankruptcy of the debtor and the prospect of cash distribution. Creditors are not obligated to attend the creditors’ meetings, and the creditors will not be disqualified from the liquidating distribution due to their absence from creditors’ meetings.
Our firm can represent clients who are overseas creditors, advise them on the Bankruptcy Act and other insolvency laws/regulations, file a petition of the claims and attend the creditors meeting on behalf of the clients.