Forgot to declare a claim in bankruptcy?

The Court of Cassation rushes to the aid of mortgage creditors and other separatists

The Court of Cassation creates clarity in bankruptcy law. Mortgage creditors do not have to file a claim in order to receive payment from the sale proceeds of the mortgaged property.

In two recent cassation judgments of 16.01.2020 (C.19.0298.N) and 12.03.2020 (C.19.0437.N) settled the discussion on whether or not mortgage creditors and other separatists[1] must file a claim in bankruptcy in order to be eligible for payout.

In a contribution by mr. Cedric Haspeslagh in the Journal for Insolvency and Attachment Law (TIBR) these judgments are discussed.

In principle, separatists are obliged to submit a claim statement in good time in order to be eligible for payments in connection with a bankruptcy (art. XX.155 and XX.165 CEL; Cass. 17 September 2015, C.15.0143.N).

According to a first purport, the lack of declaration leads to a total loss of the (privi) right to payment, both inside and outside the estate (Orb. Gent (Dendermonde dept.) 31 December 2018, TIBR 2019, ep. 2, RS-4). According to a second tenor, a declaration is not necessary in order to receive payment from the proceeds of the preferential collateral (the mortgaged real estate that is located outside the bankruptcy estate, in a sub-estate). According to this view, a declaration is only required to receive payment within the bankruptcy estate for any non-privileged balance of the claim (Ghent 8 April 2019, T.Not. 2019, ep. 9, 784).

The Court of Cassation confirms the latter tenor. In the judgment of 12.03.2020, it was unequivocally ruled that mortgage and secured creditors who did not declare their claim in a timely manner cannot be excluded from the ranking or distribution of the proceeds of the sale of their senior collateral, since in a judicial sale their rights transfer by operation of law on the price pursuant to Article 1326 of the Judicial Code.

In both judgments, the Court of Cassation clarifies that “creditors who fail to declare their claims, … under Article 72, paragraph 1, are ineligible for any distribution from the estate” (own underlining). Separatists who fail to submit a claim declaration on time are therefore not entitled to a claim “any distribution from the estate”, but beyond. In other words, apart from the bankruptcy estate, the lack of declaration for separatists does not have the consequences referred to in art. XX.165 WER.

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[1]Separatists are mortgage, pledge and special secured creditors. In principle, during a situation of concurrence or collective liquidation, such as bankruptcy, they can continue to exercise their rights of recourse and they retain their privileged rights to their 'separate' or collateral separated from the (bankruptcy) estate (mortgaged immovable property, pledged movable property, etc.)