Bankruptcy filing as leverage to get your money faster?

It is commonplace: the customer who, despite repeated requests, fails to pay the invoice. When the courage really fails you and you think you can whistle for your money, you can increase the pressure and proceed to file for bankruptcy for this defaulter. Is this really allowed, using a bankruptcy petition as leverage?

Provoking bankruptcy

According to a recent court ruling, a creditor may trigger the bankruptcy of a defaulter in order to protect its own interests, namely: recover as much of the bill as possible. Thus, the creditor can use a bankruptcy petition as leverage to get the defaulter to move.

Abuse of power filing bankruptcy

However, this is only possible if the creditor keeps the reasonable interests of the debtor in mind. In other words; the creditor's interest is reasonable or outweighs that of the debtor. Otherwise, there is an abuse of discretion. This also occurs if a claim or request is based on facts or circumstances of which the creditor knew or should have known the incorrectness. Or when the request is hopeless in advance.

A real-life example

Company A took a subcontract from Dura Vermeer. Company G then carried out the contract, employed by Company A. After the job was completed, a discussion arose about the final settlement: Company G had performed additional work and wanted to receive more money for this. Company A was of the opinion that these costs could be settled in full with the payment by Dura Vermeer.

After failing to pay the bill for extra work, Company G filed a bankruptcy petition for Company A, but the court denied the petition. Company A claimed that Company G abused procedural law and acted unlawfully and suffered damages as a result.

The court ruled in favor of Company G: the creditor is free to file for bankruptcy even if there is a dispute about the claim. According to the court, Company G had a reasonable interest in filing for A' s bankruptcy, namely to get its claim paid as soon as possible in order to meet its own financial obligations. Also, G' s request was not a priori hopeless or based on incorrect information.

How can you use the bankruptcy petition in practice?

The above practical case shows that you have the option of using a bankruptcy petition as leverage to get the claim paid. However, you must weigh up your interests against those of your debtor.

If the bankruptcy petition is hopeless in advance or based on incorrect facts, you may be acting unlawfully by filing. In that case, you may be held liable for damages suffered by your debtor.