Effectiveness of the Security Interests in the Insolvency Proceedings
Polish insolvency law recognizes similar rule of effectiveness of the security interests as the Convention which means that the security interests are effective even after an insolvency procedure is commenced with the debtor. Noteworthy, this rule is not affected in any way by any provision of Council Regulation (EC) No 1346/2000 of 29 May 2000 on insolvency proceedings.8 Although, there are several types of the security interests in Polish civil law, the widest range of remedies for the secured creditor provides the security in form of the registered pledge.
As of the day of the court’s ruling declaring bankruptcy, the secured assets of the debtor are part of the bankrupt estate which is used to satisfy the claims of the bankrupt entity’s creditors. The composition of the bankruptcy estate is determined by the bankruptcy trustee in the way of making a list of inventory and list of dues (art. 69 of the Act on Bankruptcy). It must be noted that the bankruptcy trustee is appointed by the court in its ruling declaring bankruptcy and his role is to manage the bankruptcy entity’s assets as of the day of bankruptcy declaration the bankruptcy entity loses its right to use and maintain its assets (art. 75 of the Act on Bankruptcy). The bankruptcy trustee also values the bankruptcy estate and prepares a liquidation schedule.
While declaring bankruptcy, the court summons the bankrupt entity’s creditors to notify, in specified period of time, no later than 30 days, their receivables in order to drawn up a list of receivables. It is the bankruptcy trustee duty to drawn up a list of receivables. In principle, the notification procedure is necessary for all of the creditors. However, the bankruptcy trustee is obliged to place secured receivables on the list of receivables ex officio. If the bankruptcy trustee fails to fulfill this obligation, the secured receivables shall be placed on the list of receivables by a judge that supervises insolvency procedure called the Judge - Commissioner. Notification should be done in writing in two identical copies.
As it was mentioned above, Polish insolvency law provides for similar remedies upon the declaration of bankruptcy of the debtor as the Cape Town Convention. It is especially true in relation to security interest in the form of the registered pledge. Accordingly, the creditor has the right to take over ownership of or sell the secured asset (art. 327 of the Act on Bankruptcy). However, the secured creditor (pledgee) can take over possession or sell the object only if the security agreement provides such remedies for the creditor. If the secured asset is in possession of the bankruptcy trustee and the secured creditor has the right to take over the ownership of an asset, the Judge - Commissioner marks the time in which the secured creditor can make use of his right, not shorter than 1 month. If the secured creditor does not use his remedy in fixed time, the asset will be sold by the bankruptcy trustee in accordance with the rules of the Act on Bankruptcy. If the security agreement provides only for
O.J. L. 160/1, 30.06.2000.
the sale of the asset and the asset is in the possession of the bankruptcy trustee, the sale is conducted by the bankruptcy trustee. It must be underlined that if the value of the asset exceeds the value of the creditor’s receivables, then the creditor is obliged to pay the bankruptcy trustee the surplus. In some circumstances the secured creditor’s right to take over ownership is limited, even if the security agreement provides for such remedy. It is the case when the secured asset is part of the bankrupt entity’s enterprise and it is more favorable to sell the bankrupt entity’s enterprise with this asset than to sell it separately. The value of the secured asset is then separated from the general purchase price of the bankrupt entity’s enterprise and is distributed to the secured creditor.
The rule governing the allocation of the sums obtained from the sale of the secured asset under the provisions of the Act on Bankruptcy is that those sums are distributed first of all to the secured creditors (art. 336 of the Act on Bankruptcy). The remaining sums are part of the bankruptcy estate and are paid to other creditors by the bankruptcy trustee. Therefore, the bankruptcy trustee is obliged to drawn up a separate schedule of distribution of the sums obtained from sale of the secured asset (art. 348 of the Act on Bankruptcy). There is a possibility to challenge this schedule by referring it to the Judge - Commissioner.