Bankruptcy Action: Grounds, Competent Court and Procedure

İİK m.43 covers merchants, persons subject to merchant provisions and natural or legal persons made subject to bankruptcy by special legislation. It is therefore incorrect to state that no non-merchant can ever be made bankrupt. Statutory bankruptcy status must be checked in addition to merchant status.

In follow-up bankruptcy, the creditor first applies to the enforcement office and files a request for enforcement by way of bankruptcy. The debtor is served a bankruptcy payment order with a seven-day period (İİK m.155). If the debtor neither objects in time nor pays, the creditor may, within one year of service, apply to the commercial court of first instance for a declaration of bankruptcy (İİK m.156).

In case of objection the creditor may, in the same petition, request both removal of the objection and the bankruptcy decision; the court examines them together.

The grounds listed in İİK m.177 permit a bankruptcy action without prior follow-up. They include the debtor having no known place of residence, fleeing to escape obligations, engaging in fraudulent transactions detrimental to creditors, or having clearly suspended payments.

Where capital companies are over-indebted, the management body must notify the court and apply for bankruptcy; creditors may also resort to direct bankruptcy under İİK m.179 if the conditions are met. Over-indebtedness therefore imposes notification and diligence duties on company management.

The competent court is the commercial court of first instance at the place of the debtor's centre of business (the place from which the commercial enterprise is managed). This jurisdiction is mandatory and public-policy.

Dispositions concerning assets and rights in the bankruptcy estate are ineffective against creditors (İİK m.184,191). Exempt assets remain outside the estate; the debtor does not lose all personal capacity to transact. Estate assets are realised and distributed under the liquidation and ranking rules.

In enforcement and bankruptcy proceedings, the choice of enforcement track must be determined by the basis of the claim and the available documents. Although ordinary enforcement, commercial-paper enforcement, judgment-based enforcement, preliminary attachment, composition with creditors and bankruptcy may pursue the same outcome, they differ in time limits, available objections and costs.

Dates of service, objection or payment deadlines, attachment requests, sale-request periods and complaint deadlines are the most critical stages of the file. For this reason the dates of service of the payment order, enforcement order, attachment record, valuation report and sale notice should be tracked in a separate schedule.

For the creditor, interest calculation, the clarity of the enforcement request and the inquiry into the debtor's assets are decisive; for the debtor, grounds of objection, claims of exempt assets and the possibility of a negative declaratory action must be assessed from the outset. Otherwise, a procedural oversight may eclipse a meritorious position.