Insolvency contesting: recent developments regarding payment plans

In past years, German courts interpreted insolvency contesting cases broadly (Vorsatzanfechtung, i.e. contesting for wilful disadvantageous acts) – even though the respective situation would appear harmless at first sight. This tendency has recently changed – initially in the lower instance courts, but meanwhile also in decisions of the Federal Court of Justice (IXth Senate), not least owing to the draft bill of the Federal Ministry of Justice and Consumer Protection as of 16 March 2015.

In insolvency contesting practice it could be noticed that in case of payment plans payments made thereunder were contested by insolvency administrators pursuant Sec. 133 (1) of the Insolvency Code (Vorsatzanfechtung), where in spite of an agreed and implemented payment plan the debtor later becomes bankrupt. As a result of such insolvency contesting, the insolvency administrator demands that the recipient of the instalments pay back the instalments made (plus interest from the date of opening of the insolvency proceedings). The concession made by the creditor can thus easily turn into a boomerang.

Dr Philipp Rüppell and Björn Grotebrune have recently published an article on this subject in the “Neue Zeitschrift für Insolvenz- und Sanierungsrecht” (NZI 2015, pp. 832-839). The link to this article is available here free of charge.

The article deals with the practically relevant issue of whether an insolvency administrator can demand the instalments made pursuant to Sec. 133 (1) of the Insolvency Code. The authors point out that the courts’ practice was initially in favour of the insolvency administrators' goals but is now gradually changing; followed by a comment on the draft bill with further suggestions (de lege ferenda). After that, the authors show that already today the draft bill has effect on the contestability of instalment payments based on applicable law (de lege lata). The authors conclude that even based on the current legal situation instalment payments can hardly be contested successfully anymore.

To read the full article please click here.