The order of payment of liabilities when the enterprise goes bankrupt.

“Business and Success” is what everyone wants, but “Business and Loss”is also what often happens. But no one wants to lose and go bankrupt.

So when is this supposed to be a business bankruptcy?

Under the Bankruptcy Law 2014, a bankrupt enterprise is an enterprise that is unable to pay its debts within 3 months from the due date of payment, and is declared bankrupt by the court.

Assets disposed to repay debts to creditors when conducting bankruptcy are all assets of the enterprise, including: owned assets, rights to use assets, money, receivables, investments, capital contributions of the owner are missing in the commitment to contribute capital to the enterprise.

The order of payment of liabilities, when the enterprise goes bankrupt is as follows:

1.  Payment of bankruptcy costs.
2.  Payment of debts related to employees.
3.  Payment of debts for the purpose of business recovery.
4.  Payment of financial obligations to the State.
5.  Pay off other debts

Note that, private enterprises and partnerships are two types of enterprises with unlimited liability regime. Therefore, when the assets of the enterprise are not enough to pay the above debts, the next asset used to pay the debt is the personal property of the bussiness owner, even though this asset is not involved in production and business.

According to the international bankruptcy law, based on the humanitarian and scientific aspects of the law, it is stipulated that some minimum personal assets of private enterprises and partnerships are exempted when settling bankruptcy such as: minimum housing for them and their families; minimum amount of money they still have to pay to continue living and working; benefits they must still pay to pay health insurance, the cost of studying children, and utilities for the basic life of a family.

On the contrary, if the assets of the bankrupt enterprise are still left over, how will it be resolved afrer paying off all the debts.

The law also recognizes and protects the assets of the enterprise. The law stipulates that: the value of the assets of the enterprise, after payment in full to all creditors, is still in surplus, it is under the full authority of the owner of the enterprise.

In summay:

- For the limited liability company, the Owner is responsible for the debts and other property obligations of the company within the amount of the charter capital of the company. In other words, the legal entity is responsible for debts repayment on all corporate assets. Natural person shall pay debts on their capital contribution in the enterprise.

- For the unlimited liability company, the Owner is responsible with all his assets for all operations of the enterprise. In other words, the legal entity and the natural person are jointly responsible for debts repayment on all assets of the enterprise and the natural person.

Bankruptcy of a business does not always mean the termination of business operations, and neither does when the court opens bankruptcy proceedings, the business is declared bankrupt. An enterprise is insolvent, it does not necessarily have to open bankruptcy proceedings, and as soon as the court opens bankruptcy proceedings, the enterprise still has time to negotiate with creditors.