Section I Start of Proceedings

(Amended - SG 70/1998, SG 84/2000) Bankruptcy proceedings shall be instituted pursuant to an application in writing submitted to the court by the debtor, respectively the liquidator  or the  creditors under a commercial transaction, as well as under public obligation to the state and municipalities related to the commercial activity of the debtor.

(1)

(Amended - SG 84/2000) Any debtor who becomes insolvent or overdraft shall be obliged to request within 15 days institution of bankruptcy proceedings.

(2)

(Amended - SG 84/2000) The application pursuant to paragraph 1 shall be submitted by the debtor, his heir, the management body or respectively the  liquidator of a company or a partner with unlimited liability.

(3)

Procurators shall be obliged to inform merchants in writing within 7 days about the insolvency.

(4)

Should the application be submitted by an agent, explicit power of attorney shall be required.

Should persons fail observe their obligation for declaration pursuant to Article 626, paragraph 2, they shall be liable jointly and severally before creditors for damages caused by such delay.

(1)

(Supplemented SG 84/2000) Debtors, respectively liquidators shall attach to the application:

1.

a transcript of the last certified by certified public accountant annual accountancy report and balance sheet as of the date of submission of application, provided the merchant is obliged by law to prepare such documents;

2.

inventory and evaluation of assets and liabilities as of the date of submission of application;

3.

list of creditors, indicating the addresses, types, amounts and securities for receivables thereof;

4.

inventory of personal properties and properties that are joint matrimonial property - for sole proprietors and partners with unlimited liability.

(2)

Creditors shall present with their application the evidence in writing and indicate any other evidence for the debtor's insolvency.

(3)

(New - SG 103/1999) Debtors or creditors shall apply to their applications documents pursuant to Article 20, paragraph 6 of the Tax Procedure Code.

(4)

(Former Paragraph 3 SG 103/1999, Supplemented SG 84/2000) With their applications debtors or creditors may also propose a plan pursuant to Article 696, as well as to nominate a person fulfilling the requirements of ART. 655, Par. 2, who is to be appointed by the court for temporary assignee if the bankruptcy proceedings open.

(1) (Amended - SG 84/2000) Petitions to institute bankruptcy proceedings, submitted by debtors, respectively liquidators, shall be considered immediately by the court in camera.

(2) (Amended - SG 70/1998) Petitions to institute bankruptcy proceedings, submitted by creditors, shall be considered by the court in camera upon participation of the petitioner and debtor at latest within 14 days as from submission of the petitions.

(3) (New - SG 84/2000) Until the end of the first session of the case opened upon a claim of creditor, other creditors can join the proceedings, can make objections and present written evidence.

(4) (New - SG 103/1999) The court shall apply the provisions of the preceding paragraphs in case the application submitted entirely meets the conditions of Article 628.

(5) (New - SG 84/2000) The court shall open the case from the day the claim was filled and shall resolve it not later than 3-months from the opening.

(1)

Upon the request of a creditor or ex officio, prior to enact the rulings on the petition to institute bankruptcy proceedings and where the preservation of the debtor's estate demand it, the court may:

1.

appoint preliminary a provisional receiver which shall have the powers pursuant to Article 635 paragraph 1;

2.

allow the measures provided for under Article 630, paragraph1, item 4;

3.

suspend the proceedings of execution on the debtor's estate, except for the proceedings of execution instituted under the Law on Collection of the State Receivables;

4.

allow the measures provided for under Article 642;

5.

impose the measures as set forth in Article 650.

(2)

When the imposing of the measures under paragraph 1 is requested by a creditor, the court imposes these measures:

1.

provided the request of the creditor is supported by justifiable evidence in written, or

2.

in case a security is granted up to the amount fixed by the court for compensation of the damages caused to the debtor, provided it shall not be established that the debtor is insolvent, respectively overindepted.

(3)

The court may oblige the creditor to grant security also in cases under paragraph 2 item1.

(4)

All bankruptcy creditors shall profit from the security measures imposed by the court.

(5)

The court may repeal the security measures, provided that the continuation thereof is not indispensable regarding the purpose of the security.

(6)

The ruling of the court on the measures under paragraph 1 shall be announced to the person with respect to which the measures are imposed, as well as to the person, which has requested the imposition thereof. The ruling may be appealed within 7 days as from the receive of the announcement.

(7)

The ruling on the measures under paragraph 1 shall be subject to a prompt execution. The appeal shall not stop the execution thereof.

(8)

The security measures shall be considered repealed, when the petition to institute bankruptcy proceedings is refused upon an award which has entered into force.

(9)

The security measures imposed by the court shall be in force up to the date of the ruling on institution of bankruptcy proceedings. As from this date their effect shall be replaced by the effect of the ruling on institution of bankruptcy proceedings, as well as by effect of the measures enact under Article 630, paragraph 1, item 4. Pursuant to the Article 630, paragraph 1, item 4, the court may enact new security measures, as well as may continue the effect of the measures, already imposed upon this procedure.

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