Section I Distribution of the Assets Converted into Cash

The distribution shall be carried out when sufficient cash funds accumulate in the bankruptcy estate.

(1)

(Amended - SG 84/2000) The receiver shall prepare an account for the distribution of the available amounts among the creditors with receivables according to Art. 722, Par. 1, in conformity with  order, the privileges, and the pledges.

(2)

The distribution account is partial up to the point when the obligations have been repaid in full or the entire bankruptcy estate, with the exception of the unsellable chattels, has been converted into cash.

(3)

(New - SG 84/2000) The inclusion in the account for distribution of receivables under Art. 722, Par. 1, Item 7 can not be refused if the obligation is undertaken by the consent of the receiver or is acknowledged by him.

(1)

When the cashed in property is allocated, the receivables shall be redeemed in the following order:

1.

(Amended - SG 70/1998) Receivables secured by a pledge or mortgage - out of the sum received by the realisation of the security;

2.

Receivables with regards to which the right to foreclose is exercised - out of the value of the foreclosed property;

3.

Bankruptcy costs;

4.

Receivables deriving from employment contractual relations, which have emerged up to one year before the date of the ruling to institute bankruptcy proceedings;

5.

Support owed by the debtor to third persons by operation of law;

6.

(Amended - SG 70/1998; SG 84/2000) Public receivables of the state and municipalities as taxes, custom duties, fees, obligatory social security contributions and other, arisen before the date of the ruling on opening of the bankruptcy proceedings;

7.

(Repealed, Former Item 8 SG 70/1998) Receivables which have emerged after the date of the ruling to institute bankruptcy proceedings and have not been paid when due, deriving from the continuing operations of the debtor;

8.

(Former Item 9, Amended - SG 70/1998) Other unsecured receivables arisen before the date of the ruling on institution of bankruptcy proceedings;

9.

(New - SG 70/1998) Receivables under Art. 616 paragraph 2 item 1;

10.

(New - SG 70/1998) Receivables under Art. 616 paragraph 2 item 2;

11.

(New - SG 70/1998) Receivables under Art.616 paragraph 2 item 3.

(2)

(Amended - SG 70/1998) In case the cash funds are insufficient to fully satisfy the receivables under paragraph. 1, sub-paragraphs 3-11, they are allocated among the creditors under the commensurability order.

Bankruptcy costs are:

1.

The government charge on the bankruptcy proceedings;

2.

The receiver's remuneration;

3.

The payables to the employees, in case the debtor's enterprise has not wound up its operations;

4.

The expenses on replenishing, managing, assessing, and distributing the bankruptcy estate;

5.

The specified support of the debtor and his family.

(1)

In the event that the selling price of a pledged or mortgaged chattel does not cover the receivable with the interest accumulated in full, the creditor shall participate for the balance in the distribution along with the creditors with unsecured receivables.

(2)

In case the selling price of a pledged or mortgaged chattel exceeds the secured receivable with the interest accumulated, the balance shall be included in the bankruptcy estate.

(3)

(Amended - SG 70/1998) The amount due under paragraph 2 from the realisation of the security shall be immediately turned over to the creditor.

(4)

Paragraphs 1, 2, and 3 shall also apply to satisfying the receivable of a creditor with a lien.

(1)

A receivable under a postponing condition is included in the initial distribution as a disputed receivable. An adequate distribution amount is set aside for it. In the final distribution, this receivable shall be excluded, in case the condition has not been realised.

(2)

A receivable under a peremptory condition shall be included in the distribution as unconditional.

(1)

For a receivable disputed under judicial proceedings, the adequate amount shall be set aside in the distribution account.

(2)

In case only the security or the privilege has been disputed, the receivable shall be included as unsecured up to the settlement of the dispute, the amount which the creditors would have received for a secured receivable being set aside in the distribution account.

The distribution account shall be put in a visible and accessible place in the courthouse, designated for this purpose, for 14 days.

The debtor, the creditors' committee, and each creditor may put object before the court in writing to the distribution account, within the period under Article 727.

(1)

The court of jurisdiction over bankruptcy shall approve by an order the distribution account, having made the relevant change in case it has established proprio motu or following an objection non-conformity with the law.

(2)

The definition under paragraph 1 is not subject to appeal.

(3)

The distribution account approved is executed by the receiver.

A creditor who has claimed his receivable after a distribution has been made, shall be included in the subsequent distributions without the right for equalisation with what has already been paid.

The bankruptcy estate shall include additionally the newly-collected amounts from receivables of the debtor and from converting assets into cash, as well as the amounts from receivables which the creditors have waived.

After the full payment of the obligations, the bankruptcy estate balance shall be returned to the debtor.

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