The amendment of the Act on Bankruptcy in Hungary allows for the termination of liquidation procedure following the final and binding liquidation order but before the publication of commencement if the debtor settles the debts in full.
The amendment effective from 1 July, 2018 allows the termination of liquidation procedures upon request and without the consent of the creditor following the final and binding liquidation order but prior to the publication of commencement. It will be possible if the debtor substantiates until the publication that he has paid the whole amount of the debt included in the order.
The amendment on the Act on Bankruptcy raises interesting questions. Firstly, the possibility to avoid threats of the liquidation may encourage the debtor to deliver as soon as possible. In this case it is a win-win situation because the debt is recovered and the debtor is released. Secondly, the abrogated provisions required the approval of the creditor for the termination of the procedure even in case the debtor delivered which is not required under the new provisions.
Some critics say that the amendment would undermine the concept of liquidation procedure in Hungary and would erode business confidence. Nevertheless, the previous rules increased the temptation for the creditor to blackmail the debtor ensuring satisfaction of his claims beyond the scope of the procedure.
Unfortunately, the amendment does not clarify how the court would verify the debtor’s payment to the creditor. The proof of the pudding will be in the eating, so we will see how practical and applicable the new provisions will be.