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What Happens to You if Your Chinese Debtor Goes Bankruptcy?-CTD 101 Series

Thu, 20 Oct 2022
Contributors: Meng Yu 余萌
Editor: C. J. Observer

Your Chinese debtor can no longer pay off its debts to you alone. You shall be paid together with all of its creditors. You also need to declare your creditor rights to its bankruptcy administrator.

This post was first published in CJO GLOBAL, which is committed to providing consulting services in China-related cross-border trade risk management and debt collection. We will explain how debt collection works in China below.

1. Prohibition of individual discharge

In essence, bankruptcy procedures aim to ensure equality, to a certain extent, for all creditors. Therefore, it excludes the individual discharge of any debt.

It means that your Chinese debtor can no longer pay off its debts to you individually. You shall be paid together with all of its creditors. At this point, you will usually receive a certain percentage of the debt settlement, rather than not the full amount.

If you could have received full repayment from the Chinese enterprise, then its bankruptcy is not a good thing for you.

On the contrary, if you have little, if not none, chance to get repayment from your debtor, the bankruptcy procedure will get you paid to a certain degree. It’s better than nothing, isn’t it?

It is worth noting that if your Chinese debtor insists on paying you off when it has met the bankruptcy condition and goes bankrupt within six months thereafter, its bankruptcy administrator may revoke the repayment to you.

2. Declaration of creditor’s rights

As a creditor, you should declare your creditor’s rights to the bankruptcy administrator of this Chinese enterprise in accordance with the laws of China.

If the administrator does not agree to confirm your declared claim, you can initiate a declaratory action for the creditor’s rights so that the court can make a declaratory judgment in this regard.



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Photo by Max Zhang on Unsplash

Contributors: Meng Yu 余萌

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