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Bankruptcy Law
Generally, Eastern Europe has come to recognize that insolvency is not a means to tear down an economy, but a means to redistribute assets to build or rebuild a section of the economy in need. This insight underlies the adoption of the insolvency reform laws in 1994 in Bulgaria. Bulgaria first enacted insolvency legislation in 1897, but the legislation was abandoned during the communist period. When an insolvency package was first introduced in the early 1990s, it was aborted because of the perception that it was too radical. However, the Bulgarians introduced in 1994 the Law Concerning the Amendment and Amplification of the Commercial Law. The reform law focuses on reorganization of the debtor with emphasis on equal treatment for all creditors. See Article 607(1) (“Bankruptcy proceedings shall be aimed at providing fair satisfaction of creditors and opportunities for reorganization of the debtor’s enterprises.”) and Article 607(2) (“Bankruptcy proceedings shall take into consideration the interests of the creditors, the debtor and his employees.”).
Admirable in its objectives, the Bulgarian insolvency legislation bends over backward to include every possible opportunity for creditor participation. However, this attempt at ultimate fairness undermines the system’s effectiveness, generating lengthy, unnecessary litigation, numerous delays due to excessive exercise of appeal rights, and inconsistent legal standards for major issues such as valuation. The practical aspects of the system are further hampered by involvement of incompetent officials, improper compensation to receivers, inability to abide by legal time triggers within the Code, and overburdening of judges with largely administrative matters.
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