What is General Bankruptcy Proceedings? Who is it applied to?

General bankruptcy proceedings are a specific method of enforcement for monetary or collateral claims a debtor subject to bankruptcy proceedings . Simply put, if a creditor argues that "this person can be pursued not only through seizure but also through bankruptcy," they can initiate general bankruptcy proceedings within the framework of summary enforcement. The Enforcement and Bankruptcy Law regulates the general rules for enforcement of monetary debts and collateral; however, a specific distinction is made for "enforcement proceedings against persons subject to bankruptcy." Because bankruptcy ultimately has severe consequences affecting the debtor's entire assets, this method is not applicable to everyone.

What does general bankruptcy mean?

This process begins with the creditor initiating proceedings at the enforcement office; however, unlike normal seizure proceedings, it can ultimately lead to the collective liquidation of the debtor's assets. In classical seizure proceedings, the aim is to seize and sell specific assets. In general bankruptcy proceedings, if the conditions are met, the primary commercial court can declare the debtor bankrupt. In legal doctrine, it is stated that the general bankruptcy process is the "bankruptcy with follow-up" process regulated in Articles 155-166 of the Bankruptcy Law.

To whom does it apply?

The most important question is this: Not every debtor is subject to bankruptcy. According to the Turkish Commercial Code, a person who operates a commercial enterprise, even partially, in their own name is considered a merchant. Commercial companies, certain associations and foundations operating commercial enterprises, and some public institutions and organizations operated under private law provisions are also considered merchants. The same law also explicitly states that "every merchant is subject to bankruptcy for all their debts." Therefore, bankruptcy proceedings are primarily applied to merchants and those considered merchants.

The framework is the same under the Enforcement and Bankruptcy Law. The general bankruptcy procedure applies to merchants, those considered merchants, those subject to the provisions regarding merchants, and those subject to bankruptcy proceedings under special laws. In contrast, for ordinary consumers, wage earners, or most individuals who do not qualify as merchants, the general attachment procedure, rather than bankruptcy proceedings, generally applies. In other words, "bankruptcy proceedings" cannot be initiated against everyone.

Does this apply to tradespeople?

Generally, no. The Turkish Commercial Code defines a tradesperson as someone whose economic activity is based more on physical labor than capital, and whose income does not exceed a certain limit. A tradesperson is, as a rule, not a merchant. Therefore, in most cases, they are not subject to bankruptcy; they are pursued through general attachment proceedings. This is one of the points most frequently confused by citizens: doing business on a small scale is not the same as being considered a "merchant.".

How does the process work?

The creditor first initiates enforcement proceedings at the enforcement office. The enforcement office sends the debtor a bankruptcy payment order . This order includes a notice that the debt must be paid, the objection period must be extended, and that if the debt is not paid, the creditor may request bankruptcy from the commercial court. Sources regarding Article 155 of the Bankruptcy Law state that the debtor is given seven days to object, and if no objection is filed within this period, the enforcement proceedings become final.

If the debtor does not object within seven days and does not pay the debt, the creditor may request a bankruptcy declaration from the commercial court of first instance. If the debtor objects to the payment order, the proceedings are suspended; in this case, the creditor requests both the lifting of the objection and a bankruptcy declaration from the commercial court. In legal doctrine and practical sources, it is particularly emphasized that in bankruptcy cases, the appeal for the lifting of an objection should be made to the commercial court, not the enforcement court.

Will the commercial court immediately declare bankruptcy?

No. The court first examines the existence of the debt. When bankruptcy proceedings are finalized, the bankruptcy petition is announced; other creditors can also intervene in the case within a certain period or argue that there is no situation requiring bankruptcy. Sources regarding Article 158 of the Bankruptcy Law state that the court hears the parties and evaluates the existence of the debt according to general provisions; it can also grant the debtor a final payment opportunity with a "deposit order".

This "deposit order" is important for citizens. The court may give the debtor one last chance to pay the debt, interest, and expenses within a specified period or deposit them into the court's treasury. If the debtor fails to pay despite this order, the risk of bankruptcy becomes serious. Current sources on judicial decisions also state that the deposit order must list each debt item separately and clearly include a seven-day period.

What is the difference between this and general attachment proceedings?

In general attachment proceedings, the creditor attempts to recover their debt by having certain assets of the debtor seized and sold. In general bankruptcy proceedings, however, the issue is not merely the seizure of individual assets; if certain conditions are met, it involves a decision declaring the debtor bankrupt and the collective liquidation of their assets. Therefore, bankruptcy proceedings have more severe consequences and are not applicable to everyone. It is a particularly significant process for merchants, directly impacting their commercial lives.

Conclusion

General bankruptcy proceedings are a special method of debt collection applied to debtors subject to bankruptcy. As a rule, it applies to merchants, those considered merchants, and those subject to bankruptcy under special law; it is generally not applied to ordinary debtors. The process begins with a bankruptcy payment order; if no objection is raised or the debt is not paid, the creditor can request a bankruptcy decision from the commercial court of first instance. Therefore, the idea that "every debtor can be declared bankrupt" is incorrect; it is necessary to first determine whether the debtor is actually subject to bankruptcy.