I. Legislative Framework and Scope
Insolvency proceedings in Bulgaria are governed exclusively by Part Four (Articles 607–761) of the Commercial Act (Търговски закон, ТЗ). The procedure is available only in respect of traders as defined by the Commercial Act — individuals engaged in commerce and commercial entities — and is not applicable to natural persons who are not traders, public bodies, or certain regulated entities (banks, insurance companies, and pension funds) that are subject to separate insolvency regimes under their sector-specific legislation.
The Bulgarian insolvency procedure is a unified procedure that combines elements of both rehabilitation and liquidation: it opens as a general insolvency proceeding and may be directed toward either the conclusion of a rehabilitation plan approved by creditors or, where rehabilitation is not feasible, the liquidation of the estate and the distribution of proceeds to creditors. The choice between these outcomes is made by the creditors' meeting and the supervising court during the course of the proceedings.
II. Grounds for Opening Proceedings
A petition to open insolvency proceedings may be filed by the debtor itself, by a creditor with a monetary commercial claim, or — in certain circumstances — by the prosecution authority. The substantive grounds for opening proceedings are set out in Articles 608 and 742 of the Commercial Act and encompass two distinct situations: insolvency (несъстоятелност), defined as the inability of the trader to meet a due and payable monetary commercial obligation; and over-indebtedness (свръхзадълженост), applicable only to capital companies, where the value of the company's assets is exceeded by the value of its liabilities regardless of current liquidity.
The debtor is obliged to file for insolvency within thirty days of the date on which insolvency or over-indebtedness arises. Failure to file within this period exposes the managers and members of the company to personal liability for the increase in the insolvency deficit caused by the delay — a provision that creates significant personal risk for directors of financially distressed companies and has generated extensive litigation concerning the timing and scope of the filing obligation.
III. The Opening Decision and Interim Measures
Upon receipt of a petition, the competent regional court (the court of the registered seat of the debtor) conducts a preliminary examination and may appoint a provisional trustee and impose interim protective measures — including an attachment over the debtor's assets and a prohibition on disposal — pending the hearing of the petition. The opening decision, if the court is satisfied that the grounds for insolvency are established, sets the date of insolvency, opens the insolvency proceedings formally, appoints the insolvency trustee (синдик), convenes the first creditors' meeting, and suspends all individual enforcement actions against the debtor's assets.
The date of insolvency is a legally significant determination: transactions concluded by the debtor after the date of insolvency, or within defined suspect periods preceding it, may be challenged by the trustee as preferential or fraudulent disposals under the actio Pauliana provisions of Articles 645–647 of the Commercial Act. Transactions with related parties within two years preceding the opening of proceedings are presumed suspicious and may be challenged on relatively relaxed grounds.
IV. The Insolvency Estate and the Trustee
The insolvency estate (маса на несъстоятелността) comprises all assets of the debtor at the date of the opening decision, together with assets acquired by the debtor during the proceedings. Certain categories of asset are excluded from the estate by statute, including assets subject to valid reservation of title, assets held on trust for third parties, and assets that are exempt from enforcement under the Civil Procedure Code.
The insolvency trustee is an officer of the court, appointed from a list of licensed insolvency practitioners, whose functions include: taking possession and administering the estate; continuing or winding down the debtor's business as directed by the creditors' meeting; investigating and reporting on the causes of insolvency; bringing avoidance actions; verifying creditor claims; and, ultimately, distributing the estate proceeds to creditors in the statutory order of priority.
V. Creditor Claims and Priority
Creditors must file their claims with the insolvency court within one month of the publication of the opening decision in the Commercial Register. Claims filed after the deadline may be admitted in subsequent rounds, but claims filed after the closure of the second verification round are excluded entirely. The trustee verifies each claim against the debtor's books and records and prepares a list of accepted and rejected claims, which is subject to challenge by any creditor or the debtor before the supervising court.
The distribution of the realised estate proceeds follows the statutory order of priority: secured creditors are satisfied first from the proceeds of the assets over which their security was constituted; then expenses of the proceedings; then claims of employees for unpaid wages (up to six months); then public claims of the state and municipalities; and finally unsecured commercial creditors in proportion to their admitted claims. In practice, the assets of insolvent Bulgarian companies rarely suffice to satisfy more than a fraction of unsecured creditor claims, and the recovery prospects for unsecured creditors are typically poor.
VI. The Rehabilitation Plan
A rehabilitation plan (план за оздравяване) may be proposed by the debtor, a creditor, or the trustee within one month of the final approval of the list of creditors' claims. The plan must provide for the satisfaction of creditors' claims — whether in full, in part, or by restructuring — and may involve measures including debt rescheduling, debt-to-equity conversion, sale of the business as a going concern, or any other commercially viable arrangement. The plan is approved by the creditors' meeting by a qualified majority and confirmed by the court. Upon confirmation, it binds all creditors whose claims arose before the opening of proceedings, including dissenting creditors, provided the statutory protection of dissenting creditor classes is observed.