Bankruptcy estate

What is a bankruptcy estate?

A bankruptcy estate is a separate legal entity created by the court when a person or business is declared bankrupt. The bankruptcy estate is separate from the debtor and has its own company registration number. The bankruptcy estate has the right to seize all of the debtor's assets and must realise these if possible. The purpose of bankruptcy proceedings is, among other things, to ensure a controlled closure and winding up of the business, and a distribution of assets among the debtor's creditors in accordance with the law. In the period 2022 - 2025, there have been 24,195 bankruptcy openings in Norway.

Conditions for opening bankruptcy

The district court may declare bankruptcy after processing a bankruptcy petition if a company is insolvent, cf. section 60 of the Bankruptcy Act. In the assessment of whether a company is insolvent, temporary short-term inability to pay must be disregarded. Some companies and private individuals have problems paying all their obligations as they fall due. In practical day-to-day business, many companies prioritise which creditors are paid when due in the event of financial challenges, while companies with overdraft facilities begin to draw down the maximum limit in order to keep operations running as smoothly as possible. 

Insolvency means that the company must be both illiquid and insufficient at the time of the assessment. When both of these conditions are present, bankruptcy can be opened. In short, a company will be insolvent if;  

• the company is unable to pay its current obligations, 
• the company does not have sufficient assets that can be sold to remedy this, and
• the company's inability to pay is not temporary.

If the realistic value of the company's total assets, with the addition of foreseeable future income, is sufficient to cover the company's liabilities, the company is not insolvent and bankruptcy should not be opened.

In the event of bankruptcy, a company is placed under the administration of a trustee by the district court to carry out the estate administration. The debtor's creditors and employees must be safeguarded throughout the process. The aim is for creditors to be repaid all or part of their claim when the bankruptcy estate is finalised, but the reality is that there are often limited funds left in the companies at the time the bankruptcy is opened. 

At law firm Halvorsen, four lawyers are regularly appointed as trustees at Romerike and Glåmdal District Court in Lillestrøm and Eidsvoll. 

What happens before and after bankruptcy?

Bankruptcy and the practical implementation of bankruptcy proceedings are unfamiliar to many. In this article you get a brief introduction to the most important things that happen before and after a bankruptcy opening. 

I have a claim against a company or person that has gone bankrupt

If your supplier or other contractual partner goes bankrupt, questions will arise about what you should do to try to obtain coverage for your claim. The starting point is that the company's management or the bankruptcy debtor itself loses the right to control the company's/its own funds and cannot pay its creditors after the bankruptcy is opened. 

Claims against a company or person that has gone bankrupt and where one of our lawyers has been appointed as trustee must be reported to [email protected]. The email should include information about the debtor, creditor and the total amount of the claim. Documentation for the claim should be attached. Missing documentation will be requested if necessary. 

Read more about claim notification and the order of priority of claims here

Confused by many unfamiliar words? 

Press here to see our glossary of the most common terms used in bankruptcy proceedings.