Filing and Investigating Claims in Japanese Bankruptcy: A Creditor's How-To

Japanese Attorney at Law - Bengoshi L.L.

• 9 min read

When a business partner or customer in Japan enters formal bankruptcy proceedings (破産手続 - hasan tetsuzuki), creditors, both domestic and international, face the critical task of asserting their claims to have a chance at recovering outstanding debts. The Japanese bankruptcy system has a structured process for filing proofs of claim (債権届出 - saiken todokede) and for the subsequent investigation and determination of these claims (債権調査・認否 - saiken chōsa/ninpi) by the court-appointed bankruptcy trustee (破産管財人 - hasan kanzainin). Understanding this process is paramount for creditors seeking to protect their financial interests.

This article provides a practical guide for creditors on how to navigate these procedures.

Understanding Bankruptcy Claims (破産債権 - Hasan Saiken)

First, it's essential to distinguish "bankruptcy claims" from other types of obligations. A bankruptcy claim (hasan saiken) is generally a monetary claim against the debtor that arose from a cause existing before the date the bankruptcy proceedings were formally commenced by the court (Bankruptcy Act, Article 2, Paragraph 5). This includes unpaid invoices, outstanding loan balances, contractual damage claims, etc.

These are distinct from "administrative claims" (財団債権 - zaidan saiken), which are expenses incurred during the bankruptcy proceeding itself (like trustee fees or costs of preserving estate assets) or certain pre-petition claims granted high priority (like recent wages or taxes). Administrative claims are paid preferentially and typically do not go through the same formal claim filing and investigation process as general bankruptcy claims. This article focuses on the process for general and priority bankruptcy claims.

Step 1: Receiving Notice and Identifying the Claim Filing Period (債権届出期間)

Upon the issuance of a Bankruptcy Commencement Order (破産手続開始決定 - hasan tetsuzuki kaishi kettei), the court or the trustee will send an official notice to all known creditors. This notice is crucial as it will contain:

  • The debtor's details and the bankruptcy case number.
  • The name and contact information of the appointed bankruptcy trustee.
  • The claim filing period (債権届出期間 - saiken todokede kikan): This is a strict deadline by which creditors must submit their proof of claim.
  • The date of the first creditors' meeting (財産状況報告集会 - zaisan jōkyō hōkoku shūkai).

Action: Creditors must carefully review this notice and immediately note the claim filing deadline. Missing this deadline can severely prejudice a creditor's ability to recover.

Step 2: Preparing and Filing the Proof of Claim (債権届出書の作成と提出)

Filing a proof of claim is the formal mechanism by which a creditor asserts their right to a distribution from the bankruptcy estate.

Obtaining the Claim Form (債権届出書用紙 - Saiken Todokede Sho Yōshi)

The official notice of bankruptcy commencement usually includes, or provides instructions on how to obtain, the prescribed proof of claim form.

Essential Information Required

Article 111 of the Bankruptcy Act outlines the information that must be included in a proof of claim:

  1. Creditor's Details: Full legal name, address, and contact information. For corporate creditors, this includes the registered head office and the name of the representative.
  2. Amount of the Claim: The precise amount owed by the debtor, broken down into principal, pre-petition interest (calculated up to the day before bankruptcy commencement), and any other charges. If the claim is in a foreign currency, it typically needs to be converted to Japanese Yen at the exchange rate prevailing on the date of the bankruptcy commencement order (Bankruptcy Act, Article 103, Paragraph 2, Item 1(b)).
  3. Cause of the Claim (請求の原因 - seikyū no gen'in): A clear description of the basis for the claim (e.g., "unpaid invoices for goods sold under contract dated X," "outstanding balance of loan agreement dated Y").
  4. Nature of the Claim:
    • General Unsecured Claim (一般破産債権 - ippan hasan saiken)
    • Priority Claim (優先的破産債権 - yūsenteki hasan saiken): If the creditor believes their claim has statutory priority (e.g., certain tax or labor claims not qualifying as administrative claims), this should be stated.
    • Secured Claim (別除権付破産債権 - betsujo-ken tsuki hasan saiken): If the claim is secured by specific collateral, details of the security, the collateral, and the estimated amount of any deficiency (the portion of the debt not expected to be covered by the collateral) must be provided.
  5. Voting Rights: The amount for which the creditor can exercise voting rights (generally related to the unsecured portion of their claim).
  6. Subordinated Claims: If the claim is contractually or statutorily subordinated, this must be indicated.
  7. Small-Amount Distribution Waiver: Claim forms often include a section where creditors can indicate if they waive their right to receive a distribution if the amount is below a certain de minimis threshold (e.g., less than 1,000 JPY) to save administrative costs.

Supporting Documentation (疎明資料 - Somei Shiryō)

Attaching clear and comprehensive supporting documentation is critically important. This evidence substantiates the claim and allows the trustee to verify its validity and amount. Examples include:

  • Copies of contracts and agreements.
  • Invoices, purchase orders, delivery receipts.
  • Loan agreements and amortization schedules.
  • Promissory notes or other debt instruments.
  • Account statements or ledgers showing the outstanding balance.
  • Any relevant correspondence with the debtor.
  • If the claim is based on a judgment, a copy of the judgment.
    For foreign creditors, documents in a foreign language may need to be accompanied by Japanese translations.

Where and How to File

The proof of claim, along with supporting documents, must be filed with the designated bankruptcy court (not directly with the trustee, unless local court practice directs otherwise for convenience, in which case the trustee acts as a conduit to the court). It is usually submitted by mail, and it's advisable to use a method that provides proof of delivery. Some courts may require multiple copies.

Representation

Given the legal formalities and language requirements, foreign creditors with substantial or complex claims often find it beneficial to engage Japanese legal counsel to prepare and file the proof of claim and represent their interests in the proceedings.

Step 3: The Trustee's Investigation and Examination of Claims (債権調査・認否)

Once the claim filing period ends, the bankruptcy trustee undertakes the task of investigating each filed claim.

Trustee's Review (債権認否の準備 - Saiken Ninpi no Junbi)

The trustee receives all filed proofs of claim from the court. They will then:

  • Review each claim and its supporting documentation.
  • Compare the filed claims against the debtor's books, records, and other available information.
  • Interview the debtor (or its representatives) and relevant employees to clarify details about specific claims.
  • If necessary, the trustee may contact a creditor directly to request additional information, clarification, or further supporting documents (補正依頼 - hosei irai). Creditors should respond promptly to such requests.

Trustee's Schedule of Claims (破産債権者表 - Hasan Saikensha-hyō)

Based on this review, the trustee prepares a schedule of all filed claims. For each claim, the trustee will indicate their proposed position:

  • Admission (容認 - yōnin): The trustee agrees with the validity and amount of the claim as filed.
  • Objection/Rejection (否認 - hinin): The trustee disputes all or part of the claim. The reasons for the objection (e.g., amount incorrect, lack of supporting evidence, claim unenforceable) will be stated. This schedule, often called the "List of Bankruptcy Creditors" (hasan saikensha-hyō) or a similar title, effectively contains the trustee's proposed admissions and objections.

The trustee aims to resolve minor discrepancies or issues with documentation through informal communication with creditors before formally lodging an objection. This proactive approach helps to avoid unnecessary formal disputes.

Step 4: The Claim Investigation Hearing (債権調査期日 - Saiken Chōsa Kijitsu)

The Claim Investigation Hearing is a formal court session where the trustee officially presents their findings on the filed claims.

  • Purpose: For the trustee to publicly state their admission or objection to each claim.
  • Presiding Officer: A judge from the bankruptcy court presides.
  • Attendance: The trustee attends. The debtor (or representatives) and their counsel are usually required to attend. Creditors or their legal representatives may attend.
  • Trustee's Declaration: The trustee formally declares their position (ninpi) on each claim as listed in the schedule they prepared.
  • Objections by Other Creditors: Importantly, other creditors present at the hearing also have the right to object to any claim filed by another creditor if they believe it is invalid, overstated, or otherwise improper.
  • Allowance of Undisputed Claims (確定 - Kakutei): If a claim is admitted by the trustee and no objections are raised by other creditors at the hearing, that claim becomes "allowed" or "confirmed" (kakutei). An entry of an allowed claim in the official schedule of bankruptcy claims (破産債権者表 - hasan saikensha-hyō) has the same legal effect as a final and binding court judgment between the creditor and the trustee regarding that claim (Bankruptcy Act, Article 124, Paragraph 3). This means the claim is established for the purpose of receiving distributions from the estate.

Step 5: Handling Disputed Claims (異議のある債権の処理)

If a creditor's claim (or a part of it) is objected to by the trustee or another creditor, it does not automatically become disallowed. The creditor whose claim is disputed must take further steps to have its validity determined by the court:

  1. Petition for Claim Assessment (破産債権査定申立て - Hasan Saiken Satei Mōshitate):
    The creditor must file a "Petition for Claim Assessment" with the bankruptcy court. This petition asks the court to judicially determine the existence and amount of the disputed claim.
    • Deadline: This petition must be filed within one month (an unalterable period - 不変期間 - fuhen kikan) from the Claim Investigation Hearing date (or from the date the creditor was notified of the objection if they were not present) (Bankruptcy Act, Article 125). Failure to file within this period typically results in the claim being disallowed to the extent of the objection.
  2. Court's Assessment Decision (査定決定 - Satei Kettei):
    The bankruptcy court will examine the disputed claim, considering evidence and arguments from the claimant and the objecting party (usually the trustee). The court then issues a judicial decision (an assessment ruling - satei kettei) determining the claim.
  3. Objection Lawsuit (異議の訴え - Igi no Uttae):
    If either the creditor or the party who objected to the claim is dissatisfied with the court's assessment decision, they can file an "Objection Lawsuit" (igi no uttae) within one month (an unalterable period) of being served with the assessment decision (Bankruptcy Act, Article 126). This lawsuit proceeds as a full civil trial before the bankruptcy court (though often handled by a different civil division of the court). The judgment in this lawsuit will then definitively establish the claim.

Claims with Existing Judgments or Enforceable Titles (有名義債権 - Yūmeigi Saiken):
If a creditor's claim is already supported by a final judgment or another instrument that is independently enforceable under Japanese law, and the trustee (or another creditor) objects to this claim in the bankruptcy proceedings, the procedure for resolving the dispute is different. The objecting party cannot simply force the creditor into the claim assessment process. Instead, the objector (e.g., the trustee) must generally initiate such legal proceedings as the debtor could have taken to challenge the original judgment or enforceable title (e.g., a petition for retrial, or an action to declare the non-existence or invalidity of the debt, if grounds exist) (Bankruptcy Act, Article 129).

Late Filing of Claims (期限後の債権届出)

While the claim filing period is strict, Japanese law does provide a limited window for late filings (Bankruptcy Act, Article 112). A claim can be filed after the deadline if:

  • The creditor was not at fault for the delay in filing.
  • The creditor files the claim within one month after the reason for the delay ceases to exist.
  • This late filing must occur before the trustee has prepared the final distribution plan or before a "no-distribution" decision is finalized.

Late-filed claims, if accepted, are typically examined at a "special claim investigation date" (特別調査期日 - tokubetsu chōsa kijitsu). The creditor who filed late may be required to bear the costs associated with convening this separate hearing.

Practical Advice for Creditors

  • Act Promptly: Upon learning of a Japanese counterparty's bankruptcy, gather all relevant documentation immediately.
  • Be Meticulous with the Proof of Claim: Ensure all information is accurate and complete, and that all supporting documents are clear and well-organized. Consider having Japanese translations for key documents if your originals are in another language.
  • Adhere Strictly to Deadlines: The claim filing deadline and the deadline for petitioning for claim assessment are critical.
  • Respond to Trustee Inquiries: If the trustee requests additional information or clarification, respond promptly and comprehensively.
  • Attend Creditors' Meetings (or be Represented): This is the best way to stay informed and ask direct questions.
  • Consider Local Legal Representation: For significant or complex claims, or if you are unfamiliar with the Japanese language and legal procedures, engaging experienced Japanese bankruptcy counsel is highly advisable. They can ensure your claim is properly filed, represent you at hearings, and navigate any disputes.

Conclusion

The process of filing and investigating claims in a Japanese bankruptcy proceeding is designed to be systematic and to ensure that all creditors have a fair opportunity to assert their rights. For creditors, particularly international ones, understanding these procedures – from accurately preparing and timely filing a proof of claim with comprehensive supporting documentation, to navigating the trustee's investigation and the mechanisms for resolving disputed claims – is essential for protecting their interests and maximizing their potential recovery from the bankrupt estate.