What is pro rata distribution?
In bankruptcies, creditors are divided into two categories:
- Preferential creditors: They have priority in payment and can claim their debts before other creditors (for example, the tax authorities and social security/NSSO).
- Ordinary creditors: They do not have any special priority and share in what remains after the preferential creditors have been paid.
The principle of pro rata distribution means that all creditors within the same category receive the same percentage of their claim until the available assets are exhausted.
The distribution of the attachable portion is carried out by the bailiff in proportion to the original amount of each claim. This ensures that each creditor receives a fair share of the available funds based on their specific claim.
Example 1 – Distribution among creditors in the same category
Suppose there is €60.000 to be distributed between two creditors in the same category:
- Creditor A: claim of €40.000
- Creditor B: claim of €60.000
Distribution:
- Creditor A holds 40% of the total debt (€40.000 out of €100.000). They therefore receive 40% of €60.000, i.e. €24.000. (40.000/(40.000 + 60.000)) x 60.000 = € 24.000
- Creditor B holds 60% of the total debt (€60.00 out of €100.000). They therefore receive 60% of €60.000, i.e. €36.000. (60.000/(40.000 + 60.000)) x 60.000 = € 36.000
This results in creditor A receiving €24.000 and creditor B receiving €36.000 from the available assets.
Priority of preferential creditors
There are exceptions to the principle of proportional distribution. Preferential creditors are paid first.
If one of the creditors is a preferential creditor (such as the tax authorities), they are paid first. This means that in cases where preferential and ordinary creditors compete, the preferential creditor takes priority.
Example 2 – Distribution among ordinary and preferential creditors
Suppose there is €50.000 to be distributed among the following creditors:
- Preferential creditor (tax authorities): claim of €30.000
- Ordinary creditor A: claim of €70.000
- Ordinary creditor B: claim of €50.000
Distribution:
- Preferential creditor: the tax authorities have priority and receive their full claim of €30.000.
- Remaining amount: after payment to the tax authorities, €20.000 remains to be distributed among the ordinary creditors.
Proportional distribution among ordinary creditors:
- Ordinary creditor A has a claim of €70.000, which corresponds to 58,33% of the total ordinary debts (€70.000 + €50.000). A therefore receives 58,33% of €20.000, or €11.666.67.
- Ordinary creditor B has a claim of €50.000, or 41,67% of the total ordinary debts. B therefore receives 41,67% of €20.000, or €8.333,33.
Result:
- Preferential creditor receives €30.000.
- Ordinary creditor A receives €11.666,67.
- Ordinary creditor B receives €8.333,33.
Note on privileges
To benefit from their preferential status, the seizing creditor must assert their privilege. If they do not, they will be treated as an ordinary creditor.
In practice, preferential creditors almost always do this, as it increases their chances of repayment.
Act quickly on unpaid invoices
In the event of bankruptcy in Belgium, the distribution process of available assets is essential to ensure fairness among creditors. The principle of pro rata distribution ensures that creditors of the same rank are treated proportionally, while preferential creditors enjoy payment priority.
Of course, as a creditor, you want to avoid bankruptcy and be paid on time. Don’t let unpaid invoices linger. If your client does not respond to reminders or calls, contact Unpaid, and we will take immediate action!