Thai Law Insights

Legal Dimensions of Automatic Stay: Some Aspects for Better Insight

Chansilp Laosiriwut/Sahawat Monprasert

After a reorganization petition filed with the Central Bankruptcy Court (“Court”) by a creditor, debtor and/or other government agency has been accepted on the Court’s docket, there is ‘an automatic moratorium’, regardless of whether any creditors or other persons concerned have acknowledged receipt thereof, thereby preventing, inter alia, creditors from pursuing claims against the debtor or commencing any proceedings against the debtor’s property, such as legal execution, company dissolution or, repossession of property.

A Person who is protected under an Automatic Moratorium:

The automatic moratorium provides protection to a debtor under reorganization, but not to other persons who may be held jointly liable for debt repayment; for example, a joint debtor or, guarantor. Please note when a parent company wishes to commence reorganization, the automatic moratorium shall not apply to its subsidiary company.

Stay of Proceedings or Moratoria:

When a reorganization petition is accepted to the Court's docket, there is an automatic moratorium on:

• Any action against the debtor in a civil case in respect of the debtor's property, if the obligation was accrued prior to the date the Court approved the plan. In this regard, a creditor must file his claim with the official receiver for debt repayment instead of filing a lawsuit against the debtor. However, if the debtor is accused of a criminal charge, the automatic stay shall not apply and, the investigation or criminal proceedings against the debtor may proceed. If the creditor intends to file a civil case against the debtor, the creditor must seek the Court's approval prior to filing such civil claim. Otherwise, the court shall not accept such claim.
• in respect of causes of action that accrued prior to the date the Court approved the plan, the filing of a civil action or the referral of a claim to arbitration. Any civil proceedings or arbitration that has been commenced are suspended.
• the filing of a bankruptcy petition.
• the enforcement of an award in respect of any judgment obtained prior to the date the Court approved the plan. Enforcement proceedings that have been initiated are suspended. However, the automatic moratorium shall not apply when the judgment creditor has arranged for the executing officer to seize property of the debtor several times and the seized property was sold at public auction. In this regard, the judgment creditor is entitled to obtain any proceeds derived from such auction. Nevertheless, the automatic moratorium still applies if it is in the process of public auction of seized property.
• secured creditors are prevented from enforcing claims against collateral unless the Court orders otherwise.
• a creditor who is entitled to enforce payment of debt legally by himself, such as a creditor due to tax payment.  He is prohibited from seizing or selling the property of the debtor.  

Prohibition on Automatic Moratorium:

Judgment, Court order or, an arbitral award shall not be binding upon the debtor.

Right of a Creditor:

A creditor whose right is restricted due to automatic moratorium may seek a Court order modifying the restriction. Please note that such modification shall be binding only upon the creditor involved.