Bankruptcy Act

If an order commencing bankruptcy proceedings is issued against an estate, an heir's creditors may not exercise their rights as bankruptcy creditors.

For the purpose of application of the provisions of Chapter VI, Section 2, when an order commencing bankruptcy proceedings is issued against an estate, an act conducted by the decedent, an heir, an administrator of the estate, liquidator of the estate, or an executor with respect to the estate is deemed to have been conducted by the bankrupt.

If an order commencing bankruptcy proceedings is issued against an estate, if an act concerning the provision of security or extinguishment of debt to a legatee would prejudice a bankruptcy creditor that holds a claim that takes precedence over the legatee's claim, the act may be avoided.

The provisions of Article 167, paragraph (2) apply mutatis mutandis when the act stated in the preceding paragraph is avoided pursuant to the provisions of that paragraph. In this case, the phrase "that the act would prejudice a bankruptcy creditor" in Article 167, paragraph (2) is deemed to be replaced with "that the act would prejudice a bankruptcy creditor stated in Article 235, paragraph (1)".

If an order commencing bankruptcy proceedings is issued against an estate, when an act conducted by the decedent, an heir, an administrator of an estate, a liquidator of the estate, or an executor with regard to the estate is avoided, a bankruptcy trustee must distribute residual assets to the other party to the avoided act, in accordance with the value of the other party's right after making payment to the creditors of the succession.

A petition referred to in Article 218, paragraph (1) with regard to bankruptcy of an estate is to be filed by an heir.

If there are two or more heirs, each heir may file the petition referred to in the preceding paragraph.

If inheritance commences with regard to the bankrupt before an order commencing bankruptcy proceedings is made, unconditional acceptance of inheritance made by the bankrupt after an order commencing bankruptcy proceedings is issued has the effect of qualified acceptance vis-à-vis the bankruptcy estate. The same applies to renunciation of inheritance made by the bankrupt after an order commencing bankruptcy proceedings is issued.

A bankruptcy trustee may acknowledge the effect of renunciation of inheritance notwithstanding the provisions of the second sentence of the preceding paragraph. In this case, a bankruptcy trustee must submit a statement to the family court to that effect within three months after they came to know that the inheritance had been renounced.

An order commencing bankruptcy proceedings against an heir does not preclude qualified acceptance or division of property; provided, however, that if no heir other than the heir in question has the authority to conduct acts necessary for the payment of debts with regard to the estate, the procedures for qualified acceptance or division of property is suspended until an order of reversal of the order commencing bankruptcy proceedings or an order of discontinuance of bankruptcy proceedings becomes final and binding, or an order of completion of bankruptcy proceedings is issued.

If an order commencing bankruptcy proceedings is issued against an heir, even when division of property is made or an order commencing bankruptcy proceedings is issued against the estate, a creditor of the succession and a legatee may participate in the bankruptcy proceedings with regard to the entire amount of their claims.

If an order commencing bankruptcy proceedings is issued against an heir and an order commencing bankruptcy proceedings is issued against the estate, with regard to the heir's bankruptcy estate, claims held by the heir's creditors have precedence over the claims held by a creditor of the succession and a legatee.

If an order commencing bankruptcy proceedings is issued against an heir based on a petition to commence bankruptcy proceedings filed within the period prescribed in Article 225, claims held by the heir's creditors against the heir's own property have precedence over claims held by a creditor of the succession and a legatee, and claims held by a creditor of the succession and a legatee against the estate have precedence over claims held by the heir's creditors.

If an order commencing bankruptcy proceedings is issued against an heir and the heir has made qualified acceptance, a creditor of the succession and a legatee may not exercise their rights over the heir's own property as bankruptcy creditors. The same applies when unconditional acceptance of inheritance has the effect of qualified acceptance pursuant to the provisions of Article 238, paragraph (1).

A creditor of the succession or a legatee may participate in bankruptcy proceedings with regard to the amount of the claims at the time before receiving the payment, by exercising their rights in the procedures for qualified acceptance or division of property, even when they have received payment of their bankruptcy claims after an order of commencement bankruptcy proceedings is issued against an heir. The same applies when an heir's creditor has received payment of their bankruptcy claim after an order commencing bankruptcy proceedings is made against the heir by exercising their right in the procedure for division of property.

The creditor of the succession or legatee, or heir's creditor referred to in the preceding paragraph may not receive a distribution through bankruptcy proceedings until any other bankruptcy creditor with the same priority as them receives a distribution of the same proportion of payment as they have received (if there are two or more heirs, the payment is limited to the part corresponding to the inheritance share of the heir that has received the order commencing bankruptcy proceedings; the same applies in the following paragraph).

The creditor of the succession or legatee, or heir's creditor referred to in paragraph (1) may not exercise their voting rights with regard to the amount of the claims for which they received payment under the preceding paragraph.

After an order commencing bankruptcy proceedings is made against an heir, if the heir has made qualified acceptance or division of property has been conducted with regard to the heir, a bankruptcy trustee must administer and dispose of the estate separately from the heir's own property. The same applies if an order commencing bankruptcy proceedings is made against an heir after qualified acceptance was made or division of property was conducted.

If there are any residual assets after a bankruptcy trustee has completed the administrative work and disposal of the estate pursuant to the provisions of the preceding paragraph, the part of the residual assets that should belong to the heir is deemed to be heir's own property. In this case, a bankruptcy trustee must supplement the bankruptcy estate's inventory of assets and balance sheet with regard to the residual assets.

The provisions of the first sentence of paragraph (1) and the preceding paragraph apply mutatis mutandis if unconditional acceptance has the effect of qualified acceptance pursuant to the provisions of Article 238, paragraph (1) and the case referred to in Article 240, paragraph (3).

The provisions of the preceding Section apply mutatis mutandis if an order commencing bankruptcy proceedings is issued against a universal legatee.

If a particular legacy was given to a bankrupt before an order commencing bankruptcy proceedings is issued, when the bankrupt has not accepted or renounced the legacy at the time the order is issued, a bankruptcy trustee may accept or renounce the legacy on behalf of the bankrupt.

The provisions of Article 987 of the Civil Code apply mutatis mutandis in the case referred to in the preceding paragraph.