Creditors secured by a special pledge can no longer enforce their pledge after the opening of insolvency proceedings of the pledgor
At the end of 2016 the rules on the most widely used type of pledge in Bulgaria (the so called “special pledge”, i.e. a pledge where the pledged assets remain in the possession of the pledgor) were changed. One of the changes restricts the possibility of the secured creditor to sell the pledged assets in a private enforcement sale.
Prior to the amendments the secured creditor was able to privately sell the pledged assets even after the opening of insolvency proceedings of the pledgor, regardless of whether the secured creditor had commenced the enforcement before that. After the amendments the secured creditor is no longer able to sell privately the pledged assets after the opening of insolvency proceedings of the pledgor, if the private sale did not start prior to the opening of the insolvency proceedings.
This reduces the flexibility of secured creditors to sell privately the pledged assets even after insolvency proceedings of the pledgor have been opened. Secured creditors should therefore commence private enforcement as soon as an insolvency petition against the pledgor is filed to be able to keep this option open for them. Hence, secured creditors should put in place a mechanism to follow regularly for insolvency petitions against their pledgers.
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