Compulsory settlement (dwangakkoord): forcing a creditor to accept

Yes, a Dutch court can force a refusing creditor to accept a debt settlement. For private individuals this is the compulsory settlement (dwangakkoord) under Article 287a of the Bankruptcy Act (Faillissementswet, Fw), granted only if the creditor’s refusal is unreasonable; companies use the WHOA instead.

A voluntary arrangement, in which creditors accept a percentage of their claim against a discharge of the rest, collapses the moment one creditor refuses. These two routes exist to overcome that refusal.

Can a court force a creditor to accept a settlement offer?

For natural persons, yes. Under Article 287a Fw, a debtor whose offer of a voluntary arrangement (buitengerechtelijk akkoord) is refused by one or more creditors can ask the District Court to order them to accept it.

The offer must come from a proper debt settlement process, usually run by the municipal debt assistance service or a credit bank (kredietbank), which documents the debtor’s income, debts and maximum repayment capacity.

What test does the court apply?

The court grants the request only if the creditor, weighing its own interests against those of the debtor and the other creditors, could not reasonably have refused. A creditor may in principle refuse a partial payment, so the debtor must show special circumstances.

Refusal is hard to justify where the offer is the maximum the debtor can pay, is properly documented, is accepted by the other creditors, and the creditor would receive the same or less in the statutory debt restructuring. Where the offer is thin, the documentation incomplete or the debtor’s conduct open to criticism, the creditor is entitled to hold out.

What if the court refuses to impose the settlement?

The request for a compulsory settlement is filed together with a request for admission to the statutory debt restructuring scheme for natural persons (wettelijke schuldsaneringsregeling natuurlijke personen, WSNP). If the court grants the compulsory settlement, the WSNP request lapses; if it refuses, the court can still decide on admission to the WSNP.

That way the debtor keeps a route out of the debts. The WSNP is a court-supervised scheme with an administrator, after whose successful completion the remaining debts can no longer be enforced.

Is there an equivalent instrument for businesses?

Yes, and it is more powerful. Since 1 January 2021, the WHOA (Wet homologatie onderhands akkoord), set out in Articles 369 to 387 Fw, allows a business that is likely to become insolvent to offer a restructuring plan to its creditors and shareholders, divided into classes, and to have the court confirm it.

Once confirmed, the plan binds dissenting creditors in a class that voted in favour, and can even bind a class that voted against, provided the WHOA safeguards are respected. One of these is that no creditor may receive less than it would in a bankruptcy liquidation.

How does the WHOA differ from the compulsory settlement?

The compulsory settlement only overcomes individual holdouts against an arrangement that other creditors support. The WHOA can write down claims, change shareholders’ rights and terminate onerous contracts, and it can bind entire classes of creditors and shareholders.

What should you check as a debtor?

Your request under Article 287a Fw stands or falls with the preparation:

• Whether the offer was prepared through a recognised debt assistance service or credit bank.
• Whether the offer is the maximum you can pay, supported by documents on income and expenses.
• Whether all creditors are treated equally in the offer.
• How many creditors accepted and what share of the total debt they represent.
• Whether you meet the conditions for the WSNP, in case the court refuses the compulsory settlement.

What should you check as a creditor?

Refusing on principle is rarely the strongest position. Specific, substantiated objections are:

• What your claim would realistically yield in a bankruptcy or the WSNP.
• Whether the offer is supported by verifiable financial information.
• Whether all creditors are treated equally, or some are paid outside the arrangement.
• Whether there are signs of undisclosed assets or income.
• Whether the debtor’s own conduct, such as recent new debts, justifies refusal.

What can we do for you with a compulsory settlement or WHOA?

We act for debtors, creditors and businesses in restructuring matters; see also our corporate lawyer page.

• We assess whether a creditor’s refusal can be overcome under Article 287a Fw.
• We draft the request to the District Court, together with the WSNP request.
• We draft a creditor’s substantiated objections and represent the creditor at the hearing.
• We assess whether a WHOA plan is feasible for your company and prepare the class structure.
• We test a WHOA plan presented to you against the statutory safeguards.

Summary

• A voluntary arrangement fails if one creditor refuses; Dutch law offers two ways to overcome that.
• Natural persons can ask for a compulsory settlement under Article 287a Fw, granted only if the refusal is unreasonable.
• That request is filed together with a WSNP request, so the debtor keeps a route out if it fails.
• Businesses can use the WHOA (Articles 369-387 Fw, since 1 January 2021) to bind entire classes of creditors.
• Creditors are better placed with specific, substantiated objections than with an unexplained refusal.

Frequently asked questions