Security rights in bankruptcy: the right of reclamation

Unsecured creditor in bankruptcy

If, as a supplier, you do not have a security interest or preferential right, you will only be able to submit your claim as an unsecured creditor in the bankruptcy. In that case, it is uncertain whether you will recover any part of your claim. Payment to unsecured creditors will only occur once all estate claims (such as bankruptcy costs and the trustee’s fees) and preferential claims (such as those from the tax authorities) have been satisfied. Unfortunately, in many bankruptcies, there are insufficient funds in the estate to make any payment to unsecured creditors.

One way to reduce financial risks for you (or your company) is to agree on a retention of title. However, if you have not agreed to such a retention, there is another statutory right you may be able to invoke: the right of reclamation.

Rules on the right of reclamation

The right of reclamation does not need to be contractually agreed. In short, it allows the supplier to reclaim delivered goods if the purchase price has not been paid. However, certain conditions apply:

• The right of reclamation cannot be invoked if the delivered goods are no longer in the same condition as when supplied.
• The right cannot be invoked if the customer has already resold the goods and they are no longer in the original customer’s possession.
• If only part of the purchase price for a specific delivery has not been paid, only that specific part can be reclaimed.
• The right of reclamation has no effect if the purchase price is paid by the trustee within a reasonable period or if security is provided for this payment.

Invoking the right of reclamation

Strict deadlines apply when invoking the right of reclamation. The right expires if either six weeks have passed since the claim for payment of the purchase price became due, or sixty days have passed since the goods were stored on the customer’s side.

Should you wish to invoke the right of reclamation, it is crucial that you do so at the earliest opportunity.

More information

Are you looking for more information on what to keep in mind with the right of reclamation? Or do you need assistance with invoking it? Please feel free to contact us.