Bankruptcy and Business Rehabilitation in Thailand
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The Two Routes
Bankruptcy is a collective enforcement process. Once the court makes an absolute receivership order, the debtor loses control of their assets, an official receiver takes over, the assets are realised, and the proceeds are distributed among creditors according to statutory priorities.
Business rehabilitation is the opposite in purpose. It exists to save a viable business that is temporarily unable to pay. The business continues operating, a plan preparer and then a plan administrator take over management, and creditors are paid according to a plan approved by the court.
Both are heard by the Central Bankruptcy Court.
When a Creditor Can Petition for Bankruptcy
A creditor may petition to have a debtor adjudged bankrupt where three conditions are met. The debtor must be insolvent. The debt owed to the petitioning creditor or creditors must be at least one million baht for an individual debtor, or at least two million baht for a juristic person. And the debt must be capable of being determined with certainty, whether it falls due immediately or in the future.
A secured creditor faces additional requirements. Such a creditor may petition only if it is not barred from enforcing against assets beyond the security itself, and it either states in the petition that it will surrender the security for the benefit of all creditors, or values the security in the petition and shows that, after deduction, a shortfall of at least the same thresholds remains.
The Presumptions of Insolvency
Proving insolvency directly is difficult, so the Act provides a list of situations in which insolvency is presumed. These include transferring assets or the management of assets for creditors' benefit; transferring or delivering assets by sham or fraudulent means; creating rights over assets that would amount to a preference; acting to delay payment or prevent creditors from being paid, including leaving or remaining outside the Kingdom, leaving or hiding at the usual residence, closing the place of business, moving assets beyond the court's reach, or submitting to a judgment for money not properly owed; being subject to a seizure under a writ of execution, or having no assets that can be seized; stating in any case before a court that they cannot pay; notifying a creditor that they cannot pay; proposing a composition to two or more creditors; and, importantly for practitioners, having received at least two demand letters from a creditor, sent at least thirty days apart, without paying.
That last presumption is the one that shapes practice. Two properly spaced, properly documented demand letters do a great deal of work in a bankruptcy petition, which is why the timing and record of demands matter from the outset.
What Happens on a Receivership Order
Once the court orders receivership, the official receiver alone has the power to manage and dispose of the debtor's assets or do what is necessary to complete the debtor's outstanding business, to collect and receive money or property due to the debtor from others, and to compromise, sue, or defend any case concerning the debtor's assets.
For a creditor this is the point at which individual enforcement ends and collective distribution begins. For a debtor it is the point at which control of the business is lost.
Discharge: Bankruptcy Is Not Permanent
An individual adjudged bankrupt is discharged automatically once three years have passed from the date of the bankruptcy judgment, subject to extensions.
The period extends to five years where the person was previously adjudged bankrupt and less than five years had passed from that earlier judgment to the later absolute receivership order. It extends to ten years for a dishonest bankrupt, although where there are special reasons and at least five years have passed, the court may discharge earlier on the application of the official receiver or the bankrupt. It also extends to ten years where the bankruptcy arose from or was connected with public borrowing fraud. Where more than one ground applies, only the longest single period is used.
For foreign creditors, the practical implication is that bankruptcy is a pressure mechanism and a collective realisation process, not a permanent punishment, and the value of a petition lies in the leverage and the realisation of assets rather than in indefinitely disabling the debtor.
Business Rehabilitation and the Automatic Stay
Rehabilitation is where the commercial stakes are highest, because of what happens the moment the court accepts the petition for consideration.
From that date until the plan period expires, the plan is successfully implemented, or the court dismisses the petition, strikes out the case, cancels the rehabilitation order, or makes an absolute receivership order, a wide statutory moratorium applies.
Under it, no one may sue or apply to dissolve the debtor juristic person, and existing such cases are stayed. The registrar may not dissolve it and it cannot be dissolved by other means. Regulators may not revoke the debtor's operating licence or order it to cease business without the court's permission. No one may sue the debtor in a civil case concerning its assets, or refer a dispute to arbitration, where the cause of action arose before the plan approval date, and no one may petition to bankrupt the debtor; existing cases and arbitrations are stayed. Judgment creditors may not enforce against the debtor's assets where the judgment debt arose before plan approval, and existing enforcement is stayed.
Secured creditors are also caught. They may not enforce against the security without the court's permission, or until one year has passed from the date the court accepted the petition, a period the court may extend twice by up to six months each.
Owners of essential assets under hire purchase, conditional sale, or continuing lease arrangements may not repossess them or sue on those contracts, unless the debtor defaults on two consecutive payments or commits a material breach after the rehabilitation order. The debtor may not dispose of, transfer, lease, pay debts, incur debts, or encumber assets beyond what is necessary for ordinary trading. Existing provisional attachment orders may be suspended or varied. And utility providers such as electricity, water, and telephone may not cut off service, subject to court permission or two consecutive unpaid bills after the order.
Anything done contrary to these provisions is void, and a judgment, court order, or arbitral award that conflicts with them does not bind the debtor.
For a creditor, the consequence is blunt: once a rehabilitation petition is accepted, ordinary recovery stops. Creditors who suspect a debtor is heading for rehabilitation should take advice on timing well before that point.
Who Can Seek Rehabilitation
Rehabilitation has its own debt thresholds, which are higher than for bankruptcy and scale with the type of debtor, beginning at two million baht for an individual debtor and three million baht for most juristic persons. Separate provisions govern rehabilitation for smaller businesses, with their own thresholds and a streamlined process.
Management During Rehabilitation
Where the court orders rehabilitation but no plan preparer has yet been appointed, the existing management's authority over the business and assets ends. The court appoints an interim executive, who may be the existing management or another person, to manage the business under the official receiver's supervision until a plan preparer is appointed. Where no interim executive can be appointed, the official receiver manages temporarily.
The rehabilitation order is published in the Royal Gazette and in at least two widely circulated daily newspapers, and notified to the registrar and relevant regulators.
The Effect of Successful Rehabilitation
Where the court cancels the rehabilitation because the plan has been performed, the debtor is released from all debts that could have been claimed in the rehabilitation, except debts for which a creditor entitled to claim actually filed a claim. Management regains authority over the business and assets, shareholders regain their rights, and the remuneration of the interim executive, plan preparer, and plan administrator, along with debts they incurred for the purposes of the rehabilitation other than tort debts, become preferential claims over all the debtor's assets, ranking with the first preferential class under the Civil and Commercial Code.
The message for creditors is direct. File your claim in the rehabilitation. A creditor who does not may find the debt extinguished.
Practical Advice for Creditors
Document demands carefully and space them at least thirty days apart, because two unanswered demands build a presumption of insolvency. Assess early whether the debtor is a rehabilitation candidate, since the stay will freeze your options. If you hold security, understand that rehabilitation suspends enforcement for at least a year and plan accordingly. File your claim within the process rather than outside it. And take advice on whether a bankruptcy petition is the right tool, since its main value is often the pressure it creates rather than the eventual distribution.
Practical Advice for Debtors
Rehabilitation is only available to businesses with a realistic prospect of recovery, and the stay is powerful but temporary. Take advice before the position deteriorates to the point where liquidation is the only option, keep accounting records in order because they will be scrutinised, and be aware that conduct such as moving assets beyond the court's reach or submitting to judgments not properly owed creates presumptions of insolvency and can affect discharge.
Frequently Asked Questions
How much debt is needed to petition for bankruptcy?
At least one million baht for an individual debtor and two million baht for a juristic person, together with insolvency and a debt capable of being determined with certainty.
What happens to my lawsuit if the debtor enters rehabilitation?
It is stayed. Civil claims concerning the debtor's assets where the cause of action arose before plan approval cannot proceed, and existing cases and arbitrations are suspended unless the court orders otherwise.
I hold a mortgage. Can I still enforce?
Not immediately. During rehabilitation a secured creditor may not enforce against the security without the court's permission or until one year from the date the court accepted the petition, extendable twice by up to six months.
How long does bankruptcy last for an individual?
Discharge is automatic three years after the bankruptcy judgment in the ordinary case, extending to five or ten years in the circumstances the Act specifies.
Do I lose my debt if I do not file a claim in the rehabilitation?
Potentially yes. Cancellation of the rehabilitation releases the debtor from debts that could have been claimed, except those for which a claim was actually filed.
Speak to a Thai Insolvency Lawyer
Bankruptcy and rehabilitation are timing-driven, and the difference between acting before and after a petition is accepted can decide whether a debt is recovered at all. Our bilingual lawyers advise creditors on demand strategy, bankruptcy petitions, and claims in rehabilitation proceedings, and advise debtors and businesses on restructuring options before the position becomes irreversible. Contact us while options remain open.
Disclaimer
This article provides general legal information only and does not constitute legal advice. Insolvency thresholds, remedies, and outcomes depend on the facts of each case. Please consult a licensed Thai attorney before taking action.
Bankruptcy is a collective enforcement process. Once the court makes an absolute receivership order, the debtor loses control of their assets, an official receiver takes over, the assets are realised, and the proceeds are distributed among creditors according to statutory priorities.
Business rehabilitation is the opposite in purpose. It exists to save a viable business that is temporarily unable to pay. The business continues operating, a plan preparer and then a plan administrator take over management, and creditors are paid according to a plan approved by the court.
Both are heard by the Central Bankruptcy Court.
When a Creditor Can Petition for Bankruptcy
A creditor may petition to have a debtor adjudged bankrupt where three conditions are met. The debtor must be insolvent. The debt owed to the petitioning creditor or creditors must be at least one million baht for an individual debtor, or at least two million baht for a juristic person. And the debt must be capable of being determined with certainty, whether it falls due immediately or in the future.
A secured creditor faces additional requirements. Such a creditor may petition only if it is not barred from enforcing against assets beyond the security itself, and it either states in the petition that it will surrender the security for the benefit of all creditors, or values the security in the petition and shows that, after deduction, a shortfall of at least the same thresholds remains.
The Presumptions of Insolvency
Proving insolvency directly is difficult, so the Act provides a list of situations in which insolvency is presumed. These include transferring assets or the management of assets for creditors' benefit; transferring or delivering assets by sham or fraudulent means; creating rights over assets that would amount to a preference; acting to delay payment or prevent creditors from being paid, including leaving or remaining outside the Kingdom, leaving or hiding at the usual residence, closing the place of business, moving assets beyond the court's reach, or submitting to a judgment for money not properly owed; being subject to a seizure under a writ of execution, or having no assets that can be seized; stating in any case before a court that they cannot pay; notifying a creditor that they cannot pay; proposing a composition to two or more creditors; and, importantly for practitioners, having received at least two demand letters from a creditor, sent at least thirty days apart, without paying.
That last presumption is the one that shapes practice. Two properly spaced, properly documented demand letters do a great deal of work in a bankruptcy petition, which is why the timing and record of demands matter from the outset.
What Happens on a Receivership Order
Once the court orders receivership, the official receiver alone has the power to manage and dispose of the debtor's assets or do what is necessary to complete the debtor's outstanding business, to collect and receive money or property due to the debtor from others, and to compromise, sue, or defend any case concerning the debtor's assets.
For a creditor this is the point at which individual enforcement ends and collective distribution begins. For a debtor it is the point at which control of the business is lost.
Discharge: Bankruptcy Is Not Permanent
An individual adjudged bankrupt is discharged automatically once three years have passed from the date of the bankruptcy judgment, subject to extensions.
The period extends to five years where the person was previously adjudged bankrupt and less than five years had passed from that earlier judgment to the later absolute receivership order. It extends to ten years for a dishonest bankrupt, although where there are special reasons and at least five years have passed, the court may discharge earlier on the application of the official receiver or the bankrupt. It also extends to ten years where the bankruptcy arose from or was connected with public borrowing fraud. Where more than one ground applies, only the longest single period is used.
For foreign creditors, the practical implication is that bankruptcy is a pressure mechanism and a collective realisation process, not a permanent punishment, and the value of a petition lies in the leverage and the realisation of assets rather than in indefinitely disabling the debtor.
Business Rehabilitation and the Automatic Stay
Rehabilitation is where the commercial stakes are highest, because of what happens the moment the court accepts the petition for consideration.
From that date until the plan period expires, the plan is successfully implemented, or the court dismisses the petition, strikes out the case, cancels the rehabilitation order, or makes an absolute receivership order, a wide statutory moratorium applies.
Under it, no one may sue or apply to dissolve the debtor juristic person, and existing such cases are stayed. The registrar may not dissolve it and it cannot be dissolved by other means. Regulators may not revoke the debtor's operating licence or order it to cease business without the court's permission. No one may sue the debtor in a civil case concerning its assets, or refer a dispute to arbitration, where the cause of action arose before the plan approval date, and no one may petition to bankrupt the debtor; existing cases and arbitrations are stayed. Judgment creditors may not enforce against the debtor's assets where the judgment debt arose before plan approval, and existing enforcement is stayed.
Secured creditors are also caught. They may not enforce against the security without the court's permission, or until one year has passed from the date the court accepted the petition, a period the court may extend twice by up to six months each.
Owners of essential assets under hire purchase, conditional sale, or continuing lease arrangements may not repossess them or sue on those contracts, unless the debtor defaults on two consecutive payments or commits a material breach after the rehabilitation order. The debtor may not dispose of, transfer, lease, pay debts, incur debts, or encumber assets beyond what is necessary for ordinary trading. Existing provisional attachment orders may be suspended or varied. And utility providers such as electricity, water, and telephone may not cut off service, subject to court permission or two consecutive unpaid bills after the order.
Anything done contrary to these provisions is void, and a judgment, court order, or arbitral award that conflicts with them does not bind the debtor.
For a creditor, the consequence is blunt: once a rehabilitation petition is accepted, ordinary recovery stops. Creditors who suspect a debtor is heading for rehabilitation should take advice on timing well before that point.
Who Can Seek Rehabilitation
Rehabilitation has its own debt thresholds, which are higher than for bankruptcy and scale with the type of debtor, beginning at two million baht for an individual debtor and three million baht for most juristic persons. Separate provisions govern rehabilitation for smaller businesses, with their own thresholds and a streamlined process.
Management During Rehabilitation
Where the court orders rehabilitation but no plan preparer has yet been appointed, the existing management's authority over the business and assets ends. The court appoints an interim executive, who may be the existing management or another person, to manage the business under the official receiver's supervision until a plan preparer is appointed. Where no interim executive can be appointed, the official receiver manages temporarily.
The rehabilitation order is published in the Royal Gazette and in at least two widely circulated daily newspapers, and notified to the registrar and relevant regulators.
The Effect of Successful Rehabilitation
Where the court cancels the rehabilitation because the plan has been performed, the debtor is released from all debts that could have been claimed in the rehabilitation, except debts for which a creditor entitled to claim actually filed a claim. Management regains authority over the business and assets, shareholders regain their rights, and the remuneration of the interim executive, plan preparer, and plan administrator, along with debts they incurred for the purposes of the rehabilitation other than tort debts, become preferential claims over all the debtor's assets, ranking with the first preferential class under the Civil and Commercial Code.
The message for creditors is direct. File your claim in the rehabilitation. A creditor who does not may find the debt extinguished.
Practical Advice for Creditors
Document demands carefully and space them at least thirty days apart, because two unanswered demands build a presumption of insolvency. Assess early whether the debtor is a rehabilitation candidate, since the stay will freeze your options. If you hold security, understand that rehabilitation suspends enforcement for at least a year and plan accordingly. File your claim within the process rather than outside it. And take advice on whether a bankruptcy petition is the right tool, since its main value is often the pressure it creates rather than the eventual distribution.
Practical Advice for Debtors
Rehabilitation is only available to businesses with a realistic prospect of recovery, and the stay is powerful but temporary. Take advice before the position deteriorates to the point where liquidation is the only option, keep accounting records in order because they will be scrutinised, and be aware that conduct such as moving assets beyond the court's reach or submitting to judgments not properly owed creates presumptions of insolvency and can affect discharge.
Frequently Asked Questions
How much debt is needed to petition for bankruptcy?
At least one million baht for an individual debtor and two million baht for a juristic person, together with insolvency and a debt capable of being determined with certainty.
What happens to my lawsuit if the debtor enters rehabilitation?
It is stayed. Civil claims concerning the debtor's assets where the cause of action arose before plan approval cannot proceed, and existing cases and arbitrations are suspended unless the court orders otherwise.
I hold a mortgage. Can I still enforce?
Not immediately. During rehabilitation a secured creditor may not enforce against the security without the court's permission or until one year from the date the court accepted the petition, extendable twice by up to six months.
How long does bankruptcy last for an individual?
Discharge is automatic three years after the bankruptcy judgment in the ordinary case, extending to five or ten years in the circumstances the Act specifies.
Do I lose my debt if I do not file a claim in the rehabilitation?
Potentially yes. Cancellation of the rehabilitation releases the debtor from debts that could have been claimed, except those for which a claim was actually filed.
Speak to a Thai Insolvency Lawyer
Bankruptcy and rehabilitation are timing-driven, and the difference between acting before and after a petition is accepted can decide whether a debt is recovered at all. Our bilingual lawyers advise creditors on demand strategy, bankruptcy petitions, and claims in rehabilitation proceedings, and advise debtors and businesses on restructuring options before the position becomes irreversible. Contact us while options remain open.
Disclaimer
This article provides general legal information only and does not constitute legal advice. Insolvency thresholds, remedies, and outcomes depend on the facts of each case. Please consult a licensed Thai attorney before taking action.
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