In December 1996 the Bankruptcy Act was amended to a considerable extent and said amendments have been in force since February 1, 1997.
Bankruptcy is defined as the insolvency of a debtor declared by a court order.
A debtor is considered insolvent if he is unable to satisfy the claims of creditors, and due to the financial situation of the debtor such inability is not temporary. Bankruptcy Proceeding A bankruptcy petition may be filed either by a creditor or the debtor. In case the petition has been filed by the debtor, he must provide evidence of his insolvency. The Bankruptcy Act has set forth several requirements that a petition filed by a creditor shall meet, e.g. a creditor is entitled to file a petition only when the debtor's insolvency was caused by activities punishable under penal law in case the debtor has departed from Estonia in order to elude the satisfaction of the claim, etc. Mere failure to pay a debt is not sufficient for filing a bankruptcy petition - according to the Bankruptcy Act, a creditor can file a bankruptcy petition after the debtor has failed to pay a debt within ten days after the expiry of the date for payment of debt, and the creditor has cautioned him of the creditor's intention to file a bankruptcy petition.