By Av. Serkan Kara, Istanbul Bar No. 53770. Last updated: 14 June 2026.
Bankruptcy and insolvency in Turkey are governed by the Enforcement and Bankruptcy Law No. 2004, which sets out who may be declared bankrupt, how creditors enforce claims, and the restructuring alternatives (concordat and postponement of bankruptcy) that let a viable but distressed company continue trading under court supervision. A bankruptcy lawyer maps a debtor or creditor onto the correct statutory pathway, protects priority ranking in the distribution order, and coordinates recognition where assets or creditors sit in more than one jurisdiction.
What is bankruptcy law and what does a bankruptcy lawyer do?
Bankruptcy law is the collective-enforcement regime under the Enforcement and Bankruptcy Law No. 2004 that resolves a debtor’s insolvency against all creditors at once, rather than claim by claim. A bankruptcy lawyer advises on which pathway applies (follow-up bankruptcy, direct bankruptcy, or concordat), drafts and contests filings before the execution courts, secures a client’s place in the statutory priority order, and defends directors against personal-liability exposure. The same counsel handles enforcement against specific assets where collective bankruptcy is not yet warranted.
Enforcement and bankruptcy matters fall within the jurisdiction of the execution courts, which supervise payment orders, objections, and the conduct of the bankruptcy estate. For pure single-claim recovery before any bankruptcy declaration, the work overlaps with enforcement and execution practice rather than collective bankruptcy.
What types of bankruptcy proceedings exist, and when does each apply?
The Enforcement and Bankruptcy Law No. 2004 provides several distinct routes into bankruptcy, each with its own trigger and applicant. Follow-up bankruptcy (Art. 155-166) follows an unpaid enforcement action; direct bankruptcy lets a creditor (Art. 177) or the debtor itself (Art. 178) ask the court to declare bankruptcy without a prior payment order in defined circumstances. Concordat (Art. 285-309) and postponement of bankruptcy (Art. 179/a) are restructuring tracks aimed at survival rather than liquidation.
| Pathway | Legal basis | Who can apply | Aim |
|---|---|---|---|
| Follow-up bankruptcy | Art. 155-166 | Creditor, after unpaid enforcement | Bankruptcy declaration |
| Direct bankruptcy (creditor) | Art. 177 | Creditor (debtor flight, fraud, hidden assets) | Immediate bankruptcy |
| Direct bankruptcy (debtor) | Art. 178 | Debtor (liabilities exceed assets) | Bankruptcy declaration |
| Concordat (restructuring) | Art. 285-309 | Debtor or creditor | Restructuring plan or bankruptcy |
| Postponement of bankruptcy | Art. 179/a | Capital company with recovery prospect | Recovery or bankruptcy |
Personal and corporate insolvency follow the same statute but diverge in consequences. An individual unable to meet obligations faces consensual or compulsory collection (wage garnishment, asset seizure, structured payment), with knock-on effects on credit standing. A capital company’s directors carry a statutory duty to file for bankruptcy or concordat protection within the period fixed by law once they recognise that liabilities exceed assets; a late or omitted filing can convert into personal liability under the Turkish Commercial Code No. 6102.
What is concordat and how does it differ from bankruptcy?
Concordat is the court-supervised restructuring procedure under Art. 285-309 of the Enforcement and Bankruptcy Law No. 2004 that lets an insolvent but viable debtor reorganise its debts instead of being liquidated. The debtor retains operational control under the oversight of a court-appointed concordat commissioner, the court grants a provisional moratorium, the commissioner prepares a financial assessment and a restructuring plan, and creditors vote on the proposal before the court approves and supervises it. If the concordat fails, the proceedings convert to bankruptcy.
The provisional moratorium runs for the statutory provisional period and can be extended within the limits set by law; confirm the current periods in force at the time of filing, as procedural durations are amended periodically. The practical sequence is: recognise insolvency, file within the statutory window, obtain a provisional moratorium and interim commissioner, circulate the restructuring plan, secure the creditor majority required by law, and obtain court confirmation.
| Feature | Concordat | Bankruptcy |
|---|---|---|
| Objective | Restructure and keep trading | Liquidate assets and distribute proceeds |
| Management control | Debtor retains control under commissioner oversight | Control passes to the bankruptcy trustee |
| Creditor recovery | Often higher (going-concern value) | Often lower (forced-sale value) |
| Employee impact | Employment may continue | Employment terminates with severance rights |
| Existing contracts | Generally continue | Trustee may assume or reject executory contracts |
What are creditor rights and the priority order in a bankruptcy distribution?
In a bankruptcy distribution under the Enforcement and Bankruptcy Law No. 2004, creditors are paid in a statutory priority order rather than equally. Secured creditors recover first from pledged or mortgaged assets (Art. 185); privileged claims such as employee wages and certain public claims rank ahead of ordinary unsecured creditors under the distribution scheme in Art. 206; unsecured commercial creditors and subordinated claims rank last. Knowing where a claim sits in this ranking is the single most important driver of expected recovery.
- Secured creditors: recover from pledged or mortgaged assets before general distribution (Art. 185).
- Employee claims: privileged status for wages and severance within the period fixed by Art. 206.
- Public claims: tax and social-security debts hold a privileged rank under Art. 206.
- Trade creditors: file claims within the announcement period and rank as ordinary unsecured creditors.
- Shareholders: last in line; typically receive nothing on liquidation.
- Right to challenge: creditors may contest the bankruptcy decision within the appeal period set by law.
Specific objection, claim-filing, and appeal deadlines are fixed by the statute and are amended from time to time; confirm the deadline in force when you file rather than relying on a remembered figure.
How does cross-border insolvency work for a multi-jurisdiction debtor?
Cross-border insolvency arises when a debtor holds assets or owes creditors in more than one country, and it turns on recognition of foreign proceedings, coordination of parallel cases, and choice of law. The UNCITRAL Model Law on Cross-Border Insolvency supplies a harmonised framework adopted by many jurisdictions, and foreign bankruptcy decisions may be recognised and enforced through domestic courts subject to reciprocity and public-policy limits. Recognition of foreign judgments in Turkey runs through the framework of the International Private and Procedural Law No. 5718.
- Recognition of foreign proceedings: domestic enforcement of a foreign bankruptcy decision, subject to reciprocity and public policy.
- Parallel proceedings: simultaneous cases in different jurisdictions needing coordination to avoid conflicting orders.
- Asset tracing: locating and recovering debtor assets abroad through mutual legal assistance and court-to-court cooperation.
- Foreign creditor claims: overseas creditors may participate in domestic proceedings on equal terms, subject to claim-filing and proof requirements.
- Choice of law: determining which jurisdiction’s substantive insolvency rules govern specific assets, contracts, or claims.
Where the underlying disputes are contractual, cross-border insolvency strategy often runs alongside our international arbitration work, and foreign investors structuring their exposure should also review the legal aspects of foreign investment in Turkey.
What personal-liability risks do directors face in an insolvency?
Directors of a capital company carry real personal-liability exposure once insolvency is in view. The duty to file for bankruptcy or concordat protection within the statutory period attaches as soon as the board recognises that liabilities exceed assets, and a late filing can expose directors to liability for damage suffered by creditors because of the delay. Exposure also arises from preferential payments to favoured creditors in the suspect period before bankruptcy and from failure to keep adequate books and records. Directors should take advice early; our corporate and commercial law team handles defensive strategy in distress scenarios.
Frequently asked questions
What is the difference between enforcement proceedings and bankruptcy?
Enforcement proceedings target specific debts and assets, letting a creditor collect an individual claim through wage garnishment, asset seizure, or a property sale. Bankruptcy is a collective proceeding that reaches all of the debtor’s assets and all creditors at once. Bankruptcy brings in a trustee, stays individual enforcement actions, and distributes proceeds according to the statutory priority order in the Enforcement and Bankruptcy Law No. 2004.
Can a debtor keep running the business during concordat?
Yes. A central advantage of concordat over bankruptcy is that the debtor retains control of operations, subject to oversight by a court-appointed commissioner who monitors transactions, checks compliance with the restructuring plan, and reports to the court. Certain steps, such as asset disposals, new borrowing, or granting guarantees, may require commissioner approval under Art. 285-309 of the Enforcement and Bankruptcy Law No. 2004.
What happens to employee rights when a company goes bankrupt?
Employee claims hold privileged status in the distribution. Wages and severance within the period fixed by Art. 206 of the Enforcement and Bankruptcy Law No. 2004 are paid ahead of most other creditor categories, and statutory wage-guarantee mechanisms can backstop unpaid wages where the estate falls short. Employment contracts are typically terminated on the bankruptcy declaration, which triggers severance and notice entitlements under labour law.
How are foreign creditors treated in a Turkish bankruptcy?
Foreign creditors can participate in domestic insolvency proceedings on equal terms with local creditors, provided they meet the procedural requirements for claim filing, documentation, and proof of debt. Where a foreign bankruptcy already exists, recognition runs through the domestic courts under the framework of the International Private and Procedural Law No. 5718, subject to reciprocity and public-policy review.
When should a creditor or debtor bring in an insolvency lawyer?
As early as possible. For a debtor, early counsel often surfaces a concordat or restructuring route that preserves the business and limits director liability before the statutory filing window closes. For a creditor, early advice protects priority ranking and the right to challenge transactions in the suspect period. Late engagement narrows the available pathways under the Enforcement and Bankruptcy Law No. 2004 and reduces expected recovery.
Talk to a cross-border insolvency lawyer
Whether you are a creditor protecting recovery or a company weighing concordat against liquidation, the right pathway under the Enforcement and Bankruptcy Law No. 2004 is decided early and on the facts. Serka Law Firm represents creditors, debtors, and directors across enforcement, bankruptcy, restructuring, and cross-border coordination. To start, review our debt collection and execution services or contact us to assess your file.
For related reading, see our guides on Turkish labour law and the power of attorney for cross-border matters.
General information, not legal advice. Turkish law; verify your specific situation with qualified counsel.
Related legal guides
- For related guidance, see our business law and corporate restructuring.