This is the English version of a Turkish article. The original, with further detail and linked petition templates, is at Konkordato Nedir? Borçlu ve Alacaklı Açısından Sonuçları.
Composition with creditors allows a debtor who cannot pay, or is at risk of not being able to pay, to restructure their debts by agreement with their creditors under the supervision of the court (Articles 285 and following of the Enforcement and Bankruptcy Act). On an application the court first grants a provisional moratorium: from that moment no enforcement can be brought against the debtor and existing proceedings are stayed.
Composition is a restructuring institution offering an honest debtor the chance to reach a court-supervised settlement with creditors, binding once the court confirms it. Since the abolition of bankruptcy postponement in 2018 it has become the principal route, and many companies now use it.
It produces serious consequences for both sides. This article covers who may apply, the two stages of moratorium, the effect on creditors, and the routes of challenge.
Who May Apply?
- Only the debtor. Any debtor, merchant or not, who cannot pay their debts as they fall due or is at risk of that may apply. Creditors cannot apply; the right belongs to the debtor alone.
- Honesty. The debtor must not have committed acts amounting to offences such as concealing assets or fraudulent bankruptcy. The court assesses whether the application rests on an honest purpose.
- Proof of financial difficulty. The debtor must show concretely, with the latest balance sheet, cash flow statements and lists of assets and liabilities, that they cannot meet their payments. A bare assertion is not enough.
- The court. The application is made to the commercial court of first instance. For debtors who are not merchants, the civil court of first instance has jurisdiction.
- Those not subject to bankruptcy — tradespeople and individual debtors — may also apply, with some procedural differences.
The Provisional and Definitive Moratoriums
The process rests on a two-stage moratorium during which the debtor is protected from enforcement and gains time to prepare a plan.
- Provisional moratorium. If the court considers the application justified it grants a moratorium of three months, extendable by up to two months where necessary. It appoints a commissioner, who supervises the debtor's transactions, and enforcement proceedings are stayed.
- Definitive moratorium. Before the provisional period expires the court may, on the commissioner's report, grant a definitive moratorium of one year, extendable by up to six months on a reasoned application. During it no new enforcement may be brought and existing proceedings are stayed.
- Secured creditors. They are not affected in the same way: as a rule enforcement against pledged assets may continue, though the court may make orders about this too.
- The commissioner's role. The court-appointed commissioner supervises the debtor's business decisions and reports monthly. The debtor may not carry out significant transactions without approval, and an adverse report can lead to the moratorium being lifted.
“Any debtor who cannot pay their debts as they fall due, or who is at risk of falling into that position, may request time to pay or payment by instalments.” — Enforcement and Bankruptcy Act, Article 285/1
| Stage | Duration | Effect |
|---|---|---|
| Application | — | Filed by the debtor with financial documents |
| Provisional moratorium | 3 months (+2) | Enforcement stayed; a commissioner appointed |
| Definitive moratorium | 1 year (+6 months) | The plan is prepared and put to the creditors |
| Creditors' vote | Within the moratorium | The majorities the Act prescribes are required |
| Confirmation by the court | — | The plan binds all creditors within its scope |
| Refusal | — | Bankruptcy may follow for a debtor subject to it |
Secured creditors are affected differently: enforcement against pledged assets may as a rule continue.
What Should a Creditor Do?
For a creditor, a moratorium means enforcement stops — but not that the claim disappears. What to do:
- Notify the claim. Register it with the commissioner within the period announced; a claim not notified may fall outside the plan.
- Check the classification. Whether the claim has been recorded as secured, privileged or ordinary decides how much is recovered.
- Take part in the creditors' committee where one is formed, and in the vote on the plan.
- Object to confirmation where the plan is not feasible, the figures are unrealistic, or the debtor has acted dishonestly.
- Watch for dispositions made before the moratorium: transfers to relatives may be attacked by an action to set aside a disposition.
Where a plan is confirmed it binds all creditors within its scope, including those who voted against. That is why participating in the process matters more than waiting it out.
If the Composition Fails
Where the court refuses to confirm the plan, the moratorium ends and enforcement can resume. For a debtor subject to bankruptcy, the court may declare bankruptcy at the same time where the conditions are met.
Where a confirmed plan is not complied with, a creditor may apply for the composition to be set aside as regards their own claim, and may then enforce for the original amount.
For a creditor, the critical step is not opposing the moratorium but registering the claim with the commissioner in time and checking how it has been classified. A confirmed plan binds every creditor within its scope, including those who voted against it — so the classification decides what you actually recover.
Frequently Asked Questions
Who can apply for a composition?
Only the debtor — whether or not a merchant — who cannot pay their debts as they fall due or is at risk of that. Creditors cannot apply.
What does the moratorium do?
It stays enforcement against the debtor. The provisional moratorium runs three months (extendable by two) and the definitive one year (extendable by six months).
Does it affect secured creditors?
Less so. As a rule enforcement against pledged assets may continue, though the court may make orders about it.
What should I do as a creditor?
Register your claim with the commissioner within the period announced, check how it has been classified, take part in the vote, and object to confirmation if the plan is not feasible.
What happens if the plan is not confirmed?
The moratorium ends and enforcement resumes. For a debtor subject to bankruptcy, the court may declare bankruptcy where the conditions are met.