Bankruptcy Claims in the European Union: How They Work, and How Crypto Rules Are Changing the Game

Bankruptcy across the European Union is built on national legal systems, but as businesses and platforms go global, EU lawmakers have been steadily reshaping insolvency procedures to protect creditors, encourage business revival, and respond to modern challenges like digital finance.

In this post, we explore how insolvency and creditor claims work in the EU, how they are coordinated across borders, and how regulations like MiCA are changing the treatment of customer funds when crypto platforms fail.

Insolvency in the EU: A Shared Policy, Not a Single System

Unlike the United States, there is no unified EU bankruptcy code. Each of the 27 member states maintains its own insolvency laws, but two key frameworks help harmonize them:

• EU Insolvency Regulation (Recast): Assigns jurisdiction and ensures that proceedings in one member state are recognized throughout the bloc.
• EU Restructuring and Insolvency Directive (2019): Encourages efficiency, fairness, and a second-chance philosophy across national systems.

For example, a company based in France that becomes insolvent will see its French proceeding recognized by courts in Spain or Germany. A firm with offices in multiple EU states can be liquidated under one main proceeding.

Learn more: EU Insolvency Regulation (Recast).

Filing Claims: A Practitioner-Driven Process

Terminology varies between countries, with roles such as liquidator, administrator, or trustee. Nonetheless, most EU systems share the same structure:

• A court-appointed insolvency practitioner takes control of the process.
• Creditors are notified and must file claims by a set deadline.
• Claims are validated by the insolvency practitioner.
• The practitioner ranks claims and distributes assets according to national law.

This framework is common whether you are filing a claim in Austria, Italy, or Lithuania. In many jurisdictions, once the initial court ruling is issued, the remainder of the process is largely administrative.

Who Gets Paid First? A Look at EU Claim Priorities

The precise order varies, but most EU insolvency regimes follow a similar hierarchy:

• Employee wages and related claims.
• Social insurance and certain public claims, including unpaid taxes.
• Secured creditors, paid from the proceeds of collateral.
• General unsecured creditors such as suppliers, customers, and vendors.
• Subordinated claims, including fines or shareholder loans.

German insolvency law tends to treat unsecured debt equally while subordinating some shareholder claims. France emphasizes wage guarantees and court fees, and many countries, including Spain and Italy, prioritize employees and tax authorities in similar ways.

The Big Shift: What MiCA Means for Crypto and Digital Assets

Until recently, customers of crypto platforms in the EU had limited protections. If a platform failed, users were often treated like general creditors unless assets were segregated.

The Markets in Crypto-Assets Regulation (MiCA) changes that by requiring exchanges and custodians to segregate client assets. This creates traceable ownership, giving users a stronger basis to reclaim their assets in an insolvency.

As CoinDesk notes, ''MiCA's asset-segregation rules are directly aimed at preventing the kind of customer losses seen in FTX's collapse.''

Source: CoinDesk on MiCA.

Countries like Germany are already adjusting insolvency rules to reflect this shift, ensuring that crypto assets held for customers are returned before general creditors are paid.

What FTX Might Have Looked Like Under EU Rules

• Customer crypto would likely have been segregated and reclaimable.
• Assets would not have flowed into the general bankruptcy pool.
• Customers could have asserted legal ownership instead of unsecured creditor status.

Even before MiCA enforcement, many EU jurisdictions applied similar principles for regulated securities or custody services, pointing to a consistent trend toward protecting customer assets.

Key Takeaways

• The EU lacks a single bankruptcy system, but policy aims to harmonize efficiency and creditor protection.
• MiCA elevates customer protections in crypto platform failures by mandating asset segregation.
• Segregation of digital assets is fast becoming the default across the region.