The bankruptcy procedures in Estonia fall under the scope of Bankruptcy act and the aim of bankruptcy proceedings is to satisfy the claims of the creditors while still protecting the rights of the debtor. A debtor in bankruptcy proceedings may be an individual as well as a legal person. State or local Government agencies cannot be bankrupt.

The bankruptcy procedures commonly follow the provisions set in the code of civil procedure. Debtor is insolvent, if the debtor is not able to satisfy the claims of a creditor because of the financial situation of the debtor, and this situation is not temporary. Bankruptcy is declared by the court as insolvency of the debtor.  The jurisdiction lies with the county court of the relevant seat of the company indicated in the register.

The bankruptcy procedure is initiated via a bankruptcy petition, which may be filed either by the debtor themselves or by any creditor. If the petition is initiated by debtor, the debtor is presumed to be insolvent. The bankruptcy is declared also if debtor is not insolvent, but insolvency is likely to occur in the future. In case of petition by creditor, the debtor can challenge this claim by proving solvency or that insolvency is temporary.

The court will also appoint the interim trustee whose main tasks include, but are not limited to, determining the assets of the debtor and if these assets cover the costs of bankruptcy procedure; access the financial situation and solvency of the debtor and the prospect of continuing the business activities of debtor; and ensure preservation of the debtor’s assets. The Interim trustee also has obligations not stated by the bankruptcy act but which have been assigned by the court during the bankruptcy proceedings.