Checks Issued by Insolvent Debtor in Suspicion Period Between Exchange Provisions and Insolvency Law

An Analytical Study in Jordanian Legislation

Abstract

Article 245 of the Trade Law stipulates that "a check shall be payable upon viewing it, and any statement to the contrary shall be considered as if it did not exist." In relation, Article 33/A of the Jordanian Insolvency Law states that "the actions entered into by the debtor during the year preceding the date of declaration of insolvency shall be invalid" if it causes damage to the insolvency or grants unjustified preferential treatment to any of the debtor's creditors. Therefore, the insolvency agent can claim that it is not executed.  

Through the two articles mentioned above, the problem of the current study emerges, which is the extent of compatibility between these two articles and the impact of this on the issuance of the check from the insolvent debtor, its circulation, and the exchange relations arising from it during that period. 

The study is divided into two parts to address the mentioned problem. The first part deals with the exchange provisions governing the consideration for honoring the check. The second part examines the implications of the rule of non-enforcement of the insolvent debtor's actions on the check during the period preceding the declaration of insolvency (suspicion period).

 The study adopts the analytical approach to the provisions of the Jordanian Trade Law and the Jordanian Insolvency Law. The results conclude that as soon as the insolvent debtor issues the check, the consideration for fulfillment comes from their financial liability and enters the financial liability of the beneficiary or the bearer. Subsequently, this leads to the differentiation of legal provisions in stating that checks are included in the rules of non-enforcement of disposals, except where the provisions of the period preceding the date of declaration of insolvency period apply.