This master’s thesis analyzes the possibilities and limitations regarding litigation funding in the area of insolvency.

If a bankruptcy estate lacks sufficient funds to start or complete a lawsuit, the estate is forced to give up any potential claims. As a result of this, the estate’s creditors are given an opportunity to take over the lawsuit at their own risk but for the benefit of the bankruptcy estate, according to the Bankruptcy Act paragraph 137.

However, the bankruptcy estate has some alternative methods to obtain sufficient funds to start or complete a lawsuit. Traditionally, the creditors have been able to provide the estate security for the costs associated with the lawsuit. It has also been possible for the trustee in the bankruptcy to sell the estate’s assets, for instance claims linked to voidable transactions and then use the profit to fund a lawsuit.

In the spring of 2017, the Supreme Court was faced with a question regarding a bankruptcy estate that had made a contract with a creditor regarding the funding of a financial claim. The creditor demanded 50% of the profit from the acquired claim to fund the bankruptcy estate’s lawsuit – another creditor claimed that the funding contract between the bankruptcy estate and the creditor was void.

The Supreme Court decided that the funding contract between the bankruptcy estate and the creditor was not incompatible with the fundamental insolvency principals regarding equal treatment of credi-tors. As a result, the funding contract was held valid and the funding creditor received more from the bankruptcy estate than what he initially was entitled to receive according to the Bankruptcy Act.

The verdict from the Supreme Court raises a wide range of derivative questions regarding funding contract in the area of insolvency. These questions regard the trustee of a bankruptcy’s obligations when a funding contract is concluded and the legal consequences for the other creditors and the debtor when a funding contract is concluded. These questions are analyzed and answered in the light of the most recent case law.

Lastly, considerations are made stating that funding contracts in the area of insolvency might become more widespread in the future. Especially third party funding contracts and contracts where a creditor receives more than what he initially is entitled to receive according to the bankruptcy act are expected to increase.