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Bankruptcies carry important information for the market. Bankruptcy rules in crisis become even more relevant since the reason of insolvency then is often not caused by the company's failure or inefficiency, but by external impacts like chain debts or the loosing of markets. So it happened in 2008 too. The balancing in the bankruptcy rules in these cases should be designed to guarantee the return of the expectations developed by the interested parties -debtors and creditors -at the time of the investment. This is the way to protect the trust of the participants in the financial markets and in the businesses. Despite many amendments the efficiency of these bankruptcy rules in Hungary, however, is not very promising. The country is ranked in the 24th place out of the 28 Member States in the EU in a World Bank survey in 2018, in which the efficiency of the solutions to the problem of insolvency was compared. This study summarizes the results of a primary research which investigated that, although the Hungarian rules are seemingly in line with the international and regional standards and the EU regulations in reorganization matters, why is there, however, no such efficient capital allocation as it should be expected by the investors and would be necessary to reinforce the trust in the market. The main statement of the article is that the Hungarian bankruptcy rules fail to promote the efficient capital allocation because the stakeholders have no information or are not interested -for the costs may be too high -in those financial data or parameters, which are necessary for a deliberated settlement in a bankruptcy procedure.

Despite many regulatory changes there are still no sound reorganisation possibilities for financially distressed companies in Hungary. The current crisis of 2020 due to the pandemic is going to trigger mass liquidations especially there where the bankruptcy rules are ineffective. There is no efficient risk and resource allocation if there is no reasoning and the financial and economic criteria necessary for a proper bankruptcy management are not taken into consideration in the reorganisation procedure. This article is based on primary research conducted in 2014 and a further analysis of the problem published in the Eurasian Studies in Business and Economics in 2020 (Pálinkó and Pétervári, 2020). The conclusion is that the financial variables are seemingly irrelevant in decision-making. The bankruptcy procedure has become a useful tactic for the owner-management to keep their position and protected status for as long as possible even at the expense of the divergent creditors. There is a genuine need for a different model in Hungary, one in which financially rational decisions are not dysfunctional. We have found that time is the most important factor here. It is therefore suggested that the rules should be designed so that the companies be motivated to file for bankruptcy in time. This design is the automated mandatory auction bankruptcy procedure or its pre-pack version.