On October 1, 2015, a legislative event occurred that gives hope for a successful resolution of the situation for citizens in financial difficulties - Federal Law No. 476-FZ of December 29, 2014 “On Amending the Federal Law“ On Insolvency (Bankruptcy) entered into force "(Hereinafter - the Federal Law). In connection with these changes, citizens who are not individual entrepreneurs received the right to declare bankruptcy under certain circumstances. The bankruptcy of an individual is called upon to contribute to the safe and, most importantly, legal resolution of the situation that is very common today, when due to circumstances the debtor is not able to pay one or more loans. But is the bankruptcy procedure so simple, and what are the real consequences of the bankruptcy of an individual?
Who can be declared bankrupt
The legislators initially considered the bankruptcy procedure for citizens as an affordable way to solve financial problems. But still, considering bankruptcy as an easy way to get rid of the debt of a credit institution will be wrong. To begin with, it should be clarified that not every application for bankruptcy of an individual will be accepted and considered by the court. In accordance with the Federal Law, a debtor initiating bankruptcy proceedings must have a loan debt of three months, despite the fact that the loan or their total amount is 500 thousand or more rubles. In addition, already at the stage of filing an application, it is necessary to prove the insolvency of the debtor, that is, his inability to provide credit on his own.
Among other things, the future bankrupt will need to provide documented information about their expenses, income, property owned as evidence of their own insolvency.
Who begins the bankruptcy of an individual
In addition to the debtor himself, the creditor organization itself can file for bankruptcy. If there are several creditors, then it is possible to recognize an individual bankrupt not only in case of absolute impossibility to pay debts, but also provided that repayment of debt to one of the creditors will deprive the non-payer of the opportunity to fulfill other financial obligations.
In special cases, the petition for bankruptcy of an individual may be submitted by the tax inspectorate.
Where to start the bankruptcy procedure of an individual
How to start bankruptcy of individuals? The practice of such processes today is not large enough, but now you can already notice that becoming bankrupt is “long and expensive.”
All cases of bankruptcy of individuals, as well as cases of individual entrepreneurs, are considered in the arbitration court. By law, a period of up to three months is established, during which the bankruptcy of individuals is established in court. Practice shows that the process can drag on for many months due to circumstances.
In addition, the bankruptcy procedure itself is not affordable for everyone. In addition to the mandatory court fee and payment for the work of a lawyer, the debtor will have to pay for the services of a financial manager.
So, in the case when bankruptcy of individuals is inevitable, the instruction by which to begin the process of declaring bankrupt is as follows:
- Any trial begins the same way - with the submission of an application. The following circumstances must be indicated in a declaration of bankruptcy.
- Amount of debt with a detailed description of all components (loan amount, penalties, tax fees, debts for utility bills, etc.).
- An indication that an individual is not an individual entrepreneur - this must be confirmed by a certificate from the tax office.
- Indication that all funds were taken on credit not for business purposes.
- Description of the existing property - supporting documents are also required here. For the bankruptcy of an individual will have to provide information on the income available to the debtor at the moment, and the unavoidable expenses.
- Information about dependents (for example, minor children of the debtor).
Lawyers also recommend that they describe in detail in a statement (if there are such circumstances): a reduction in employment, loss of ability to work (gaining disability) and other reasons for the deterioration of the financial situation. Of course, these facts must also confirm the relevant documents. For the bankruptcy of an individual, it is important to consider all the circumstances under which the debtor is not able to pay off all credit obligations.
An individual starting a bankruptcy process should take care in advance of documentary evidence of his unenviable financial condition. Therefore, in order to take into account all the details, and especially circumstances in favor of the debtor, the main advice is not to save on the services of a lawyer.
The next stage in which the bankruptcy of individuals proceeds is that the court appoints a financial manager. From now on, all available creditors are given a formal notice of the start of bankruptcy proceedings in order to give them time and opportunity to make all credit claims.
Financial (competitive) manager
Another party involved in the bankruptcy process is the financial manager.
His candidacy is submitted to the court by a motion of the creditor. The main task of the manager is debt restructuring. But, in addition, the financial manager will have to conduct an objective analysis and provide the creditor with information about the economic, financial and investment activities of the debtor. In general, the powers of a financial manager are not limited to this. There is another important task - to exclude the possibility of fictitious or intentional bankruptcy. From the moment the manager is appointed, all transactions of the debtor are monitored. Any of these, including donations, must be approved by the financial manager.
The debtor will have to pay for the services of a financial (competitive) manager from his own pocket. The cost of services at the moment is from 10,000 rubles per month. Plus, after the completion of the bankruptcy process, the manager receives 2% of the amount owed. Paying these costs is also the obligation of the debtor.
How to solve the problem with loans: restructuring, amicable settlement, sale of property
The process of declaring a citizen bankrupt may include the following procedures:
- Debt restructuring.
- Realization of property of the debtor for repayment (or partial repayment) of debts.
- Settlement approved by court.
The latter between the parties to the loan is quite possible, however, the parties may not always come to it. An agreement can be concluded only after the requirements of the first, and after the second stage of creditors are fully satisfied.
The most common solution to the debt problem is debt restructuring and / or seizure of property from a bankrupt debtor for sale. As a rule, debt restructuring is proposed first. If the debtor agrees to this, a restructuring plan is drawn up, where the procedure for deferral, the amount of payments per month, the dates by which it is supposed to pay off the debt, and other details are discussed.
Important: during the restructuring process, the total amount of debt can be partially reduced. But to completely "write off" the debt will not work.
If restructuring is ineffective for some reason, property owned by the debtor is seized and sold as debt.
Moreover, for the concealment of property (as well as for deliberate bankruptcy), the debtor is provided with real criminal liability, allowing up to six years in prison.
What property is not seized from a bankrupt?
Withdrawal and subsequent sale of property are inevitable consequences of the bankruptcy of an individual. However, not everything can go under the hammer. The Federal Law strictly determines that it is not subject to exemption:
- The only housing of the debtor and his family, including the land on which it is built. Exception: if housing is listed as collateral under a loan.
- Food and fuel needed for home heating and cooking.
- Cash in the amount necessary for the maintenance of the debtor, taking into account all the dependents whom the debtor is required to maintain (cost of living).
- Property intended for the implementation of labor (professional) duties.
- Domestic animals owned by the debtor, including livestock and livestock housing.
- Prizes, awards, wins, commemorative and honorary signs.
Lack of property to be seized from the debtor
The bankruptcy of an individual may be somewhat complicated if there is no property that can be sold to repay the loan. Today, the legislative resolution of such a situation is too vague; there is no single decision as to what the court should do in this case. One thing is clear: the absence of property does not exempt the debtor from debts. And in the event of recognition of insolvency for the debtor without property, all other consequences of the bankruptcy of an individual are inevitable.
In addition, the law provides for the right of the financial manager to cancel or challenge the debtor’s transactions, as a result of which the property allowed for withdrawal can be returned to the bankrupt.
The negative consequences of bankruptcy
By a court decision, a citizen is granted bankrupt status for five years. It is assumed that during this period a person can and must solve his financial problems. The debtor is not allowed to restart the bankruptcy procedure within these five years. Exception when the application is submitted by the financial manager or authorized body.
A bankrupt gains many advantages: a decrease in the amount of debt, a delay in payments, the absence of charges of various fines and penalties for existing loans. At the same time, there are negative consequences of the bankruptcy of an individual:
- Within three years after obtaining bankruptcy status, it is forbidden to officially register a legal entity, register as an individual entrepreneur, and participate in any way in the management of legal entities.
- Restriction on traveling outside the country until the end of the sale of seized property.
- Obligation to report your status if a citizen is again going to take a loan during the time of bankruptcy.
Bankruptcy - How Justified Is It?
What conclusions can be drawn from all of the above? In the Federal Law, of course, there are still certain shortcomings, as in any "fresh" law. It is possible to eliminate defects and correct them adjusted for real conditions only with time, in the process of identifying all “roughnesses” in practice.
But even now, lawyers urge not to be afraid of the bankruptcy process. And although it will not work to get rid of all debts at once, declaring himself bankrupt, for many, it is precisely the bankruptcy of individuals that can become a chance to safely settle their existing debts. Reviews about the bankruptcy procedure are mixed. In favor of the bankruptcy process is a real chance to get installments on debt payments and the ability to reduce the amount owed to 50%. Upon successful resolution of the situation, bankruptcy is beneficial to all parties to the loan.
But it is worth considering, starting the bankruptcy of individuals, the reviews of finance experts who are not so optimistic. In view of the substantial amount that will have to be paid only for the procedure and the gaps in the Federal Law, financiers advise treating bankruptcy as an extreme means of solving credit problems - when there is no other way out. According to estimates, bankruptcy is truly beneficial only to those whose debts amount to millions in total.