Every person or company has the right to declare bankruptcy. This possibility is prescribed by law. Often used bankruptcy of individuals by citizens who start an entrepreneurial activity, but do not get enough profit to cope with high debts. This procedure does not involve the forgiveness of all debts, but different methods are used to remove the entrepreneur from a crisis situation.
Legislative regulation
The bankruptcy procedure of a citizen who is a private entrepreneur should be carried out on the basis of the provisions of Federal Law No. 127.
For competent registration of the process, it is necessary that the citizen meets certain conditions and requirements.
The opportunity for individuals and individuals to declare bankruptcy appeared only in 2015.
Where does the process begin?
Initially, the entrepreneur must make sure that he does not have other opportunities to solve the financial problems that have arisen. He should not have different property, through the sale of which it would be possible to cope with debts. The bankruptcy procedure of IP begins with the implementation of simple actions:
- initially prepared documents confirming the deplorable financial condition of the entrepreneur;
- an application for bankruptcy proceedings is filed with the arbitration court;
- after consideration of the documentation by the court, the beginning of the process is announced.
If after studying the documents it is established that the IP does not meet the requirements, then his application is invalid. Therefore, bankruptcy of an individual entrepreneur in the Republic of Belarus or in the Russian Federation is not carried out.
What grounds are required?
For an individual entrepreneur to be declared bankrupt, appropriate good reason is required. These include:
- poor financial condition of the entrepreneur;
- the presence of large debts;
- lack of payments on debts for three months.
Most often, the initiators of this process are the lenders themselves, who cannot receive their funds back from the businessman. Debt in size should exceed 500 thousand rubles, since only under such conditions bankruptcy of an individual IP is permitted.
The nuances of this process include the fact that it is not allowed to summarize the debts of a person as an entrepreneur and as an individual. Therefore, the court can make two separate decisions at once regarding one citizen.
Who becomes the initiator?
The procedure can begin on the initiative of different people. Therefore, the Law on Bankruptcy of IP indicates that the corresponding application to the court may be filed by different persons and organizations:
- the entrepreneur himself, who is aware of his poor financial situation, therefore, he understands that he can no longer cope with a serious credit load;
- the bank in which the loan was issued;
- other lenders;
- tax authorities;
- labor inspection in the presence of large debts to employees.
A request may even be submitted by representatives of various government bodies. In any situation, all steps must be carried out correctly so that the procedure complies with the requirements of the law.
Bankruptcy Nuances
Most often, this procedure is required if it is not possible to undertake to cope with high payments on loans, taxes or other payments.
Quite often, a citizen has a debt to the Federal Tax Service, which cannot be repaid, so bankruptcy of an individual entrepreneur is necessary. Taxes are considered quite large payments, so often starting entrepreneurs can not cope with them. Under such conditions, the tax inspectorate itself can become a plaintiff, therefore its representatives send a statement to the court, on the basis of which the IP is declared bankrupt.
Also, there are often debts to the bank or other credit institutions where a loan was issued to open or develop a business. Under such conditions, property of the debtor may be seized. Additionally, the conditions are taken into account:
- if the loan is issued by a citizen as an individual entrepreneur, then after the bankruptcy process the remaining debts are written off;
- if a citizen applied to the bank as an individual, so he took funds for personal needs, then in any case he would have to pay off the debt.
When applying for a loan, entrepreneurs often use personal property in the form of collateral. To pay off debt, you will have to sell these values at auction, and the process is carried out by bailiffs after a court decision is made.
Bankruptcy stages
With respect to debtor entrepreneurs, various measures can be used to improve the financial condition or identify all property that can be used to pay off debts. The purpose of the work of the court is to comply with the requirements and rights of creditors so that as a result all debts are repaid.
Initially, the manager reveals whether there is an opportunity for drawing up a settlement agreement between creditors and the debtor. In this case, the interests of both parties must be respected.
If it is not possible to come to a compromise, then the initial monitoring process is appointed in the event of bankruptcy of the individual entrepreneur. Usually at this time it is established that there are no opportunities to improve the financial situation of the entrepreneur. Therefore, bankruptcy proceedings are further carried out, which assumes that the entrepreneur’s personal property is being sold to pay off debts.
What documents are filed with the court?
If an entrepreneur understands that he cannot cope with his debts, then for him the best solution would be an independent appeal to the court. For this, documents are transferred to the organization:
- bankruptcy petition;
- certificate of registration;
- a special list of all property that is officially owned by the entrepreneur is drawn up;
- a list of creditors as well as debtors is being drawn up, and contact information of each person should be included in it;
- other materials are also transferred, on the basis of which the court can understand for what reason and how the entrepreneur lost solvency.
All documents are carefully considered by court employees, after which a decision is made regarding the need for bankruptcy proceedings.
Process cost
An entrepreneur will have to pay a certain amount of money for the process. Bankruptcy IP requires payment of state fees before filing an application with the court. The received receipt is attached to the collected package of documents.
The amount of such a duty is established by the provisions of the Tax Code, and 6 thousand rubles are paid for the bankruptcy procedure of IP. In addition, a manager is appointed as part of this process, studying the financial condition of the entrepreneur, as well as distributing his finances. The work of this specialist is paid precisely by the debtor.
The consequences of the procedure
Bankruptcy is considered an excellent outlet for many debtors represented by individuals or entrepreneurs. Although it does not make it possible to completely get rid of all debts, it allows you to officially and profitably close the IP, as well as write off some types of debt. The consequences of bankruptcy IP are as follows:
- as soon as the entrepreneur is declared financially insolvent, after the sale of all his property, the remaining commercial debts will be written off;
- it is impossible to cancel debts on alimony or payments due to harm to the health of other citizens;
- as soon as the application is accepted by the court, the accrual of fines and penalties will cease, therefore, the total debt will not increase;
- after this process is completed, a special ban is imposed, on the basis of which a citizen will not be able to engage in entrepreneurial activity for five years;
- all licenses or permits issued to the entrepreneur earlier cease to be valid, so if they are needed in the future, you will have to re-engage in their design and payment.
This procedure has both positive and negative consequences. Therefore, bankruptcy of individual entrepreneurs with debts is usually carried out only if there is an urgent need.
Is it possible to close an IP with debts?
By law, every entrepreneur can cease activities in the status of individual entrepreneurs at any time, even if there are significant debts. But in the event of bankruptcy of an individual entrepreneur, this process has some nuances.
If a citizen closes the IP before the application is submitted to the court, then it is impossible to start the procedure, so the application is returned to the citizen. If the entrepreneur liquidates after accepting the application, then the bankruptcy process is carried out on general terms, although the individual is no longer an entrepreneur.
When is property seized?
A citizen loses his values if he has debts to banking institutions. All his property is seized by bailiffs, after which tenders are organized at which it is sold at the highest price. Usually, the cost is not set too high, and even when using such a measure, it is not always possible to return all funds to creditors.
Such a method of returning debts cannot be applied under the conditions:
- a citizen has only one housing;
- personal items of the entrepreneur are not sold;
- pets are not allowed;
- fuel necessary for heating residential premises cannot be sold;
- funds are not taken if their size does not exceed the subsistence level for the entrepreneur himself and all members of his family.
Therefore, if a citizen lacks significant incomes and a lot of expensive property, then the arrest may not be carried out in view of the lack of values.
How are debts repaid?
When conducting bankruptcy proceedings, managers will certainly consider different options for paying off debts. The particularities of bankruptcy of an individual entrepreneur suggest that debt restructuring may be carried out or installments for up to three years may be provided.
If it is not possible to return money in this way, then bankruptcy proceedings may be carried out, on the basis of which the property of the debtor is sold. Funds received from this process are sent to creditors.
At any stage of the process, an amicable agreement may be concluded between the entrepreneur and the creditors.
If, after the sale of the existing property, a large debt still remains, then it is written off, so then the entrepreneur will not have to repay these debts at the expense of personal funds. Therefore, the application of bankruptcy is a profitable process. This is especially true for people who do not have personal property, because under such conditions they do not lose their values, and can also cancel the resulting debt.
Is it possible to open the IP after the process?
If an entrepreneur declares himself bankrupt, then by law he can no longer open an IP for five years. If the requirements of the law are violated, so a citizen continues entrepreneurial activity without official registration, then he is held administratively liable. He has a need to pay a fine of 500 rubles or more. up to 2 thousand rubles In this case, all goods sold by the citizen, if any, will be confiscated. Even production equipment is confiscated.
If the unlawful actions of an entrepreneur do harm to other persons or the state, then the punishment for such an infringer is much tougher. He can be held criminally liable, therefore, not only a fine will be levied, but imprisonment may also be imposed.
Thus, the bankruptcy of individuals and individual entrepreneurs is considered a profitable process if significant debt arises, which cannot be repaid even by selling all the property of a citizen. After the completion of the procedure, the remaining debt is canceled, but there are also negative consequences of bankruptcy. They consist in the fact that it will not be possible to reopen IPs and engage in entrepreneurial activity within 5 years.