Bankruptcy is ... The concept, causes and signs of bankruptcy

For many people, bankruptcy is something frightening, scary and inevitable. A person can regard this phenomenon as a punishment for irresponsibility and ineffective economic planning. At the same time, few think that the officially formalized state of financial insolvency can save a person or enterprise from many troubles. What is the essence of bankruptcy? We will try to understand our article, based on the provisions of Law N 127-FZ "On Insolvency (Bankruptcy)".

Bankruptcy concept

No organization is insured against undergoing bankruptcy proceedings. This is an important rule that all legal entities should remember. But what does the concept itself mean? In short, bankruptcy is financial insolvency, the inability of the debtor to respond to his debts. A debtor is always a bankrupt - a person who owes money to a creditor. Do not confuse the phenomenon under consideration with cases when a person can simply go broke, lose a source of income or destroy his own enterprise.

The concept under consideration has an interesting history. The etymology of “bankruptcy” is the Italian phrase banca rotta, which translates as “broken bench”. On the benches in Italy sat moneylenders - persons who gave money on credit. If the moneylender went broke, then he broke the bench, thereby declaring himself bankrupt.

A person is declared bankrupt in an arbitration court. This applies to both organizations and ordinary citizens. An application for recognition of a person as financially insolvent may be submitted both by the debtor himself and by other persons. It can be a court, an individual or even a creditor. The latter, incidentally, the recognition of the debtor bankrupt can be extremely disadvantageous. Some lenders are capable of opposing debtors in court. They are trying to challenge the financial insolvency of a person, but because the process of bankruptcy can be dragged out.

Signs and types of bankruptcy

Bankruptcy is a procedure that does not deprive a person of all his obligations to pay debts. A bankrupt can only be released from certain obligations, depending on what property is left with him. So, the arbitration court, deciding bankruptcy cases, must verify the financial insolvency of the debtor. In addition, the state should calculate the remaining property of an individual or organization. If there are surpluses, they will go to the creditor.

The main goal of bankruptcy of enterprises is not exemption from debt bondage, but the direct closure of the business. With rare exceptions, the procedure can be used for reorganization, but this will require special efforts of the debtor. Bankruptcy of individuals, by contrast, aims to stop the constant growth of loan obligations.

There are several types of bankruptcy. The publications on the procedure in question speak of real, conditional, intentional and false financial insolvency.

Real bankruptcy means the release of a person from all debts due to his significant financial losses. Contingent bankruptcy implies an increase in the organization’s assets, but a simultaneous decrease in liabilities. As a result, a person accumulates a large number of unsold products. In order not to close the company, the founder makes a temporary bankruptcy.

Intentional bankruptcy is considered an unlawful act. The organization, with the aim of withdrawing funds from the company, forges documents and registers itself as a bankrupt. Any such acts are illegal. Keep in mind the criminal sanctions that may result from intentional bankruptcy.

The last type of bankruptcy is false financial insolvency. It is somewhat similar to intentional bankruptcy. But in this case, the person does not withdraw money from the company, but merely weakens the existing debt bondage.

Audit and Supervision

The bankruptcy procedure has a number of signs. All of them are divided into two groups - formal and informal. The formal features of financial insolvency are:

• noticeable lack of finance;
• a significant excess of expenses over income;
• lack of ability to pay off debts.

Among the informal features include:

• late delivery of financial statements;
• delay in dividend payments to investors;
• change in pricing and financial policies;
• change in the external balance of a legal entity;
• growth of debt to employees on wages;
• a large number of inaccuracies in accounting documents, etc.

Most of the signs presented can only be identified after an audit. A large part of bankruptcy cases occurs precisely after an audit. Moreover, financial control cannot be called the first stage of bankruptcy. The fact is that the recognition of a person as inconsistent must be realized in court. Anyone can be the initiator of the procedure, but the debtor must declare his insolvency on his own. Only after this will the beginning of the first stage of bankruptcy be laid - observation.

Observation takes place up to 7 months. An interim manager is put in place of the head of the organization, who checks the following points:

• probability of debt repayment;
• the possibility of paying salaries to employees;
• restoration of solvency;
• legal costs, etc.

The interim manager may convene a meeting of creditors at which questions will be resolved on the reorganization of the enterprise (transfer to someone else's control), on bankruptcy proceedings, the need to change the management team, etc. Each issue can be resolved only by voting.

Improvement and management

The healing procedure is an integral part of the observation. The interim manager should determine the future of the company, its resources and capabilities. Only after that he begins a direct modernization.

Improvement is also called reorganization. This is a large form of economic modernization of an enterprise when third-party companies or managers take control of a “sick” organization. A simple example is the recent bankruptcy of Otkritie Bank. An interesting precedent is connected with this organization - for the first time in the history of the country, the Central Bank began to sanitize a private company, that is, in fact, the state.

What does the healing procedure suggest? Firstly, this is a restriction on the rights of owners and managers of the company. These individuals retain their status, but their terms of reference are noticeably narrowing. Secondly, the goal is the restructuring. Interim managers, having discovered problems in the enterprise, begin to carry out economic reforms. The healing procedure can take up to two years.

The third stage of bankruptcy is external management. The onset of this stage may depend only on the decisions of the persons conducting the rehabilitation. External management involves the removal of company leaders from their posts and independent implementation of further reforms. A plan is being drawn up, which should include the following items:

• debtor's expenses;
• necessary reforms;
• the period during which you can improve the solvency of the company.

The bankruptcy publication compiled by the external manager should include the following measures:

• issue of securities;
• debt repayment;
• increase the authorized capital;
• modernization of pricing policy;
• Partial sale of company property, etc.

Based on the results of external management, two decisions can be made: on the closure of production due to its complete unprofitability or reprofiling the company. If the first option is adopted, then bankruptcy proceedings will begin - the most important stage in the bankruptcy procedure.

Competition proceedings and settlement

No matter how hard the temporary managers try, the far from ruined enterprise can be pulled out of the abyss. The only option left is the liquidation of the organization. Where does it all start?

Temporary employees file an application with the arbitration court. According to a court decision, the property of the enterprise is seized, after which it is sold at open auction for bankruptcy. Data on the debtor organization is entered into the Unified Federal Bankruptcy Information Register. It records information on the property obtained at the auction, and on the further repayment of part of the debt. Part of the funds is taken by the court as a fee.

If the court finally recognizes the bankruptcy of the enterprise, a peace agreement is concluded between the parties to the conflict (the debtor and the creditor). This is the last step in registering financial insolvency status. The parties reach a certain compromise. So, the debtor repays part of the debt, and the creditor ceases to demand the rest of the finances.

Often, beneficiaries can help conclude a peace agreement. These are intermediaries, recipients, witnesses and all sorts of third parties who accept payment of obligations. Most often, the state itself is the beneficiary. This happens if the lender has insured possible losses.

So, how long does the procedure for processing financial insolvency last? Consider the example of bank bankruptcy.

Thus, the duration of bankruptcy will depend on the financial condition of the organization. The more chances to “pull out” the enterprise, the longer the external control will take place. If everything is bad with finances, then bankruptcy will take place in a couple of months.

Bankruptcy of individuals

The procedure for recognizing financial insolvency for large organizations differs significantly from the same procedure, but implemented for individuals - individual entrepreneurs. Until 2015, collectors and bailiffs were involved in bankruptcy of citizens. Today, everything is a little easier.

There are five steps a citizen needs to take to declare himself bankrupt. The first stage, the beginning of bankruptcy, is called the assessment of the financial viability of a person. Bankruptcy will be possible only if the amount of debt is more than half a million rubles, and the delay in payments exceeds three months.

At the second stage, a bankrupt or other interested person submits documents to the court. A special statement must be drawn up, to which you must attach a statement of income, personal documents, bank account statements and an inventory of property. The third stage is waiting for a court response. The financial manager appointed by the state establishes the signs of economic insolvency of the citizen, and also gives an independent assessment of his property.

At the penultimate, fourth stage, it is necessary to draw up a debt restructuring schedule. We are talking about increasing the loan term, reducing the amount of payment on debts and the cancellation of interest or forfeits on the part of the lender. Simply put, debt restructuring is a combination of various measures to weaken the financial position of the debtor.

Finally, the last step in declaring a debtor bankrupt is the sale of property. The property of a bankrupt citizen is sold at auction, and the finances received go to pay off debt. The law prohibits the sale of the debtor's only living space. The rest of the property may well be transferred to tenders.

The consequences of bankruptcy

What happens after the bankruptcy of citizens or legal entities? As we have already discussed, there can be two outcomes: positive - in the form of enterprise restructuring and negative - when a person sells all his assets and is liquidated.

The consequence of the bankruptcy of individuals is the seizure of property and its subsequent sale. Along with this, the citizen can expect the following points:

• the inability to file for insolvency within five years;
• a ban on holding public office for five years;
• obligatory warning of creditors about their bankruptcy.

The listed consequences are optional, that is, they are not always mandatory. Their application can be implemented only by decision of the arbitration court.

Everything will be a little more complicated with the bankruptcy of organizations. First, all data on the financial insolvency of the enterprise will go to the Unified Federal Register of Bankruptcy Information. This registry is needed to analyze the economic condition of the country. Secondly, along with entering data into the system, the following will happen:

• maturities of debts from deferred are retrained to the onset;
• interest on debts ceases to accrue and interest;
• all property disputes in which the organization participated are liquidated;
• property will be recovered for existing debts.

Thus, the bankruptcy of individuals and legal entities is different except in its scale. Combines both forms of financial insolvency such a thing as responsibility. She may be charged with fictitious or intentional bankruptcy. About these forms of violations of the law will be described in detail below.

Intentional bankruptcy

If the organization has debt obligations in the amount of more than 500 thousand rubles, while it does not have the ability to pay them off, then this circumstance will be called legal financial insolvency. However, there are a number of criteria indicating the identification of intentional bankruptcy. This is an illegal form of action with a number of specific features. It should highlight:

• concealment by the debtor of his property, as well as information about his whereabouts;
• selling property that auditors or interim managers are not aware of;
• failure to comply with the requirements for filling out a bankruptcy petition;
• failure by the debtor to comply with the legal rules of bankruptcy proceedings;
• the provision of fictitious documents relating to accounting or the financial condition of the organization.

Thus, deliberate bankruptcy refers to the procedure of financial control of a person intentionally complicated by the initiator of this procedure - the debtor or supposedly the debtor. Most often, the considered form of bankruptcy is expressed in the failure by the management of the company to fulfill its direct responsibilities. The result of their behavior will be either criminal liability or liquidation of the enterprise without the right to restructuring.

The penalties for intentional bankruptcy, it must be said, are considerable. In case of especially large damage, the organization-culprit will be held criminally responsible. The maximum possible sanction is 1.5 million rubles. Administrative responsibility provides for a fine from 100 thousand to 300 thousand rubles. An individual will be fined up to 3 thousand rubles.

Fictitious Bankruptcy

The main difference between intentional financial insolvency and fictitious is the motive for breaking the law. The desire to hide their assets from creditors is called deliberate bankruptcy, and the motive in the form of deferred debt or evading payments is a fictitious bankruptcy.

A situation where the debtor wants to create the impression of his own financial insolvency is considered quite common, although in reality everything is different. He goes to deceive his colleagues, as well as auditors, interim managers, and finally, the whole state. There are many ways to create the appearance of bankruptcy. Talking about them is pointless, because each option has long been studied, and therefore familiar to the tax authorities.

Some debtors act very rude and clumsy: they fake documentation. Such a violation is detected almost immediately, because all the data about citizens, and even more about organizations, has long been on the state Internet portal. But there is another type of scam that comes in a little smarter. They transfer their property through the channels of third parties, conduct a front audit and try their best to circumvent the law. It turns out, as you might guess, only worse.Deceivers are quickly identified and held accountable for fictitious bankruptcy. Most often this is a fine of up to 1.5 million rubles, imprisonment of a citizen from 1 to 5 years, or forced labor for 5 years.

Bankruptcy Institute. Key questions on the topic

Bankruptcy is an incredibly complex and extensive procedure. Its implementation is extremely difficult, and therefore debtors and creditors often have topical issues on the topic of financial insolvency.

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The last question may be of interest to individuals, that is, individual entrepreneurs. It is known that some citizens do not have the status of an enterprise, but they are deploying their activities quite widely. Is reorganization possible if such citizens are insolvent? The law answers in the negative. Unfortunately, legal entities for reorganization have a certain monopoly. How long this will continue is unknown. However, some legislators have already raised the issue of the possibility of introducing reorganization for individuals.