The law on bankruptcy of citizens began to be developed back in 2012, but it was adopted not so long ago - in 2015. Not all loan debtors turned out to be solvent, therefore for the majority of Russian residents the introduction of this law was a long-awaited event. Is it worth initiating bankruptcy? What subtleties do the debtor need to know?
Why was the law passed?
Debts of Russians on loans are growing every year. According to the Central Bank, on January 1 of last year, the total debt of citizens amounted to more than 600 billion rubles, and in 2014 it was a third less. The law is designed to positively influence the sphere of consumer lending. Interest rates on loans are growing every year, because they contain the risks of payment and delinquency. The same situation exists with the payment of utilities. The Federal Law applies to all types of debts.
Law on Bankruptcy of Citizens: Essence, General Provisions
On July 1, 2015, Federal Law No. 476 entered into force. According to this Federal Law, the existing Bankruptcy (or Insolvency) Law and a number of other acts have been amended to regulate the rehabilitation of debtor citizens.
From this moment on, citizens whose debts to creditors exceed 500,000 rubles and have a delay in payment of more than 90 days can apply to the court to declare them bankrupt. In this case, the bankruptcy procedure of a citizen may be the initiative of a credit organization or tax service. According to Article 214 of this Federal Law, the bankruptcy procedure for individual entrepreneurs is identical to that applied to citizens.
Clause 1 of Article 213 states that information on procedures is recorded in the Federal Register and cannot be published in official sources. Information may be announced on declaring individuals bankrupt, on launching the process of debt restructuring, and on the sale of their property.
A feature of the law is binding to the official place of registration of an individual.
Signs of bankruptcy of a citizen: insolvency criteria
- An individual has completely stopped fulfilling monetary obligations to credit organizations.
- A citizen does not repay mandatory payments, which are due on time.
- If more than 30 days have passed since the execution of the debt obligations, and their total amount is more than 10% of the total amount of money payable.
- The cost of property of a citizen is significantly lower than the amount of debt.
- If a citizen has a decision on the completion of enforcement proceedings, because he does not have property that can be recovered.
Who can declare bankruptcy
Not every citizen of the Russian Federation can declare bankruptcy. According to the new law, this can be done in three cases:
- When the amount of debt exceeded 500,000 rubles.
- When the debtor can prove that he is not able to pay money on the obligations assigned to him.
- If the debtor proves that he tried to pay off creditors and conclude an agreement on the restructuring of monetary obligations.
Insolvency (bankruptcy) of a citizen of the Russian Federation cannot be declared when the amount of monthly payments, according to the agreement with the creditor, exceeds the person’s real income. In this case, the court can only recognize the citizen as insolvent, but the debt for this reason will not be written off.
Risks for the debtor
The commencement of bankruptcy proceedings of a citizen debtor assumes that he does not have money for payments on current debts. In accordance with this, bailiffs will be forced to sell his property. All transactions with property relating to the transfer to his relatives will be canceled. The gift contract may also be terminated . If the property is jointly owned, a part of the property belonging to the debtor is sold. If the bankrupt is IP, all licenses and certificate of state registration of the entrepreneur are canceled.
Recovery may not be imposed on all property of the debtor. Real estate is not subject to confiscation if it is the only place for the debtor to live. The same rule applies to real estate, which was acquired with the help of credit funds (if it is not the subject of this dispute). Confiscation does not apply to clothing, shoes, home furnishings, prizes, state awards.
Bankruptcy Procedure
Bankruptcy of citizens is a multi-stage procedure, the launch of which is possible only by decision of the arbitration court. To do this, the court must submit a statement. If the application is deemed reasonable, then the following measures are taken:
- Debt restructuring.
- Realization of movable and immovable property of the debtor.
- Amicable agreement (the parties can reach a compromise, and the case ceases).
The procedure for the sale of property is a last resort. It is applied only when the debt restructuring plan is not executed by an individual. The property that the debtor had at the time of the court decision or acquired after it is sold at auction.
Debt restructuring plan
Bankruptcy of citizens is a measure, the first stage of which is debt restructuring. Its purpose is the additional ability of a citizen to pay off debts with creditors, using all possible sources of income. By decision of the court, a plan is developed that indicates the time and amount, as well as the procedure for repayment of payments on debt. The development of this plan is central to the bankruptcy case. The plan has a maximum implementation period of 3 years. However, it can be extended by court order.
According to the law, debt restructuring can be applied to an individual if:
- The citizen has a source of income.
- There is no criminal record in the field of economic crimes (or the term of prosecution has expired).
- Bankruptcy of a debtor citizen was not recognized for 5 years.
- The restructuring plan was not developed and was not approved within 8 years before the launch of this procedure.
The amount of debt according to the plan also includes interest based on the requirements of the lender. Moreover, the interest rate corresponds to the Central Bank refinancing rate.
How is the plan implemented?
As the debt is repaid according to the approved plan, the debtor has the right to make proposals on amendments to it. The financial manager should be informed of this . If the property situation of the debtor improves, creditors apply to the arbitration court, where the plan is amended.
When the deadline for the implementation of the plan comes to an end, the financial manager prepares a report, which is subsequently sent to the court and the credit institution. If the creditor's claims are not satisfied within the prescribed time, then he goes to court.
In this case, the court may take one of two decisions:
- Complete the restructuring process.
- Recognize bankruptcy of citizens.
Realization of property
There can be several reasons for declaring bankruptcy:
- Overdue debt restructuring plan.
- The plan did not receive approval from credit institutions.
- Cancellation of restructuring by court order.
- Resumption of bankruptcy litigation.
Bankruptcy of citizens (individuals) implies the sale of property of debtors. By court decision, a restriction on travel abroad may also be imposed . The restriction is removed only at the completion of the trial. It can be canceled ahead of schedule only in case of a citizen's request and in agreement with the creditors.
When the debtor is declared bankrupt, all property is transferred to the financial manager. All operations with property without his participation are canceled. This also applies to funds in bank accounts, and the performance of property obligations by third parties.
Evaluation work is carried out under the supervision of a financial manager. Appraisers may be involved by decision of creditors from their funds. Moreover, the assessment itself can be challenged in court.
If the sale of property did not occur, and credit organizations refused to accept it as a debt, the citizen again passes the right to dispose of it. In this case, the claims of creditors are deemed satisfied.
Settlement agreement
This procedure is provided for by this law. On its basis, the trial is terminated. The decision is made at a meeting of creditors, and the agreement is already in court.
After the conclusion of the agreement, the debt restructuring plan is canceled, the ban on satisfying the creditor's requirements is lifted. A citizen begins to pay off debt. If the terms of the agreement are violated on his part, the bankruptcy case is re-launched.
Cons for the debtor
- Bankruptcy of citizens of the Russian Federation - a procedure requiring material costs (payment of court costs and manager services).
- All accounts, including joint ones, are frozen.
- The property of the debtor is seized.
- In the three-year period after the recognition of bankruptcy, the debtor cannot become the founder of a legal entity.
- A ban on overseas trips.
- In the five-year period after the recognition of bankruptcy, a citizen will not be able to take loans.
- If the purchase or sale of property takes place without the knowledge of the financial manager, the debtor faces a fine of 4,000 to 5,000 rubles.
- Within a year after a court decision, you can not do business.
Pluses for the debtor
- When the debt exceeds the value of the property, the residual amount is debited from the citizen, because he has no funds left to pay it.
- When the debtor does not own any other property except his apartment, where he lives.
- During the trial, fines and penalties are not charged.
- Removal of excessive financial responsibility.
Implications for Lenders
For credit organizations, the bankruptcy procedure allows you to collect the full amount of debt, as well as take part in the distribution of funds received from the sale of property.
Fictitious Bankruptcy: Implications for the Debtor
For fictitious bankruptcy of citizens, that is, for false information about their solvency, the law introduces administrative responsibility. The commission of this offense is fraught with an administrative fine, the amount of which is from 1000 to 3000 rubles.
An administrative penalty is provided for the deliberate actions of the debtor, which entailed a loss of solvency and the inability to pay debts to creditors.
Giving false information about property, rights to it, monetary obligations, amount of debt and other information threatens the citizen with a fine from 4000 to 5000 rubles. For individuals, the fine for unlawful obstruction of the activities of a financial manager appointed by a court is up to 3,000 rubles.
If you try to transfer rights to movable and immovable property, the bankrupt will face imprisonment of up to 6 years.
Subtleties
It is advisable for the debtor to know the particularities of a citizen's bankruptcy. The law is imperfect and has many controversial details.
The minimum amount of debt to creditors may be challenged. At the time of analysis of the solvency and welfare of the debtor, the latter may transfer rights to use the property. For entrepreneurs, the impossibility of a loan of funds may be a kind of prohibition for the implementation of their activities. However, the situation is fixable, since now there are enterprises that provide finance after these procedures.
Obtaining bankruptcy status provides few advantages for citizens, although it does provide additional opportunities. The procedure itself takes a lot of time. The law can improve the situation of those who owe large sums of money and are unable to pay off debts. Bankruptcy does not always become a salvation for the debtor.