In the modern world, economic instability and financial difficulties can lead to a financial crisis for individuals who are no longer capable of meeting their obligations to creditors and maintaining financial stability. In such cases, bankruptcy can be the last and effective step to restore the debtor's solvency. In this article, we will explore the key aspects of personal bankruptcy in Ukraine and the procedure for its implementation.
Therefore, personal bankruptcy refers to the status of an individual who is unable to repay debts to creditors, and their assets can be liquidated to satisfy creditor claims.
Main Causes of Personal Bankruptcy
- Job loss or reduced income.
- High medical or educational expenses.
- Divorce or family issues.
- Uncontrolled credit obligations and increasing debt burden.
- Economic crisis in the country.
- Legal Mechanism of Personal Bankruptcy in Ukraine
Personal bankruptcy in Ukraine is regulated by the Commercial Code and the Bankruptcy Procedure Code of Ukraine. The main purpose of these legal acts is to protect the rights of the debtor and their creditors, as well as to create fair and transparent conditions for resolving the financial problems of individuals.
Procedure for Personal Bankruptcy
- Filing a court petition: An individual seeking to declare themselves bankrupt must file a petition with the local commercial court based on their place of registration.
- Financial analysis: The court conducts an analysis of the debtor's financial condition to determine their solvency. If they are deemed unable to fulfill obligations to creditors, the court decides on declaring the debtor bankrupt.
- Appointment of a liquidator: After an individual is declared bankrupt, the court appoints a liquidator who manages the debtor's assets and carries out the sale of assets to satisfy creditor claims.
- Determination of the liquidation estate: The court determines the extent of the debtor's property subject to liquidation to settle debts.
- Distribution of assets: After the assets are sold, the liquidator distributes the funds among creditors according to their claims. Conclusion - Personal bankruptcy is a complex process, but it can help individuals resolve their credit problems.
Since 2019, individuals in Ukraine have had the opportunity to be recognized as bankrupt and have their debt from credit obligations (banks and online lenders), debt from promissory notes, and loan agreements related to utility debts written off. However, with substantial overdue debt, only 978 Ukrainians have initiated bankruptcy procedures.
Maxim Marusich, an attorney from "Monarch Business Consulting," has participated in ten such court cases throughout Ukraine with a total debt of 4,069,771.00 UAH. Among them, two debtors were recognized as bankrupt, and the debt of 3,836,384.70 UAH was written off. For five cases, debt restructuring procedures were carried out for a total amount of 233,386.34 UAH.
Pros:
- Not all creditors (banks and online lenders) submit their claims to the court, which means that debts not claimed by creditors are considered repaid, and enforcement documents based on these claims are considered unenforceable.
- The case is always favorable, as the entire debt is written off or debt restructuring is carried out (monthly, interest-free, without commissions, over a five-year period).
- There are favorable conditions for mortgage property.
- The case is resolved within two to eight months.
- No court fees need to be paid.
Cons are completely absent! Therefore, the personal bankruptcy procedure is a viable option for resolving debt issues and starting a peaceful life without debts and collectors.
free "verbal" consultation for up to 10 minutes, without document review, by appointment only, available only on Fridays.
unlimited duration verbal consultation, without document review, by appointment.
unlimited duration verbal consultation with document review, by appointment.
demanding, obtaining, and compiling a package of documents by an attorney for subsequent submission to a judicial authority.
an attorney's actions are aimed at initiating and guiding the legal process with the goal of declaring a person bankrupt (debt discharge).
transportation expenses, travel costs, postage expenses, court fees, and advance payment to the arbitration manager are not included in the service cost.
- The partner of the company is a professional practicingattorneyin Ukraine, the founder and managing partner of the Law Firm "Marusish and Partners," with extensive experience in senior legal positions in several well-known Ukrainian banks, such as "UkrSibbank" and "UkrEximBank."
- The lawyer's main areas of expertise include the defense and restoration of rights, freedoms, guarantees, as well as the interests of citizens, foreigners, or stateless persons in the fields of commercial, migration, criminal, and military law. They skillfully provide defense for individuals in banking and credit disputes and offer legal assistance in cases involving personal bankruptcy.
- The partner of the company is a professional practicingattorneyin Ukraine, the founder and managing partner of the Law Firm "Marusish and Partners," with extensive experience in senior legal positions in several well-known Ukrainian banks, such as "UkrSibbank" and "UkrEximBank."
- The lawyer's main areas of expertise include the defense and restoration of rights, freedoms, guarantees, as well as the interests of citizens, foreigners, or stateless persons in the fields of commercial, migration, criminal, and military law. They skillfully provide defense for individuals in banking and credit disputes and offer legal assistance in cases involving personal bankruptcy.
According to Article 135 of the Bankruptcy Procedure Code of Ukraine:
- Within five years after an individual is declared bankrupt, proceedings for insolvency cannot be initiated upon their application, except if the debtor has fully repaid all debts in accordance with this Code.
- Within five years after an individual is declared bankrupt, the person is obligated to notify other parties in writing about their insolvency before entering into loan agreements, credit agreements, surety agreements, or pledge agreements.
Additionally, an individual cannot be considered to have an impeccable business reputation within three years after being declared bankrupt.
In accordance with Part 2 of Article 30 of the Bankruptcy Procedure Code of Ukraine, the amount of the main monetary remuneration for an arbitration manager performing the duties of restructuring manager is five times the subsistence minimum for able-bodied persons for each month of performing the duties by the arbitration manager. Additionally, according to Part 3 of Article 116 of the Code of Ukraine on Bankruptcy Procedures, the following documents are attached to the application for the initiation of proceedings in a case of insolvency: 12) evidence of the debtor's advance payment of a reward for restructuring management to the court deposit account for three months of performing the duties. As the subsistence minimum for able-bodied persons can change in accordance with Article 7 of the Law "On the State Budget of Ukraine," as of August 2023, the value is 40,260.00 UAH.
It depends on the judge's workload and the claimed creditors, as well as the debtor's assets (ranging from two months to one year).
In such cases, there are no losing cases because there are two ways to resolve the matter. The first is the discharge of the debtor's entire debt, and the second is the restructuring of the debt for up to five years without interest, limited to the amount the debtor can allocate from their household budget. This option is more favorable than paying the entire debt to all of the debtor's creditors since the debt in the bankruptcy procedure will be reduced significantly (not all banking institutions file claims against the debtor, and microfinance institutions generally do not file claims at all).
If the debtor, in addition to the residence in which they live (primary residence), also possesses another apartment, house, or land plot, and the debtor refuses to liquidate the additional property to repay the debt, the option of debt restructuring remains viable.
Is it better to be employed, whether officially or unofficially, and receive a minimum wage (so that the court does not consider the debtor as fraudulent)?
The debtor's presence is not obligatory; an attorney participates in all court hearings and creditors' meetings. Occasionally, a judge may request the debtor's appearance in a court session for providing additional explanations or answering specific questions.
