The possibility of declaring individuals as insolvent (bankrupt) is quite new in Russian legislation, and if bankruptcy through the court has already developed a certain practice, then out-of-court bankruptcy (according to a simplified procedure) is just beginning to form.
In September 2020, amendments to the Law "On Insolvency (Bankruptcy)" entered into force, which introduced a simplified bankruptcy procedure for individuals through multifunctional centers (MFC).
What has changed?
- you can file for bankruptcy if you have a debt starting from 50,000 rubles and up to 500 thousand rubles (if amount is larger - possible only through the courts)
- the procedure is free, in contrast to the legal process, which implies such mandatory costs as payment of state fees, remuneration to the arbitration manager.
- you can apply for bankruptcy through the MFC.
Terms of a simplified bankruptcy:
- the amount of debt declared to be written off shall be within the established limits (from 50 to 500 thousand rubles);
- the absence of property on which a foreclosure could be imposed and this is confirmed by the completed enforcement proceedings on a similar basis;
- there are no other enforcement proceedings that are not completed or terminated.
Procedure is the following:
- Submit an application to the MFC;
- from the moment of entering the data on the beginning of the procedure in the Unified Federal Register of Information on Bankruptcy, all collection and accrual of interest and fines will be stopped. Be careful: we are talking only about those debts that were mentioned in the application;
- during the procedure, an individual cannot take out new loans and borrowings, issue guarantees and execute other security transactions;
- in the event of an improvement in the financial situation, the individual is obliged to report on it to the MFC and the procedure in this case shall be terminated;
- the whole procedure lasts 6 months.
The MFC includes information in the Unified Federal Register of Information on Bankruptcy that the procedure has been completed. From this moment, an individual is released from obligations to creditors, which were mentioned in the application. Compared to the alternative - bankruptcy proceedings - the new opportunity for individuals seems to be more convenient, faster and much more cost-effective. However, the procedure does not justify its name “extrajudicial”, as it implies mandatory preliminary court proceedings against the debtor, as a result of which the bailiffs must check the property status of the individual.
In addition, there is a risk that people will begin to abuse the right, using the new procedure to hide property: after all, there will be no thorough verification and challenging of the debtor's transactions.
TEAM monitors the current practice that is developing in the country and can always give you full and useful advice on this topic, answer any questions you may have and, if necessary, prepare a package of documents for filing for bankruptcy.