• The financial abyss is the deepest of all abysses:

    you can fall into it all your life

    (I. Ilf and E. Petrov)

     

    What can people expect who have taken a loan from a bank and are no longer able to pay the amount of debt accrued by the lender due to the change in the national currency exchange rate? Today, one of the most painful issues for individuals debtors is the repayment of problem foreign currency mortgages. According to rough estimates alone, there are about 20,000 of them in Ukrainian banks in the amount of UAH 50 billion. And this without taking into account the bankrupt banks. There are many other situations that have led to an unbearable financial burden, which at first glance has no solution.

    However, a way out of complex debts can be found. So, if you are a debtor and it is not:

    – compensation for damage caused by injury, damage to health or death;

    – payment of alimony;

    – fulfillment of non-property requirements imposed on a specific person, you will be assisted by a qualified lawyer in Kiev, who will be able to provide professional advice on bankruptcy of an individual.

    On October 21, 2019, the Bankruptcy Code of Ukraine was enacted, which entered into force on April 21, 2019 (hereinafter – the Code). This Code is the first comprehensive document designed to resolve all procedural issues of bankruptcy. Prior to the entry into force of the Code, only legal entities and natural persons-entrepreneurs could restore their solvency or be declared bankrupt.

    If earlier the Law of Ukraine “On Restoration of Debtor’s Solvency or Recognition of Debtor’s Bankruptcy” provided for the possibility of bankruptcy of individuals for debts incurred as a result of entrepreneurial activity, ie natural persons-entrepreneurs, then the new code may bankrupt a natural person without such status. That is, all debts, including receipt of money on receipts, fast online loans and arrears of utility payments are included in the list of debts that can be written off by the court.

    The peculiarity of this procedure is that the proceedings in the case of insolvency of the debtor-individual can be opened at the request of the debtor and will be considered by the court at the place of residence.

     

    Therefore, there may be one of the circumstances that is a condition for going to court for bankruptcy, namely:

    • the amount of debt to creditors is not less than 30 minimum wages. As of September 2020, this is UAH 150,000. The indisputability of these requirements in the understanding of the legal construction of the term “indisputability” is optional. The existence of the creditor’s claims and their recognition by the debtor can be confirmed, for example, by an act of reconciliation of monetary claims or correspondence;
    • the debtor has stopped repaying loans or making other payments in the amount of more than 50% of monthly payments on each of the credit or other obligations within 2 months.
    • in the enforcement proceedings, a decision was made on the absence of property of an individual, which can be levied. In practice, such a decision looks like the end of enforcement proceedings on the grounds of lack of property that can be sold at the expense of debts;
    • other circumstances that may indicate insolvency. It is worth emphasizing here the possible subjective assessment of such circumstances by the court, which gives grounds to assume that the conditions for initiating proceedings provided for in the code are not exhaustive.

    The provisions of the law do not necessarily establish all the above grounds for initiating bankruptcy proceedings against an individual. Therefore, the presence of one of the grounds is sufficient to initiate bankruptcy proceedings against an individual. In addition, the law does not specify the specific grounds on which an individual has incurred debts. Yes, it can be a bank loan, loan (receipt) between individuals, tax debt, utility debt, property lease debts, and so on.

    On each of the grounds, the debtor submits a declaration of property for the last 3 years preceding the filing of the application in court. Such declarations must contain information not only on the debtor’s property, but also on the property, income and expenses of his family members, which exceed the amount of UAH 150,000. As lawyers with experience in bankruptcy, we advise you to pay attention to filling out the declaration. After all, in practice there are cases of submission of unreliable data, which was a consequence of the court’s refusal to positively resolve the issue of bankruptcy.

    Bankruptcy can be initiated only by the debtor – an individual. In practice, our lawyers in Kyiv are approached by individuals who have significant debts to utilities, other individuals or legal entities, or have a bank foreign currency loan with overdue debt repayment, which is several times higher than the amount of collateral. The borrower has no other liquid assets, such as land, apartment, garage, car, cottage. Or the value of this property is many times less than the accrued debts. With respect to the borrower-debtor, enforcement proceedings are opened, an enforcement document is issued, the creditor further accrues interest or applies penalties. Litigation regarding the illegality of the creditor’s claims, as a rule, in such cases there is no judicial prospect. Only in such circumstances, a qualified lawyer advises the borrower-debtor to apply to the commercial court with a request to open insolvency proceedings, because there must always be economic feasibility.

    It should be noted that the law contains a number of restrictions on the debtor’s property, which can repay his debts. The liquidation estate does not include: housing, which is the only place of residence of the debtor’s family (apartment not more than 60 m2 or living area not more than 13.65 m2 for each member of the debtor’s family or a house not more than 120 m2 ) and is not the subject of security, as well as other property of the debtor, which can not be levied; funds in accounts in pension funds and social insurance funds. The court may exclude from the liquidation estate the debtor’s property, which may be subject to recovery, but it is necessary to meet the urgent needs of the debtor or his family members, as well as things worth not more than 50 thousand UAH, which are illiquid or income from the sale of which will not significantly affect the satisfaction of creditors’ claims. At the same time, the above-mentioned property with a total value of more than UAH 150,000 cannot be excluded from the liquidation estate.

    So how does it work? An individual applies for legal assistance in bankruptcy. During the analysis, the situation of the debtor is analyzed, including the current amount of property claims of creditors, the available property of the debtor and a list of documents for litigation in court. As mentioned above, bankruptcy can be initiated only by the person himself, of course, here will need the help of an experienced lawyer who will help to make a statement and attach to it a significant amount of evidence. The application must be accompanied by a receipt of the advance by the debtor to the deposit account of the court remuneration to the restructuring manager for 3 months of performance.

    The amount of the basic monetary remuneration of the arbitral trustee for the performance of the powers of the restructuring manager is 5 subsistence minimum for able-bodied persons for each month of the arbitral trustee’s performance (ie, for 2020 the amount of the advance will be UAH 31,530). Please note that the court fee for filing this application is not paid.

    After the opening of the proceedings, the court appoints an arbitral trustee by random automatic selection. The debtor has 120 days during which a moratorium on debt payments is in effect. The moratorium does not apply to the obligation to pay alimony.

    Creditors must submit all their claims to the debtor within 30 days.

    Within 120 days of the debtor’s moratorium on debt payments, he and the trustee must develop a restructuring plan, agree it with the creditors and file a lawsuit.

    The plan also contains conditions for forgiveness, write-off and installment of debts. For example, a tax debt older than three years is written off. And arrears of alimony, SSC and compensation for damage to life and health of third parties are not subject to restructuring. The installment plan is approved for 5 years. But if the housing loan is restructured – for 10 years. Under certain conditions, the term may be extended.

    The restructuring manager performs the following measures in the debtor’s debt restructuring procedure: sends inquiries to the debtor and competent authorities to obtain documents to verify the debtor’s declaration, holds creditors’ meetings and decides to apply to the commercial court to declare an individual bankrupt and repay the debtor’s debts. Thus, if the restructuring plan is not implemented or the creditors do not approve it, or it is not approved by the court – the individual goes bankrupt. The Commercial Court, when ruling on the completion of the procedure for repayment of the debtor’s debts and the closure of insolvency proceedings, makes a decision on the release of the debtor – an individual from debts. Thus, an individual receives a solution to the issue (restructuring, write-off) of debts only in the legal field with the help of the court and the arbitral trustee.

     

    We are often asked whether bankruptcy is linked to a travel ban. It should be noted at once that the restriction of the debtor’s right to travel abroad is a measure used in enforcement proceedings, for those who have already been declared bankrupt, such a restriction is not provided. However, the law imposes certain restrictions on a person declared bankrupt. In particular, within five years after the declaration of bankruptcy of an individual:

    – insolvency proceedings may not be opened on her application, unless the debtor has repaid all debts in full;

    – such a person is obliged to notify the other parties of such agreements in writing of the fact of his insolvency before concluding loan agreements, credit agreements, surety agreements or pledge agreements. At the same time, experts point out that neither liability for non-notification of the fact of insolvency nor the consequences of such non-notification have been determined (whether it will be possible to terminate the contract / declare it invalid, etc.).

    Within three years after a natural person is declared bankrupt, he or she cannot be considered to have an impeccable business reputation (it may become important for the person’s intention to hold certain positions). Such a debtor is clearly included in the credit register administered by the NBU and one should not expect to receive unsecured loans in the future.

    At first glance, the bankruptcy procedure is quite simple, because according to ordinary citizens, you can borrow money without giving it through bankruptcy mechanisms, writing a statement to the court. However, this is not the case, in the Ukrainian reality the bankruptcy of an individual is quite a difficult and formalized procedure. There is currently no settled case law, and the process can be protracted in time if a lawyer is not involved. This procedure is really economically attractive for those debtors whose debt is much higher than the cost of a lawyer and an arbitration trustee.