Bankruptcy of natural persons: application difficulties. "Delovoy Peterburg", 31 May 2017

Since the 1st of October 2017 those people who owe more than half a million roubles, exceeded the payment deadline for 90 days and are unable to settle with their creditors, received a lawful opportunity to be recognized as bankrupts: either to write off their debts, or to restructure them for up to 3 years. This law was meant to ease the unbearable debt burden for conscientious debtors who became unable to repay all their debts due to circumstances, and to enlarge opportunities for creditors to settle problem debts, and to speed up all procedures.

But practice turned out otherwise. Experts emphasize that according to different estimates only 3-5% of people that met legal requirements for initiation of the bankruptcy procedure, managed to start considering their applications of bankruptcy recognition. One of the key reasons for such a low effectiveness of this institution is that at present the bankruptcy procedure is pretty expensive for most of the debtors.

Bankruptcy procedure for people is really expensive for many of those who would like to use it. It could become more attractive due to the changes in the legislation on bankruptcy. The legal community is well aware of the problem and legislature is persistently informed about it and that caused a drop in the duty on bankruptcy application for natural persons on the 1st of January 2017. Now the duty is equal to 300 roubles instead of 6 thousand.

The Ministry of Economic Development (MED) and the Russian Union of Self-Regulatory Organizations of Arbitration Managers (RUSROAM) have already worked out draft changes in the federal law "On insolvency (bankruptcy)". Both drafts suggest a more simple bankruptcy procedure for a special kind of debtors who should match several criteria.

The key difference between these two drafts is that according to the MED project it will be possible not to use a financial manager in the simplified bankruptcy that will considerably reduce expenses. RUSROAM suggests reducing the role of a manager in this procedure and decreasing their rewards but not giving up their services at all. Otherwise financially incompetent people will have to carry out the whole bankruptcy procedure by themselves. Legislators should thoroughly examine the bills in order to create a single law that will enable to solve these problems in the best possible way.

I would like to make one more change in the law on bankruptcy: bankrupts should be allowed to delay reward payments to financial managers for one year since the beginning of the bankruptcy procedure on condition that the natural person's income allows to save a required sum with monthly remittance not exceeding 20% of the income. This change is meant to make the institution of bankruptcy for natural persons more reasonable.

Anton Imennov, Managing Partner of Pen & Paper Moscow Office