Out-of-court bankruptcy of citizens: where is the balance of interests?

On July 13, the second in a series of online conferences dedicated to bankruptcy was held by MCBA “Bureau of Lawyers “De Jure” together with the Dolg.RF portal and Rykov Group. The discussion focused on the draft law on out-of-court bankruptcy of citizens.

According to its author, Chairman of the State Duma Committee on Natural Resources, Property and Land Relations Nikolay Nikolayev, the draft is currently ready for consideration in the second reading. Deputies are waiting for a response from the Government of the Russian Federation. “We have simplified the procedure for filing an application for out–of-court bankruptcy as much as possible, – Nikolayev said. – It seems to me that even a five-year-old child can apply to the MFC, and if he can’t, then the center’s specialist will help them on the spot.” At the same time, if the creditor believes that the debtor who filed for bankruptcy is lying, and he himself is able to pay off the debts, then nothing prevents from filing a lawsuit to court. If it is obvious that the debtor is not creditworthy, then the out-of-court bankruptcy procedure will save the creditor money and time. Nikolayev’s speech caused a rather tough discussion and a lot of acute questions from the arbitration managers.  Responding to one of them, that the bill allegedly introduces an imbalance in the relationship “creditor-debtor”, the deputy said: “We have done our best to keep the balance of interests of debtors and creditors.  At the same time, let’s not forget that lenders often do not behave very correctly when offering loans to people. “

Moderator of the conference – Nikita Filippov, Head of MCBA “Bureau of Lawyers “De Jure”, noted that “such a bill is definitely needed to cope with the wave of bankruptcies that is coming to us.” According to the lawyer, last year the number of registered bankruptcy applications approached 100 thousand. This year, due to the economic problems associated with the pandemic, bankruptcy could affect several million Russians.  “Of course, even 10 thousand arbitration managers are not able to cope with such a wave,”- Filippov noted.

Lawyer of Rykov Group, Elena Kharlamova, recalled that only those who have from 50 to 500 thousand rubles of debt and in respect of whom the enforcement proceedings have been completed due to lack of property, will be able to take advantage of out-of-court bankruptcy.

Andrei Khokhlov, senior lawyer at the “De jure” Department of Legal Support for Bankruptcy of Credit and Financial Organizations, focused on the topic of enforcement immunity – the principle of the inviolability of the minimum property necessary for the existence of a citizen debtor and his family.

Vadim Makarichev, lawyer of “De jure”, shared his experience related to the sale of the debtor’s only home, which is not always modest.  In one case, creditors offered to put money on a court Deposit to buy a modest home for the debtor and then sell a house that they considered luxurious. In this case, the court did not allow this to be done. In another case, creditors achieved that the bankruptcy trustee in the framework of enforcement proceedings bought home for the debtor and put up for auction more expensive real estate. And when the debtor tried to challenge this decision, the court sided with the creditors, pointing out that the debtor owns two residential premises. “In my opinion, today there is hope that the Supreme Court will change its position on the sale of the debtor’s only home, provided that he will be given another home,” – Makarichev summed up.

The full recording of the online conference can be viewed on the “De Jure” YouTube channel