Source: https://ceelegalmatters.com/index.php/over-the-wire/legal-ticker-deals-and-cases-in-cee/2-legal-ticker-deals-and-cases/4154-borza-associatii-schoenherr-and-tuca-zbarcea-involved-in-disputes-between-hidroelectrica-alpiq-and-alro-in-romania
Timestamp: 2019-01-20 01:53:38
Document Index: 225372831

Matched Legal Cases: ['Art. 6', 'Art. 213', 'Art. 213', 'Art. 213', 'Art. 213', 'Art. 213', 'Art. 446', 'Art. 213']

CEE Legal Matters - The Latest Trend in Russian Insolvency Law: Individual Bankruptcy
The Latest Trend in Russian Insolvency Law: Individual Bankruptcy
Previous Article Real Estate and Insolvency in Russia: General Issues and Recent Changes
Next Article Laws on Arbitration Reform in Russia Adopted
Following many years of fierce discussions and opposition from the banking lobby, Russian lawmakers finally decided in June 2015 to allow individuals to declare themselves bankrupt. Before the amendments, the Federal Law of 26.10.2002 N 127-FZ “On Insolvency (Bankruptcy)” (the “Insolvency Law”) allowed individual insolvency for private entrepreneurs only.
The new version of the Insolvency Law, which has been in force since October 1, 2015, may not have come at the best of times, as the economy is in a recession and banks hold around one trillion rubles (approximately USD 12.5 billion) in overdue consumer loans. Of course, not all of those are expected to go bankrupt. Still, the scale of the consequences is still uncertain.
Although the general norms of the Insolvency Law apply to individuals as well, many specific regulations should be kept in mind. Unlike with the insolvency of a legal entity, where the minimum amount of claims should be no less than RUB 300,000 (approximately USD 3,750), for instance, Art. 6 of the Insolvency Law raises the bar for individuals to RUB 500,000 (approximately USD 6,250). The debts should be overdue by three months at least and confirmed by a court resolution, or should be based on credit institutions’ demands, taxes and other state duties, notarized deeds, or alimentary obligations (Art. 213.5).
The application/bankruptcy petition shall be submitted by the debtor or his creditors to the Arbitration (Trade) Court at the debtor’s place (region) of residence. The applicant shall pay the insolvency fee of RUB 6,000 (approximately USD 75) plus RUB 10,000 (approximately USD 130) to the relevant court in order to secure the wages of financial managers.
The court shall evaluate the debtor’s financial and other conditions and come to a conclusion regarding his/her ability or inability to pay the amounts demanded. Once all the documents have been submitted and the debts have been confirmed, the court shall start the procedure of debt restructuring. Its decree shall be issued within three months of the date when the application was admitted to examination (Art. 213.6 of the Insolvency Law).
Creditors have two months within the debt restructuring procedure to submit their demands. Unlike the procedure for legal entities, the deadline can be revised or the claims can be submitted during the procedure of debt restructuring (Art. 213.19, 213.14). Within sixty days of the expiration of the period for submitting creditors’ claims, a financial manager must hold the first creditor’s meeting (Art. 213.12). The court may, however (and most certainly will), extend the period for almost every procedure, since examination of the claims takes quite some time.
The first creditors’ meeting approves the debt restructuring plan, which is then subject to court approval. However, the plan may be amended afterwards on the debtor’s or the creditors’ initiative.
Should no restructuring plan be approved, the court will issue a resolution declaring a person bankrupt, which is followed by the disposal of the debtor’s assets in order to arrange settlements with creditors. The asset disposal should generally be finished within six months.
Some debtor property may not be put on sale, including the debtor’s only housing, individual belongings, foodstuffs, and money in an amount not to exceed the minimum cost of living. (Art. 213.25 of the Insolvency Law and Art. 446 of the Civil Procedural Code).
Assets for sale or money for settlements with creditors may be obtained through challenging the debtor’s transactions (including marriage contracts and other means of disposal of property) made within three years before he/she was declared bankrupt. This option is the most interesting for creditors, because during general enforcement proceedings, creditors do not have legal instruments to challenge the debtor’s transactions related to the disposition of his/her property, even when the only purpose of the disposition was to infringe creditor interests.
Once the disposal procedure for assets is finalized (and creditors’ interests are settled proportionally), the debtor shall be deemed relieved of any obligations, including those not claimed within the insolvency procedures. This does not apply to debtors who were abusing their rights and avoiding their obligations, or those who provided false information regarding their property or hid assets (Art. 213.28 of the Insolvency Law).
As we can see from the above, the insolvency procedure for individuals can be quite long and complicated and has many nuances, which is generally true for the insolvency of legal entities as well. Nevertheless, both creditors and debtors seem to be interested in the new option: on the first day the new amendments to the Insolvency Law were in force, as many as 112 petitions for individual bankruptcy were received by the Arbitration Court of Moscow alone. It remains to be seen what the effect will be; however, it is already clear that the demand for insolvency professionals will grow in the near future in Russia.
By Marina Tarnovskaya, Partner and Director, Peterka & Partners Russia