Bankruptcy of individuals: is it all that complicated? A clear guide for beginners

Individuals, that is, ordinary citizens, have been able to go bankrupt since 2015, with the introduction of amendments to Federal Law No. 127-FZ “On Insolvency (Bankruptcy).” After this, many are interested in how an individual can declare himself bankrupt before a bank, what needs to be done for this, and what requirements are imposed on an applicant for this status.

In fact, the procedure is quite complicated. The face must meet a number of characteristics. Otherwise, the court will not be able to accept the application and make an appropriate decision. It is also worth considering the consequences that may be extremely disadvantageous for some citizens.

Is it possible to declare bankruptcy on your own?

You can declare yourself bankrupt on your own, without the help of lawyers and other assistants! But you need to imagine what difficulties you will face, especially if you do not have a legal education. Our step-by-step instructions for bankruptcy of individuals will help you deal with this.

First, you will need to delve into the legal intricacies and study bankruptcy law.

Secondly, set aside time to run around the state. authorities, courts and banks.

But this is not a guarantee of successful completion of the bankruptcy procedure, since, let’s be honest, its outcome largely depends on the figure of the arbitration manager, and one can only guess how bankruptcy will end with the participation of a bankruptcy “from the street”.

“Unfortunately, in practice it happens that you will receive bankruptcy status, but the court will not write off your debts.”

In this article, we will try to ease the thorny path of writing off credit debts and warn you against the main mistakes of self-bankruptcy.

Bankruptcy conditions

So, the bankruptcy procedure itself is fully set out in Federal Law No. 127 “On Insolvency (Bankruptcy)”. However, to carry it out independently, it is necessary to clearly define the conditions under which the future bankrupt must qualify. We have already written an article about this “What are the conditions for bankruptcy of individuals.” Let's list the conditions briefly:

Condition No. 1. Your total debt must be at least RUB 500,000. In this case, the law itself obliges to go to court to declare yourself bankrupt. However, the Law also indicates that with a debt amount of 300,000 rubles. You have the right to go to court. But only if criterion No. 2 is present (see below).

Condition No. 2. You really must have a situation where you cannot pay (for example, you pay a monthly loan payment, however, the remaining income is barely enough for your minimum needs).

Condition No. 3. For loans, you must make at least 3 payments. Compliance with this criterion will allow you to confirm in court that your bankruptcy is not intentional. And your critical financial situation is just a series of life troubles. However, you can file for bankruptcy without having any outstanding loans, but in this case the court may have reasonable questions about the reasonableness of the bankruptcy procedure for individuals.

Bankruptcy through court

Bankruptcy can be voluntary, mandatory or forced. Voluntary completion of the procedure is carried out at the request of the debtor and for debts of 300 thousand rubles.

The obligation to declare insolvency arises if there is a debt of 500 thousand rubles and a 3-month delay. Forced bankruptcy is introduced at the request of creditors - when the bank initiates recognition of the borrower's insolvency.

Conditions in 2021

The bankruptcy procedure in court is carried out in two stages: through debt restructuring and sale of property. In both cases, the debtor is subject to the requirements provided for in Art. 213.13 No. 127-FZ and other regulatory documents.

To submit an application to the Arbitration Court in connection with insolvency, a person must meet the following criteria:

the amount of debt is more than 300 thousand rubles;
bankruptcy has not been declared against the citizen over the past 5 years;
no convictions for crimes in the field of economics;
the terms of punishment for court decisions related to administrative liability for intentionally causing damage to the property of third parties, petty theft, deliberate or fictitious bankruptcy have expired;
there was no fraud or dishonesty in the processing of the loans;
a person must be able to explain to the court that his property situation has deteriorated, and he is about to be unable to pay his debts according to the schedule previously agreed upon with creditors.

Bankruptcy of individuals is gaining popularity in 2021, and most often citizens are interested in what will happen if a person provided false information about their salary in an application for a bank loan or in a questionnaire on the MFO website.

Banks quite rarely end up in court because of “drawn” income certificates. If a person brings a fake certificate to the bank, but at the same time carefully pays the loan, then the bank does not care where he got the document with an inflated salary amount.

But banks check such certificates very actively. Through the Pension Fund, where the employer submits information about his employee’s pension contributions. If the amount of income in the certificate and contributions to the Pension Fund do not significantly match, then the bank will simply refuse the loan.

But problems may arise if an individual acts as a creditor, and the debt was issued against a receipt.

A possible bankruptcy scenario in which a citizen overstated official income or otherwise deceived creditors:

Banks do not report fraud, and the financial manager also does not show initiative. Debts are written off and the procedure is completed.
Example: official income of the debtor I.I. Petrov according to personal income tax-2 it is 20,000 rubles. When applying for the loan, 45,000 rubles per month was indicated. The lenders are Sberbank and Raiffeisenbank. Both creditors are included in the register of claims, but do not apply for verification of the debtor's good faith.
The procedure is completed, the person is declared bankrupt and relieved of obligations to pay loans
.
The deception is revealed at the initiative of the creditor. Bankruptcy is recognized, but debts are not written off.
The creditors are Sberbank, Raiffeisenbank with loan debts and the individual A.A. Ivanov. with a debt on receipt. All three creditors are included in the register. Ivanov A.A. demands to check why banks issued loans to a person with an income of only 20,000 rubles.
Banks raise a loan case; when studying the documents, it turns out that the debtor Petrov incorrectly indicated his income, unreasonably inflating the amount to 45,000 rubles. The actions are considered unfair. The procedure is completed, the person is declared bankrupt, but debts are denied write-off
. Petrov will repay the loans and debt under the receipt after the bankruptcy is completed.

Indicating unofficial income in an application for a loan or microloan is a crime. But it’s not so fatal that it would land you in jail. But we recommend that you consult with lawyers about what documents to collect to confirm good faith at the time of receiving a loan, and what to say in court.

In order to write off debts, several conditions must be met

You must prove to the court that you cannot pay the loans, but at the time when you took them out, there was no intention in your plans to deceive the bank or microfinance organization. In court, you will be heard by the judge himself, the financial manager and creditors. And the financial manager will tell you what and how to do. In case of simplified bankruptcy, you will have to take care of the accuracy of the documents submitted to the MFC yourself.

When to file for judicial bankruptcy?

Let's look at how and in what cases it is logical to recognize oneself as financially insolvent.

Bankruptcy at will.
Insolvency is recognized by an individual voluntarily, that is, the applicant is the debtor himself (a lawyer on his behalf). The value of the bankrupt's property is less than the amount of debts, and the income is not enough to pay creditors.
Important!
The bankruptcy estate is the property that will be sold at a bankruptcy auction to pay off the debt. The bankruptcy estate does not include the only housing and other property listed in Art. 446 of the Code of Civil Procedure of the Russian Federation: household items, equipment for work worth up to 10 thousand rubles, outbuildings and personal belongings.
Accordingly, if you own an old car worth 200,000 rubles and an apartment, and the amount of debt is more than 450,000 rubles, with an income of 15-20,000 rubles per month, it makes sense to apply for a judicial procedure.
The apartment will not be touched, but the car will be sold, but after that the debts will be written off completely. This is more profitable than trying to pay off debts on your own or taking out new loans to close old ones.
Read also: Inheriting a pension: conditions, terms and procedure
Forced bankruptcy.
Not only the debtor himself, but also his creditor, whose debt to whom exceeded half a million rubles, and the obligation has not been fulfilled for 90 days, has the right to apply for recognition of insolvency.
According to the law, if the debt amount is over 500 thousand rubles and there are no payments for 3 months or more, the debtor has the obligation to apply for his own bankruptcy. An individual in this situation must officially declare himself bankrupt without fail.
.
For cases where this does not happen and the citizen deliberately avoids submitting documents, liability is provided:
- administrative sanctions in the form of a fine;

Thus, according to the provisions of the Bankruptcy Law, you not only can, but in certain cases must go to court to recognize your financial insolvency.

Many debtors, realizing that they have nothing to pay and the situation will not improve in the near future, still delay filing documents for bankruptcy. Why? People can be understood - they are ashamed to admit that they have taken out loans, but cannot service them, they are under pressure from banks and debt collectors, and in the end the eternal maxim “what will my neighbors and colleagues say about me” comes up?

But such debtors are delaying the recognition of their bankruptcy in vain. Because economic processes in our country do not stand still, and under their influence the behavior of the creditors themselves changes.

In a few words, this change can be described as follows: they are becoming more demanding and picky towards debtors. As a result, it becomes more and more difficult to write off debts month by month, the terms of procedures are stretched out.

Creditors are looking for property practically with the involvement of detectives; they are actively protesting not only the transactions themselves that the debtor made three years before filing for bankruptcy. They even find fault with the fact that a person’s registration has changed if he was registered in a more expensive apartment before bankruptcy.

If previously it was believed that banks only sell completely bad debts to collectors, and collectors rarely sue citizens, since banks sold them illiquid assets, often with an expired statute of limitations, now this is no longer the case.

Banks and microfinance organizations began to get rid of overdue loans and loans rapidly, as soon as they crossed the 90-day mark. Lenders need to clean up their balance sheets to comply with regulatory standards.

What does this mean for the debtor? Often - by changing the creditor during the procedure, when collectors take the place of banks in the register of claims. And collectors, as creditors in court, are much more unmerciful to the debtor. The procedure is delayed, collectors insist on restructuring debts rather than writing them off, all property is carefully checked, and often things not listed in the inventory are found.

Financial managers say that over time, creditors become tougher, therefore, if debts have reached a critical level, there is no point in delaying bankruptcy, the problem will still not resolve “on its own.”

Consequences of bankruptcy and risks

So, we have decided on the conditions. If you qualify, then the next step is to weigh the risks of personal bankruptcy and become familiar with the consequences of the procedure. We have prepared a separate material on this topic: Consequences of bankruptcy of an individual.

The risks boil down to the loss of property (except for your only home), as well as the fact that the court will reveal signs of fictitious or deliberate bankruptcy and will not relieve you of debts.

And the consequences directly follow from Article 213.30 of Federal Law No. 127 of October 26, 2002, mainly a ban on holding managerial positions and restrictions on repeated bankruptcy.

Let’s move on directly to the steps necessary for self-inflicted bankruptcy.

We determine what documents are needed for bankruptcy of an individual

We determine a list of documents (the ability to download) that we need to prepare an application to the Arbitration Court and allocate time in our busy schedule to collect them, write an application and submit a package of documents to the court.

To go through the bankruptcy procedure for an individual, you will need the following documents:

Loan agreements
SNILS
TIN certificate
Certificates from place of employment in form 2NDFL
Pension Fund (PFR) (Information on the status of the personal account of the insured person for the previous three years through the territorial body of the PFR)
Copy of work book (To confirm the presence or absence of a place of work during a given period)
Account statement showing availability of funds

At the stage of collecting documents, we will also not focus our attention in this article, since we prepared step-by-step instructions: How to collect documents for bankruptcy in 10 days. After studying it, you will independently collect documents for bankruptcy in about two weeks.

Leave a request for a free consultation!

How does the bankruptcy procedure work for an individual?

In order to obtain bankrupt status in a bankruptcy case, the person concerned will need to meet a number of certain conditions before filing the appropriate bankruptcy petition with the branch. All of them are provided for by the Federal Law “On Insolvency (Bankruptcy)” of the Russian Federation.

Thus, a citizen must have a total debt amount for all loan obligations exceeding 500,000 rubles. This amount may be less. However, the individual will need to prove the fact of bankruptcy in the arbitration court.

Also, we must not forget about the period of delay. It should not be less than three months from the moment the last payment on loan obligations was made.

An individual may be declared financially insolvent by an arbitration court, provided that each time he pays his obligations, he is left with an insufficient amount of money for living. Its size should be less than the established standard of living wage, which is valid in the region in which the citizen lives.

One of the mandatory and basic conditions for declaring bankruptcy is the citizenship of the applicant. An insolvency case can only be opened against a citizen of the Russian Federation.

It will also be necessary to provide the court with sufficient evidence that the applicant, for some reason, cannot fulfill his obligations to creditors. This may be a certificate of injury or a serious diagnosis. Loss of a job due to staff reduction may also be grounds for going to court.

When making a decision, the arbitration court pays attention to the following aspects:

Borrower's good faith. So, the court should be clear that the citizen really made every possible attempt to independently deal with the resulting debt.
The applicant made no attempt to hide his property or any income. If this violation is detected, the judge will refuse to further file bankruptcy.
The citizen is actively looking for a new job. In this case, you will need to prove the fact that the borrower is registered in the vacancy exchange and is listed as unemployed.

Search for an arbitration manager

Arbitration, or financial manager, is the legal status of a citizen, which allows him to conduct bankruptcy proceedings. This is an independent figure, but at the same time, the outcome of the procedure, in particular debt relief, depends on him. It is appointed by the court based on the information that you provided in the bankruptcy application; this information is the name of the self-regulatory organization to which the applicant is a member.

When choosing a competitive one, it is important to pay attention to the following points:

Check candidate for disqualification
Managers are disqualified for violations of their work; if such an event took place, it is worth refusing to cooperate with this applicant;
Check the number of successfully completed bankruptcy procedures
This is one of the main indicators of the performance of the competition. After all, if he has already freed other citizens from their debts, he will probably be able to free you too, if, of course, he reaches certain agreements. Here you need to be careful, since this is still a special legal status and you should not offer him remuneration in any form.
Check the number of cases that the AU refused

If the AU refuses a large number of cases assigned to him, this is also a reason to think about it. After all, the next person who may be left to the mercy of fate may be you.

This is only a small part of the advice on choosing a manager; unfortunately, this issue cannot be covered in one article. Knowing your full name, you can check the financial manager here.

Preparing an application and sending documents to the court

Preparing an application is a technical process that you will definitely encounter if you go bankrupt on your own. On this issue, of course, it is easier to turn to professionals, but we are talking about independent bankruptcy, so I have attached a sample application and video instructions for filling it out.

After collecting documents and preparing an application, we carry out the following actions:

We attach a package of documents to the application, pay a state fee of 300 rubles, and deposit the Arbitration Manager’s fee of 25,000 rubles into the court’s deposit. and submit this set to the Arbitration Court at the place of permanent registration of the Debtor (1 day);
We are waiting for information from the court about accepting the application for consideration or about leaving the application without progress (in this case, it will be necessary to eliminate the shortcomings indicated by the judge) - (5-7 days);
Scheduling a court hearing (approximately 1 month from the date of filing the application);
We notify creditors by mailing them a statement of your bankruptcy.

Conducting a simplified insolvency procedure

The process will be “compressed” due to fewer steps taken during the procedure. A more accelerated stage usually goes through those individuals who do not have any income or expenses.

The following procedure can be distinguished:

The decision to liquidate was made voluntarily.
Appointment of a person to act as liquidator.
Entering relevant statements into the register.
Informing creditors and other persons interested in the current case.
Drawing up a current balance sheet.
Carrying out calculations of the entire amount of debt.
Submitting a statement of claim to the arbitration court to declare a person financially insolvent.
Adoption of an appropriate court decision.
The beginning of bankruptcy proceedings in the case under consideration.
Appointment of a bankruptcy trustee.
Conducting an assessment of property that rightfully belongs to the debtor.
Carrying out the sale of property at auction. However, the legislation provides for a certain number of properties that are not subject to sale. Thus, the borrower’s only home cannot be sold to pay off debts.

Stages of bankruptcy: Restructuring and implementation

So, if your application was accepted, and the financial manager agreed in writing to conduct bankruptcy proceedings for an individual, then after the first court hearing, the court will introduce one of two possible procedures: debt restructuring, or sale of property.

Restructuring – A court decision on your ability to pay off your debt in installments for a period of up to three years. In making this decision, the court relies on your income. Your task is to show the court that you are not able to pay creditors within three years, then you move to the stage of selling the property.

Sale of property - What we need. This stage is the very option for writing off debts. It is important to note that such property, like the only housing, is not subject to sale and sale, as well as household items and clothing. You must understand that property will be sold, in addition to the only housing, if any: cars, apartments, land plots, and so on.

Cost and terms of bankruptcy

As mentioned earlier, in the bankruptcy procedure there are mandatory payments, without which bankruptcy would be impossible in principle.

25,000 rubles is the remuneration of the financial manager at the initial stage;
300 rubles – state fee for filing an application with the Arbitration Court.
15,000 rubles – mandatory publication in the media about the bankruptcy of an individual and other expenses of the AU for the procedure, for example contributions to the SRO. (The insolvency practitioner is obliged to notify all your creditors by notifying them in this way).

It is important to understand that the court deposit in the amount of 25 thousand rubles. (AU remuneration) is paid for any stage of bankruptcy. That is, if at first a restructuring procedure was introduced against you, you pay the court deposit for the first time, if after it you go to the stage of selling the property, then you again pay 25 thousand rubles. Therefore, it is important to organize the case in such a way as to immediately go into the procedure for selling property , and without legal support this is not always possible.

If you do not have any property, except for the only housing, which the bankruptcy manager will not have to sell at auction, and also you have not had any transactions over the last three years, which the bankruptcy trustee is legally obliged to challenge, then the bankruptcy itself will last from 4 to 6 months . If there have been transactions or the property needs to be sold, the period will be extended.

Step-by-step instructions for the insolvency procedure for an individual

In the event that the debtor has definitely decided to declare bankruptcy, a certain procedure will need to be followed. It is regulated by law, which means it will not be possible to skip this process.

What actions must be taken by the interested individual:

Collection of documents. It is very important to prepare the most complete list of documentation. It is also necessary to ensure that each document meets all established requirements in the preparation of the relevant papers. Otherwise, consideration of the request will be denied.
Submitting an application. The claim must be filed in accordance with the form prescribed by law. The document must not contain any errors, and all information reflected in it must coincide with reality.

After a citizen files a corresponding claim, creditors must stop collecting funds. The arbitration court will check the documents provided to it within seven calendar months.

After the court considers the request, the applicant and creditors may be offered a procedure for restructuring the debt under the loan agreement. The corresponding schedule can be submitted by both the borrower and the lender.

It is important to pay attention to the fact that the period for carrying out restructuring and concluding a settlement agreement is limited. The schedule should not be drawn up for more than three years.

For one procedure, the applicant will need to pay for the work of a financial manager. The fee for this service will be 25,000 rubles. If a person does not have such money, then in order to be declared bankrupt, he can apply to the court for an installment plan to file the bankruptcy of an individual.

Pros and cons of bankruptcy

The main advantages of bankruptcy include:

Debt cancellation. Perhaps the most significant plus, for the sake of which the procedure is most often initiated.
Stopping the growth of debts, penalties and fines.
Termination of all restrictions that were previously imposed due to debts, including a ban on traveling to another country.
Freedom from pressure from collectors.

The disadvantages include:

loss of property that is subject to sale;
the possibility of the court challenging various transactions made over the last 3 years before bankruptcy.

It is also worth noting that a person declared bankrupt cannot hold leadership positions for 5 years after the procedure is completed.

What package of documents must be attached to the application?

When filing a statement of claim with a request to officially declare a citizen bankrupt, the following bankruptcy documents must be attached:

Marriage certificate.
Certificate of divorce.
Certificate of guardianship.
Child's birth certificate.
SNILS.
TIN.
Written evidence that the citizen actually has the debt that he claims.
The circumstances on the basis of which the debt arose.
If there are debts as a result of the court, you will need to provide the relevant court decisions.
Information about the income received by the applicant over the last three years.
Information about all completed transactions with the debtor’s property over the past 3 years.
Information about the cash flow of an individual.
Passport.
Marriage agreement.
Information about the presence/absence of individual entrepreneurs.
A complete list of the property that rightfully belongs to the borrower. Even if the debtor owns only a certain share, he will also need to provide information about this.
Evidence that the property actually belongs to the debtor.
Statement of a citizen's personal account.
Bank statements.
Certificate of income.
Credit agreements. You will need to indicate absolutely all creditors.
An inventory of property that belongs to the debtor.
Medical certificates confirming the presence of injury, illness, etc.
If the debtor has any shares, he will also need to provide the relevant extract from the register to the authorized body.