Federal Law 127 on financial insolvency. Current judicial practice

The federal bankruptcy law was adopted by the State Duma almost 15 years ago. Since then, dozens of changes have come into force, which, taken together, have shaped this legal act in the form in which it is considered today by lawyers and in courts.

The very first article states that the current federal law regulates the issue of debtor insolvency. For example, it is this normative act that determines whether the grounds for declaring bankruptcy are sufficient. It also covers the following issues:

• Conditions for the application of certain measures to prevent insolvency;
• The procedure for conducting bankruptcy proceedings;
• Relationships that arise when you are unable to pay a debt;
• Write-off of existing debt.

This Federal Law applies primarily to legal entities. Many issues of this act are described in accordance with the Civil and Criminal Codes.

Federal Law 127 on bankruptcy and insolvency

The current federal bankruptcy law is the main regulatory act in the Russian Federation, which establishes specific grounds for declaring a legal entity bankrupt and possible debt write-off. The Federal Law on Insolvency is currently one of the most important regulations for the country's economy.

The basic concept of “insolvency” was deciphered by the current Federal Law as the recognized inability of the debtor to fully satisfy the demands made by creditors, to fulfill the conditions for payment of wages, severance pay and other obligations.

In total, the federal bankruptcy law has ten main chapters:

• Insolvency prevention;
• Litigation of cases in arbitration court;
• Observation;
• Financial recovery and its conditions;
• External control;
• Bankruptcy proceedings;
• Settlement agreement;
• Features of the procedure for individual categories;
• Bankruptcy of a citizen.

In addition, this legal act contains basic provisions with definitions, as well as final provisions.

Latest changes to Federal Law 127 for individuals

We list the main conditions that were changed in this legal act during its last consideration:

If previously the minimum insured amount under the contract of compulsory liability insurance of the arbitration manager was equal to 3 million rubles per year, now it has increased to 10 million rubles per year;

If in the issue of developer insolvency the concept of an unfinished apartment building was previously present exclusively, then from now on another one has been added to the text - a residential building of blocked development.
The mentioned additions were made already in 2017.

Changes in the bankruptcy law for legal entities

If you study history, this federal law became the third of its kind regulating the procedure for recognizing bankrupt status. This federal law made numerous changes in insolvency matters. Unlike previous editions, the main conditions and points from the Federal Law were introduced into the Criminal Code of Russia.

It gave more rights to self-regulatory organizations. If previously the state took upon itself to write off debt and other components of the process of managing an insolvency case, now the position of an insolvency administrator has been introduced. The provisions also stated that the practice of so-called sudden bankruptcy would cease.

How to declare yourself bankrupt under law 127

By receiving this status, the debtor hopes to have the debt written off. However, it is worth understanding that debt cancellation is possible only through the sale of the enterprise’s property and other sanctions. Debt write-off and other issues, in accordance with the current regulations, are dealt with by bankruptcy trustees.

According to the current federal insolvency law, the bankruptcy procedure starts with the filing of an application by the debtor. Although there is no condition that the debtor is obliged to submit an application. The creditor also has this right. The first stage of the bankruptcy confirmation procedure is to determine the level of solvency. Whether there are grounds for bankruptcy is determined within three to four months.

The current federal bankruptcy law also establishes a mandatory second stage - financial recovery. This procedure is aimed at saving a legal entity. As it progresses, some debts are being restructured and even written off, and the arbitration court is approving a new payment schedule.

Next, the court may appoint a manager for a period of up to one and a half years. Fines and penalties for debts will not be assessed during this time. It is at this stage that the court can finally recognize the debtor’s compliance with the conditions of insolvency and initiate bankruptcy proceedings.

Federal Law of the Russian Federation dated October 26, 2002 No. 127-FZ “On Insolvency (Bankruptcy)” is a key legal act, based on the provisions of which the court can declare a legal entity or individual bankrupt, as well as make a number of decisions related to the recognition of insolvency. (Find out everything about bankruptcy of legal entities)

It is one of the main links in the entire system of the domestic economy. Bankruptcy (insolvency) is the inability of a person to pay debts for loans or to make mandatory government payments, legally recognized by the court.

Description of Federal Law 127 on bankruptcy

The initiative to restore order in the country's economy at the turn of the 1990s-2000s came from V.V. Putin. In his comments, the President actively called for this. It was his desire to restore order in the field of bankruptcy that served as the starting point for the publication of the corresponding legal act. As a result, at the end of 2002, the previous law on insolvency (bankruptcy) was replaced by one with the same name.

The new law consists of several main elements. So he reveals in the content of his articles:

• general provisions of the procedure for declaring a person bankrupt,
• measures to prevent bankruptcy,
• procedure for proceedings in arbitration court,
• the process of challenging the debtor's transactions,
• liability of officials and other persons in bankruptcy cases,
• procedures for monitoring, financial recovery, external management, bankruptcy proceedings, etc.,
• procedure for concluding a settlement agreement.

In addition, Federal Law 127 distinguishes between the insolvency (bankruptcy) of individual Russian citizens and legal entities, while dividing them into different categories of debtors. It is also necessary to note that the bankruptcy law is subject to regular changes, but its essence does not change. So the latest changes were made at the end of July 2017.

Bankruptcy of legal entities

In modern economic conditions, the question of... This section will discuss just that.

In the case when a legal entity cannot pay its existing bills, while its management does not see the prospects and further ways of developing the organization, a huge debt arises, which becomes impossible to repay. Debts arise both to creditors and to employees.

The insolvency of a legal entity is recognized in court. The initiator of this proceeding can be any of the parties interested in this. By court decision, anti-crisis procedures (monitoring, financial recovery, and others) may be applied to a legal entity. In addition, a liquidation procedure may be applied to the legal representative. As a result, management of the enterprise passes to a special manager, the accrual of interest on debts ceases, and the activities of all former managers also cease. During these activities, all existing debts are gradually repaid from the property of the legal entity.

The consequences of bankruptcy of legal entities are not serious. since those who are not deprived of the right to engage in entrepreneurial activity

Bankruptcy of individuals under the new law

The Insolvency (Bankruptcy) Law of 2002 has undergone significant changes. Thus, the amendments of 2017 led to the fact that it even began to be characterized as New bankruptcy law.

The new bankruptcy law establishes that a citizen can go bankrupt for those persons who have large debts to other individuals or legal entities.

Adopted by the State Duma on September 27, 2002. Approved by the Federation Council on October 16, 2002.

Chapter I. General provisions

ARTICLE 1. RELATIONS GOVERNED BY THIS FEDERAL LAW

1. In accordance with the Civil Code of the Russian Federation, this Federal Law establishes the grounds for declaring a debtor insolvent (bankrupt), regulates the procedure and conditions for implementing measures to prevent insolvency (bankruptcy), the procedure and conditions for conducting bankruptcy procedures and other relations arising when the debtor is unable to satisfy in full the requirements of creditors.
2. This Federal Law applies to all legal entities, with the exception of state-owned enterprises, institutions, political parties and religious organizations.
3. Relations related to the insolvency (bankruptcy) of citizens, including individual entrepreneurs, are regulated by this Federal Law. The rules that regulate the insolvency (bankruptcy) of citizens, including individual entrepreneurs, and are contained in other federal laws, can be applied only after making appropriate changes and additions to this Federal Law.
4. If an international treaty of the Russian Federation establishes rules other than those provided for by this Federal Law, the rules of the international treaty of the Russian Federation apply.
5. The provisions of this Federal Law apply to relations regulated by this Federal Law with the participation of foreign persons as creditors, unless otherwise provided by an international treaty of the Russian Federation.
6. Decisions of foreign courts in cases of insolvency (bankruptcy) are recognized on the territory of the Russian Federation in accordance with international treaties of the Russian Federation.
In the absence of international treaties of the Russian Federation, decisions of courts of foreign states in cases of insolvency (bankruptcy) are recognized on the territory of the Russian Federation on the basis of reciprocity, unless otherwise provided by federal law.
***
Chapter IX. Peculiarities of bankruptcy of certain categories of debtors - legal entities

§ 1. GENERAL PROVISIONS

Article 168. General provisions for bankruptcy of certain categories of debtors - legal entities

The provisions of this Federal Law governing the bankruptcy of debtors - legal entities, unless otherwise provided by this chapter, apply to relations related to the bankruptcy of city-forming, agricultural, financial organizations, strategic enterprises and organizations, as well as subjects of natural monopolies.
***
§ 4. BANKRUPTCY OF FINANCIAL ORGANIZATIONS

Article 180. Regulation of bankruptcy of financial organizations

This Federal Law applies to relations related to the bankruptcy of financial organizations (credit organizations, insurance organizations, professional participants in the securities market) with the specifics established by the federal law on the insolvency (bankruptcy) of financial organizations.
Article 181. Grounds for declaring a credit organization bankrupt
1. The grounds for declaring a credit organization bankrupt are determined by the federal law on the insolvency (bankruptcy) of credit organizations.
2. An application to declare a credit organization bankrupt is accepted for consideration by the arbitration court after the Bank of Russia revokes the credit organization’s license to carry out banking operations, unless otherwise provided by the federal law on the insolvency (bankruptcy) of credit organizations.
Article 182. Bankruptcy procedures for credit organizations
1. Based on the results of consideration of an application to declare a credit organization bankrupt, the arbitration court may make one of the following decisions:
— on declaring a credit organization bankrupt and on opening bankruptcy proceedings;
— on refusal to declare a credit organization bankrupt.
2. If the arbitration court makes a decision to declare a credit organization bankrupt, bankruptcy proceedings are carried out in the manner established by this Federal Law, taking into account the specifics provided for by the federal law on the insolvency (bankruptcy) of credit organizations.
3. The bankruptcy trustee, within ten days from the date of the arbitration court’s ruling on the completion of bankruptcy proceedings, must submit the said ruling to the body carrying out state registration of legal entities.
Article 183. Consideration of a bankruptcy case of an insurance organization
1. When considering a bankruptcy case of an insurance organization, a person participating in the arbitration process in a bankruptcy case, along with other persons specified in Article 35 of this Federal Law, is recognized as a federal executive body authorized by the Government of the Russian Federation to supervise insurance activities.
2. An application for declaring an insurance organization bankrupt may be submitted to the arbitration court by the debtor, bankruptcy creditor, or authorized body.
3. If bankruptcy procedures are introduced in relation to a debtor - an insurance organization in the manner established by this Federal Law, the debtor or bankruptcy trustee is obliged, within ten days from the date of introduction of the monitoring procedure or bankruptcy proceedings, to notify the federal executive body authorized by the Government of the Russian Federation to carry out supervision for insurance activities, on the introduction of appropriate bankruptcy proceedings against the debtor.
Article 184. Sale of the property complex of an insurance organization
1. The sale of the property complex of an insurance organization can be carried out during external management according to the rules provided for in Article 110 of this Federal Law, and taking into account the requirements of federal laws regulating insurance activities.
During bankruptcy proceedings, the property complex of an insurance organization can be sold only with the buyer’s consent to accept insurance contracts that have not expired and for which the insured event did not occur on the date the insurance organization was declared bankrupt.
2. The buyer of the property complex of an insurance organization can only be an insurance organization that has a license from the federal executive body for supervision of insurance activities to carry out the corresponding type of insurance and has assets sufficient to fulfill the obligations under the insurance contracts assumed.
3. In the event of the sale of the property complex of an insurance organization during external management, all rights and obligations under insurance contracts are transferred to its buyer, under which, on the date of sale of the property of the insurance organization, the insured event did not occur.
Article 185. The right of claim of policyholders in the event of bankruptcy of insurance organizations
1. If an arbitration court makes a decision to declare an insurance organization bankrupt and to open bankruptcy proceedings, all insurance contracts that were concluded by such an organization as an insurer and for which the insured event did not occur on the date of adoption of this decision are terminated, except for the cases provided for in paragraph 1 Article 184 of this Federal Law.
2. Insureds or beneficiaries under insurance contracts terminated on the grounds provided for in paragraph 1 of this article have the right to demand the return of part of the insurance premium paid to the insurer in proportion to the difference between the period for which the insurance contract was concluded and the period during which it was valid, if otherwise not provided by federal law.
3. Insureds or beneficiaries under insurance contracts under which the insured event occurred before the arbitration court made a decision to declare the insurance organization bankrupt and to open bankruptcy proceedings have the right to demand insurance payment.
Article 186. Satisfaction of claims of third-priority creditors
1. If the arbitration court makes a decision to declare an insurance organization bankrupt and to open bankruptcy proceedings, the claims of third-priority creditors shall be satisfied in the following order:
- first of all - the requirements of the insured, beneficiaries under compulsory personal insurance contracts;
- secondly - the claims of beneficiaries and policyholders under other compulsory insurance contracts;
- in the third place - the claims of the insured, beneficiaries, policyholders under personal insurance contracts, including the claims provided for in paragraph 2 of Article 185 of this Federal Law;
- fourthly - the claims of other creditors.
2. The claims of creditors secured by a pledge of the debtor's property are satisfied in the manner established by Article 138 of this Federal Law.
Article 187. Peculiarities of regulating bankruptcy of professional participants in the securities market
1. When considering a bankruptcy case of a professional participant in the securities market, the arbitration court has the right to involve in the case the federal executive body for regulation of the securities market and the corresponding self-regulatory organization in the securities market.
2. An arbitration manager participating in a bankruptcy case of a professional participant in the securities market must have an appropriate certificate issued by the federal executive body regulating the securities market.
3. Features of bankruptcy procedures for professional participants in the securities market that are not regulated by this paragraph, as well as measures to protect the rights and legitimate interests of clients of professional participants in the securities market may be established by federal law.
4. If bankruptcy procedures are introduced in relation to a debtor who is a professional participant in the securities market in the manner established by this Federal Law, the arbitration manager is obliged, within ten days from the date of introduction of bankruptcy procedures, to send a corresponding notification to the federal executive body for regulating the securities market papers, a self-regulatory organization of which the professional participant is a member, and the clients of the professional participant.
The notice sent to clients of a professional participant proposes to give instructions on actions to be taken with securities owned by the client.
5. The provisions of this article and Articles 188 and 189 of this Federal Law do not apply in the event of bankruptcy of a credit organization that is a professional participant in the securities market, except for cases where the credit organization is a professional participant in the securities market carrying out depository activities.
Article 188. Restrictions on transactions by a professional participant in the securities market
Restrictions on transactions or operations to record rights to securities by a professional participant in the securities market when bankruptcy procedures are applied to him, with the exception of bankruptcy proceedings, do not apply to transactions with securities of his clients or operations to record rights to securities carried out under instructions from clients and confirmed by clients after the initiation of bankruptcy proceedings.
Article 189. Features of external management and bankruptcy proceedings of a professional participant in the securities market
1. During external management, the arbitration manager, with the consent and on behalf of the debtor’s clients, has the right to transfer securities managed, in the possession of a professional participant in the securities market, stored and (or) registered with him, to another organization that has the appropriate license of a professional participant securities market.
2. Securities and other property of clients, including funds belonging to them and located in a special brokerage account of a professional participant in the securities market carrying out brokerage activities, are not included in the bankruptcy estate. Also not subject to inclusion in the bankruptcy estate are funds and securities that are part of special funds designed to reduce the risks of non-execution of transactions with securities and formed by trading organizers or clearing organizations.
3. From the moment of the introduction of external management or bankruptcy proceedings, client securities that are under management, in the possession of a professional participant in the securities market or accounted for by a professional participant in the securities market are subject to return to clients, unless otherwise provided by the agreement of the owner of the specified property with the debtor or arbitration manager .
If there is no client consent to the transfer of registered securities accounted for by the debtor to another organization that has the appropriate license as a professional participant in the securities market, the accounting data is transferred to the professional participant in the securities market that maintains the register of owners of such securities.
4. If clients’ demands for the return of securities of one type (one issuer, one category, one type, one series) belonging to them exceed the number of these securities at the disposal of a professional participant in the securities market, the return of such securities is carried out in proportion customer requirements.
The amount of funds belonging to each client and subject to return in a special brokerage account is established on the basis of the accounting records of a professional participant in the securities market carrying out brokerage activities.
Clients' claims that are not satisfied are recognized as monetary obligations and are satisfied (repaid) in the manner prescribed by Chapter VII of this Federal Law.
5. In the event of bankruptcy proceedings being introduced against a professional participant in the securities market that stores and (or) records the rights to securities belonging to its clients, the professional participant in the securities market is obliged to transfer these securities to another professional participant in the securities market specified by the client.
6. In the event of the introduction of bankruptcy proceedings in relation to a professional participant in the securities market maintaining a register of owners of registered securities, a register of owners of shares of a mutual investment fund, a register of participants in a non-state pension fund or a register of creditors’ claims, such a professional participant in the securities market is obliged within a month from the date of commencement of bankruptcy proceedings, transfer the information and documents included in such registers to another professional participant in the securities market, indicated by the client or the arbitration manager.
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President of the Russian Federation V. Putin

The level of overdue debt in Russia is constantly growing every year. So, in order to help ordinary citizens get out of the “debt hole” and save them from harsh “cooperation” with collectors, a special law on bankruptcy of individuals was developed. In the Russian Federation, it has been in force since October 1, 2015 under the number 127-FZ and is still relevant for 2019.

Main norms

Federal Law No. 127 on bankruptcy of individuals (more precisely, changes to this law under Federal Law No. 476) appeared in connection with the adoption of relevant amendments to the previously approved insolvency law. As a result, not only individual entrepreneurs and legal entities, but also ordinary residents of the state who have a huge debt burden and are unable to fulfill their obligations to creditors, partners, and other authorized bodies can now apply to the Arbitration Court for bankruptcy proceedings. The formal process may result in complete forgiveness of the borrower's debts.

The main rules regarding bankruptcy of a citizen are covered in Chapter X of the current law (Articles 213.1 - 213.32). Let us note that bankruptcy of individuals is applicable in our country for foreign citizens, if appropriate conditions exist. For example, a Belarusian who received a loan from a Russian bank may be declared bankrupt based on “local” legislation.

The legislator has defined clear requirements for debtors to prove their insolvency, the procedure for completing the procedure, and the methods used to resolve issues with creditors. The law assigns a special role to the financial manager, who, for a fee, carries out all the necessary stages of the bankruptcy procedure.

Necessary requirements for a citizen

The Law on Bankruptcy of Individuals allows not only the debtor himself, but also the bankruptcy creditor, as well as authorized bodies, to apply to the Arbitration Court to declare an individual bankrupt. This is evidenced by clause 1 of Art. 213.3 Federal Law No. 127.

In order for the court to consider an official request, the debtor must meet a number of requirements reflected in the same article (clause 2), namely:

1. Have a total debt on one or more loans of at least 500,000 rubles.
2. Fail to fulfill the demands of creditors within 3 months from the date on which they had to be fulfilled.

Bankruptcy debt bar - features

The Federal Law on Insolvency and Bankruptcy of Individuals is interpreted somewhat illiterately on many legal websites. So, as stated above, the amount of debt of a potential bankrupt must be at least 500,000 rubles, however, in the same law in Art. 213.6 there are other prerequisites for recognizing a citizen as an insolvent person, for example:

1. The borrower has completely stopped making payments to creditors.
2. More than 10% of all obligations and duties of the debtor were not fulfilled by him within a period of more than 1 month from the date required to repay the debt.
3. The amount of a person's total debt exceeds the value of his legal property.

The court also has the right to assign “bankrupt” status to a citizen who has no property at all. It turns out that the court is considering a number of comprehensive explanations confirming the real insolvency of an individual, and not just those specified in Art. 213.3 Federal Law No. 127, the debt threshold is 500,000 rubles and above. Conclusion - read the Federal Law on Bankruptcy of Individuals as amended for 2019 more carefully.

Jurisdiction - place of sending the application

Let's turn to Art. 213.4 of the law on bankruptcy of individuals. It states that to begin the bankruptcy procedure, you must submit an application to the Arbitration Court at your place of residence. This can be done if it is impossible to fulfill the demands of one or more creditors, as well as if the debtor was able to foresee the fact of his bankruptcy in the presence of certain circumstances.

We note that based on clause 2.1 of Art. 213.4, before submitting an application to the court authorities, individual entrepreneurs should publish in advance (at least 15 days in advance) a preliminary notice to the EFRS that it is planned to file a paper declaring the individual entrepreneur bankrupt.

The application will need to be accompanied by many other documents, the list of which contains clause 3 of Art. 213.4 of Law No. 127. For a sample application, see our website.

Selecting an arbitration manager

Based on Art. 34 and art. 2 of the law on bankruptcy of individuals under the current edition, we will define an arbitration manager: this is a citizen of the Russian Federation who is a member of the SRO of arbitration managers. They can be:

1. Temporary – conducts observations.
2. Administrative – deals with financial recovery.
3. External – assigned for external control.
4. Insolvency – works on insolvency proceedings.
5. A financial manager is a direct participant in a citizen’s bankruptcy case.

A representative of the law is appointed by the arbitration court, i.e. The debtor himself essentially does not take part in the selection of a candidate for the “position” of an arbitration manager, but, as a rule, the court selects the manager who is part of the SRO registered by the debtor in the bankruptcy application. Setting the goal of finding a financial manager is pointless. Please note that in the largest self-regulatory organizations the number of managers is over 140 people, and the court will independently decide which of them to appoint.

The law does not allow people interested in the potential bankrupt or creditors to get into the case. It is also possible to replace the arbitration manager in accordance with clause 4 of Art. 45 Federal Law based on a request from the applicant.

Important articles of the law on bankruptcy of individuals

Let us recall that document No. 154, the Federal Law on Bankruptcy of Individuals, adopted on June 29, 2015, became invalid as of October 1, 2015, therefore, when considering the most important points of the procedure, we will continue to refer to Federal Law No. 127. So, a potential bankrupt should know what type of bankruptcy procedures are applied in the case. Their list is set out in Art. 213.2 of the current law, namely:

1. Debt restructuring.
2. Sale of property.
3. Settlement agreement.

An equally important article in the document is Art. 213.9, which spells out the definition and features of the work of a financial manager. According to paragraph 1, his participation in the case is mandatory, but he will not work for free, but for a fee (a fixed amount - 25,000 rubles and the amount of interest - is established depending on the requirements of the creditors), paid by the debtor.

Next you should pay attention to Art. 213.11 of the law, which indicates the consequences of introducing a debt restructuring plan and at the same time study in detail Art. 213.14, which sets out the contents of this plan. Art. 213.25 and art. 213.26 cover in detail issues related to the debtor’s property subject to sale.

Also, while flipping through the pages of Federal Law No. 127, carefully read Art. 213.30 of the law on bankruptcy of individuals. She will tell you what the consequences of recognizing an individual as an insolvent person - bankrupt.

Bankruptcy procedure in practice. Step-by-step instructions.

Perhaps the most common question in legal practice regarding this is how is this procedure carried out, what are the features, stages, deadlines? Let's figure it out. You have made an informed decision to begin legal proceedings to obtain bankrupt status. You will need to follow a certain pattern, but first, remember if you are related to the following actions:

1. Conclusion of a marriage agreement on division of property, alimony, etc.
2. Drawing up a purchase and sale agreement, donation of personal property for the last 3 years.
3. Appointment of a debtor as a founder in a particular company at any time.

The above will have a serious impact on the progress of bankruptcy proceedings, if any. Now, specifically, how the process works in practice:

As for the timing, much depends on the procedure prescribed by the court. If we are talking about restructuring – up to 6 months. The sale of property involves a period of 4 to 6 months. An important role in the timing of the entire process is played by the financial manager and the judge, i.e., if you find a responsible, executive manager, then everything will go as quickly as possible for you and your creditors.

Cost of the procedure

We indicated above that payment for the services of a financial manager is borne by the debtor and amounts to 25,000 rubles plus 2% of the amount of creditors’ claims (in case of debt restructuring), 2% of the proceeds from the sale of property. In addition, the bankrupt is charged the following fees:

1. State duty – 6,000 rubles.
2. Postage costs - 1,000 - 4,000 rubles.
3. Other possible expenses: amounts to be paid to witnesses, translators (if necessary), specialists, lawyers, etc.

You can contact specialized legal companies that provide special service packages, for example: “Preparation for bankruptcy”, “Turnkey bankruptcy”, etc. The price of services is considered on an individual basis.

After bankruptcy

So, the debtor of banks, microfinance organizations and other possible bodies has been declared bankrupt. Now creditors will demand repayment of the debt according to the court decision to the maximum. The stage of sale of the bankrupt's property (if any) occurs in several stages. We note that in Art. 213.25 describes that all the property of a citizen available on the date of the court decision is included in the bankruptcy estate with the exception of property that cannot be foreclosed on, for example, the debtor’s only apartment, the land plot on which his only house or share of housing is located.

After a citizen is declared bankrupt, all issues regarding the sale of his property will be decided by the financial manager. Calls from collectors and the growth of debt obligations stop at the stage of announcing the procedure in accordance with clause 5 of Art. 213.25 Federal Law.

Features of the sale of the debtor's property

The property of the debtor or part of it after declaring a citizen bankrupt is sold at special auctions, as specified in paragraph 3 of Art. 213.26 Federal Law, unless otherwise provided by decision of the meeting of creditors. Jewelry and various luxury items (movable or immovable property) with a cost of 100,000 rubles or more are also subject to sale at open auction. The procedure for selling collateral is described in Art. 110, in paragraph 3 of Art. 111, as well as in Art. 134 Federal Law. It is noteworthy that according to clause 5 of Art. 213.26 property that the financial manager was unable to sell is returned to the bankrupt under a transfer and acceptance certificate.

The process of inventory, assessment and sale of the debtor’s property must be noted by the manager in reports to creditors, citizens and other authorized bodies (clause 6 of Article 213.26).

If, during the sale of, for example, a debtor’s apartment, the share of his wife, which belongs to her according to the RF IC (50%), is affected, then the money proceeds from the transaction are transferred to the bankrupt’s wife in the appropriate amount.

Restrictions on a bankrupt citizen

Declaring an individual bankrupt carries certain consequences for him, covered in Art. 213.30 Federal Law, namely:

1. For 5 years, you cannot apply for credits or loans without indicating the fact of your bankruptcy.
2. Within 5 years, a citizen is not allowed to re-apply for bankruptcy proceedings.
3. For 3 years, it is not permissible to hold leadership positions in the management bodies of a legal entity or otherwise participate in the management of a legal entity.

The court also has the right to prohibit the bankrupt from traveling abroad for a certain period of time (the period is set on an individual basis).

Pros and cons of the law

The adoption of a law on bankruptcy of individuals has become rather a necessity in our country in connection with the ensuing crisis. It allowed many ordinary people to get rid of their debt burden. Naturally, each case should be considered separately, but there is still a chance of complete debt write-off at the stage of the procedure. Yes, the debt will have to be repaid, but its size may be much smaller than the obligations previously established by creditors. In addition, the law does not provide for the deprivation of the debtor of his only property, basic necessities, prizes won, awards, and takes into account the division of shares (spouses, children, relatives).

There are also some disadvantages in the law, for example:

1. The procedure is expensive - all costs of the trial are borne by the bankrupt, who, in fact, is already a penniless and insolvent person.
2. Restrictions to the citizen described in the section above.
3. Duration of the entire process (up to 6 months).
4. Absolute control over the debtor's finances passes into the hands of the financial manager.

In general, Law No. 127-FZ has more advantages for the debtor; the main thing is to approach the process competently, study all the features and nuances.

Current judicial practice

Today, the law on bankruptcy of individuals works in real conditions. During the period of its adoption, many (deputies, banking institutions) had some concerns, but the process of implementing the law went well.

The number of documents required to begin the procedure is quite cumbersome, but it is quite possible to collect it if desired. The application is submitted by the debtor at the place of registration, not registration, which is quite convenient for the population.

If a potential bankrupt has at least some source of income, then the court will order a procedure for restructuring debts to creditors, and further proceedings will take place based on Art. 213.11-213.23 Federal Law. Judicial practice shows that the restructuring clause can be bypassed and proceed to the sale of the debtor’s property, i.e. start selling it.