Application for declaring an individual bankrupt

An application for recognition of an individual as bankrupt is an application to the court with which an individual initiates bankruptcy proceedings in order to legally settle debts. Since 2019, Ukrainians have been able to use the personal bankruptcy procedure in accordance with the provisions of the Code of Ukraine on Bankruptcy Procedures. This tool allows either to restructure the debt or to write it off partially or completely.

According to the definition of the legislator, “insolvency is the inability of a debtor to fulfill monetary obligations to creditors after the established deadline, other than through the application of procedures provided for by the Code.” In other words, if a person cannot repay debts due to objective reasons, he has the right to initiate an official bankruptcy process — as a means of legal protection and restoration of financial stability.

When is it possible to initiate bankruptcy of an individual?

Ukrainian law clearly establishes the grounds on which an individual may file an insolvency application with the court. According to Art. 115 , it is sufficient to have one of the following criteria:

• A significant amount of overdue debt - not less than thirty minimum wages (calculated on the day of filing the application).
• Systematic non-payment of mandatory payments - more than 50% of scheduled payments are not repaid for more than two months.
• Lack of property - the enforcement service confirmed that the person does not own assets that could be sold to repay debts.
• Approaching insolvency - for example, loss of stable income, significant medical expenses or other life circumstances that make it impossible to repay obligations in the near future.

All of these situations are legally justified reasons for initiating bankruptcy proceedings.

Important: only the debtor himself can file an application - it is impossible to forcibly declare an individual bankrupt at the initiative of a creditor in Ukraine.

How is an individual bankruptcy application filed?

To start the procedure, you must apply to the commercial court at the place of registration of the debtor. The application must be drawn up in accordance with the requirements of the law and contain a justification for the reasons for insolvency. It must be accompanied by:

• a list of creditors and the amount of debts;
• data on existing property;
• a declaration of income and expenses for the last 3 years;
• confirmation of payments or their absence;
• documents regarding concluded agreements (pledges, sureties, etc.).

If the package of documents is complete and meets the requirements, the court opens the proceedings. This officially launches the process of considering the case and appoints an arbitration manager who will coordinate the next steps.

Stages of the bankruptcy procedure for an individual

The bankruptcy process for an individual consists of several consecutive stages, each of which has its own tasks and characteristics:

1. Filing the application and opening the proceedings.
2. Introduction of a moratorium on satisfying creditors' claims.
3. Debt restructuring — formation of a debt repayment schedule.
4. Bankruptcy — provided that the restructuring is not implemented.
5. Completion of proceedings and write-off of the remaining debts.

Each stage is implemented under the control of the court and with the participation of an arbitration manager. It is important that the debtor acts honestly, openly and does not try to hide assets or income.

Consequences of declaring an individual bankrupt

After the bankruptcy case is completed, the debtor faces a number of consequences specified in the Code of Bankruptcy:

• It is not allowed to re-initiate the bankruptcy procedure for 5 years.
• For 3 years, the person is considered to not have an impeccable business reputation (which affects trust from banks and counterparties).
• For 5 years before concluding credit agreements, the debtor is obliged to notify the creditor of the fact of bankruptcy.
• During the period of the procedure, there are restrictions on the disposal of property, in particular, a ban on large purchases without court permission.

In addition to the above restrictions, the law determines which debts are not subject to write-off even after bankruptcy. The debtor is not released from obligations regarding: alimony, compensation for damage caused by injury or death, as well as some other debts inextricably linked to the person (for example, administrative fines). Such debts will have to be repaid regardless of bankruptcy. All other debts are considered repaid after the procedure is completed, which is the main benefit for an honest debtor.