Insolvency of an individual

Insolvency of an individual is the inability of a person to fulfill his/her financial obligations to creditors within the established deadlines. In simple words, an individual is recognized as insolvent when he/she can no longer pay his/her debts on time. This condition can arise due to various reasons: loss of job, significant decrease in income, sharp increase in expenses, unsuccessful investments or other circumstances. In Ukraine, the possibility of bankruptcy of individuals appeared relatively recently - only since 2019, individuals have received the right to their own bankruptcy to legally write off debts. It is worth understanding that the insolvency of an individual is not a sentence, but a legal condition that can be overcome through bankruptcy proceedings with the support of experienced lawyers.

What does insolvency of an individual mean?

In the legislation, insolvency is defined as the inability of a debtor to fulfill his financial obligations other than through special procedures provided for by law. That is, a person can no longer pay his debts on his own, and court intervention is required to resolve the situation. It is important to distinguish simply financial insolvency from bankruptcy. Bankruptcy of an individual is the official recognition by the court of his insolvency, which makes it possible to restructure debts or write it off under certain conditions. The fact of insolvency itself does not mean bankruptcy - it is only a reason to initiate proceedings in court.

Conditions for declaring an individual insolvent

According to the Code of Ukraine on Bankruptcy Procedures, an individual has the right to apply to a commercial court with an application to open insolvency proceedings if there are one or more of the following grounds:

1. The total amount of the individual's monetary obligations to creditors exceeds thirty times the minimum wage established by law at the time of filing the application with the court.
2. In enforcement proceedings, it has been established that the debtor does not own property sufficient to satisfy the creditors' claims. In particular, this may be confirmed by a resolution of the state bailiff on the absence of property for collection.
3. The individual documents the circumstances indicating that within the next 12 months he will not be able to fulfill his monetary obligations, including under loan, credit, lease agreements, payment of utility services, taxes, etc.

The legislation also provides that other circumstances that objectively indicate the debtor's inability to fulfill his obligations may be taken into account by the court when opening proceedings.

Please note: the debtor (individual) has the right to file an application.

Bankruptcy procedure for an individual

The process of declaring an individual bankrupt consists of several stages established by law:

1. Filing an application with the court. The debtor files an application with the Commercial Court to open an insolvency case together with the necessary documents. If the court establishes that all conditions are met, it opens proceedings in the case.
2. Debt restructuring. The court appoints an arbitration manager (property administrator) and imposes a moratorium on creditors' claims (payment of debts and the accrual of fines are temporarily suspended). The bankruptcy trustee, together with the debtor and creditors, draws up a debt restructuring plan - for
3. Debt liquidation. If the restructuring plan is approved and implemented, the debtor settles the debts on new terms. If not, the court declares him bankrupt, and the debtor's property is sold to repay the debts. After that, the remaining outstanding debts are written off, and the bankruptcy case is closed.

Consequences of bankruptcy for an individual

Successful completion of the bankruptcy procedure significantly reduces the debt burden, but also has certain consequences for the debtor:

1. Debt relief. After the procedure is completed, most of the debtor's debts are canceled, and creditors can no longer demand their payment.
2. Property losses. To satisfy the creditors' claims during the procedure, the debtor's property may be forcibly sold. This leads to certain material losses.
3. Limitations for the future. Within five years after bankruptcy, the debtor cannot re-initiate his insolvency and is obliged to notify creditors of the fact of bankruptcy before obtaining a new loan. Information about the bankruptcy will be marked in his credit history, which temporarily complicates access to loans.

How we can help

The bankruptcy procedure of an individual is complex and requires a professional approach at every stage. The law firm "Prikhodko and Partners" provides a full range of services in the field of recognizing the insolvency of individuals:

• Consultations on insolvency issues.
• Preparation and filing of an application with the court.
• Representation of the interests of the debtor in court.
• Development of a debt restructuring plan.
• Liquidation of debts through the sale of property.

Our specialists have many years of experience in this area and are ready to help you obtain a legal debt write-off or restructure your financial obligations.

If you need help resolving the issue of insolvency, contact the lawyers of "Prikhodko and Partners". We will provide you with support at all stages of the process and help you start a new stage of your financial life without debts.