In the current conditions of the country’s development, and especially in the face of difficulties in the economy, legal entities and individuals may find themselves in difficult financial situations where the fulfillment of their obligations under the concluded contracts becomes impossible. These may be various circumstances, such as hostilities, occupation, unpredictable economic changes in the country, etc. In such cases, the bankruptcy procedure comes to the rescue, according to which the debtor can legally get rid of the creditor debt. In this article, we will consider in detail how in Ukraine to write off debt in case of bankruptcy of an enterprise.
How does the bankruptcy procedure work in Ukraine?
Before proceeding to writing off debts in bankruptcy, it is necessary to consider the general procedure for declaring a debtor bankrupt. To give an answer to this question, you should contact the KUzPB, where it is stipulated that the bankruptcy procedure of a legal entity begins with the submission of an application by the creditor or debtor to the economic court about the opening of the proceedings in the case. After that, the following stages of the proceedings take place in stages: disposal of the debtor’s property, judicial recovery and liquidation of the enterprise. We are interested in the stage of rehabilitation and liquidation, as it is possible to write off the organization’s debts directly on them.
How are company debts written off in bankruptcy proceedings?
Upon the occurrence of judicial rehabilitation in the bankruptcy proceedings, the court appoints a rehabilitation manager who must take measures to restore the debtor’s solvency. These measures are reflected in the rehabilitation plan and may include:
- deferment, installment or forgiveness of a debt or part thereof;
- elimination of receivables of the organization;
- sale of a certain part of the property owned by the debtor, etc.
Thus, in terms of reorganization, the arbitration manager may provide for the cancellation of the debtor’s debt.
If we are already talking about the stage of liquidation of a legal entity, then at this stage of bankruptcy, the liquidator appointed by the court forms the liquidation mass of the enterprise. After it has been formed and an inventory of the property has been carried out, the liquidator sells all the assets of the debtor at an auction. In practice, it often happens that the debtor’s property is not enough to satisfy the claims of creditors of all stages and it is sold at an auction not with a high market value, so it turns out that not all debt can be repaid. And in this case, if all the property was sold by the liquidator, but a certain part of the debt remains, then it is liquidated in accordance with the bankruptcy procedure.
How are debts on loans written off from individuals?
The bankruptcy procedure of an individual can be initiated only at the request of the debtor. Together with the application for opening insolvency proceedings, the debtor is obliged to submit a debt restructuring plan. It usually includes:
- Sale of a part of the debtor’s property in favor of the creditor;
- Temporary delay, installment plan, change of terms;
- Significant reduction in payments;
- Write-off (forgiveness) of a part of debts;
Thus, when restructuring the debt of an individual in the bankruptcy procedure, his debt can be liquidated.
Later, when measures to restore the solvency of an individual did not work, he is declared bankrupt in court and the stage of paying off the debtor’s debts begins.
After its completion, the economic court closes the proceedings on the debtor’s insolvency and makes a decision on its full release from debts.
If you need to write off your debt in case of bankruptcy, contact the experts in your field – the law office “Prikhodko and Partners”. Our team is always ready to provide you with professional advice and support at every stage of bankruptcy, from preparing documentation to representing the client’s interests in court and creditors. Contact us!