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Bankruptcy Judicial debt restructuring outside of bankruptcy proceedings

Kolesnyk Ilya

Attorney

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kolesnyk@prikhodko.com.ua

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Specialist in bankruptcy of individuals and legal entities. Provides legal support in bankruptcy procedures for individuals, private limited liability companies, legal entities, as well as closing executive proceedings, concluding restructuring and settlement agreements with financial institutions

Judicial debt restructuring outside of bankruptcy proceedings

Judicial debt restructuring outside of bankruptcy proceedings is a legal mechanism for settling debts through a court decision, but without officially declaring bankruptcy. In other words, the debtor and creditors change the terms of debt repayment with the participation of the court in order to distribute the debt burden in a more manageable way. This approach helps the debtor restore solvency and avoid the harsh consequences of bankruptcy proceedings, while ensuring the protection of the interests of creditors.

In this article, we will consider how judicial debt restructuring outside of bankruptcy proceedings takes place, what its advantages are, legal grounds and when it is advisable to apply it.

Legal advice on restructuring

Legal basis and regulation

Judicial debt restructuring outside of bankruptcy is based on several key provisions of Ukrainian legislation. The main legal mechanisms that allow restructuring without formal bankruptcy:

Pre-trial rehabilitation for legal entities.

The Code of Ukrainian Bankruptcy Procedures allows an enterprise to submit a rehabilitation plan before opening a bankruptcy case. The plan is approved by the majority of creditors and approved by the commercial court, after which it becomes mandatory for all creditors. This is actually a judicial confirmation of debt restructuring without declaring the debtor bankrupt.

Debt restructuring of individuals.

The Central Bank of Ukraine states that if circumstances have changed significantly, the court may review the terms of the loan agreement. Regarding the postponement or installment payment of the decision, the norms of the Central Bank of Ukraine indicate that the debtor has the right to ask the court to allow the debt to be paid in installments or to postpone the execution of the decision, proving the presence of good reasons.

Extrajudicial mechanisms.

The Law “On Financial Restructuring” provides for the voluntary settlement of debts of enterprises with the participation of creditors and independent arbitrators. This procedure takes place without bankruptcy, but the results of the agreements can be confirmed by the court. For individuals, a similar tool is amicable agreements with creditors, which can be approved by the court in already open disputes.

It will also be useful: Advice on banking (credit) issues

Advantages of debt restructuring outside of bankruptcy

Judicial debt restructuring, carried out without declaring bankruptcy, has a number of significant advantages for both the debtor and creditors:

Without bankruptcy status.

The debtor avoids official bankruptcy, which spoils the credit history and business reputation. Property is not forcibly sold, and payments are made according to a new schedule.

Faster and more flexible.

The restructuring procedure takes less time than a bankruptcy case and allows you to adjust the schedule to the debtor’s capabilities. The law gives freedom in choosing repayment terms and methods.

Benefits for creditors.

In bankruptcy, assets are often not enough. Restructuring, on the other hand, gives you a chance to get more through gradual payments.

Preservation of business and assets.

The enterprise can continue its activities, jobs are preserved. An individual often keeps housing and necessary property.

When should you consider judicial debt restructuring?

Judicial restructuring can be an effective solution in the following cases:

There is a real chance of restoring solvency.

For a business – when the enterprise is operating, but needs time to complete projects, sell products or attract an investor. For an individual – when a new source of income, recovery or receipt of payments is expected, which will allow you to gradually repay the debt.

The debt is still under control.

If the amount of debt is commensurate with assets or potential income. For example, with debts at the allowable threshold for personal bankruptcy, a person with income can agree on payment over several years instead of full bankruptcy proceedings. For a company, this is justified if the liquidation analysis shows the profitability of restructuring for creditors.

Creditors are ready for dialogue.

If banks or other creditors are already offering to revise the terms or at least do not object, judicial approval of the plan will be easier. In case of creditors’ refusal, it is first necessary to negotiate with the participation of a lawyer, and only then to apply to the court.

It is necessary to stop the pressure of creditors.

Initiating pre-trial rehabilitation can give the company protection – a moratorium on creditors’ claims during the consideration of the case. This allows to avoid enforcement proceedings and buy time for stabilization.

Calculate the cost of restructuring lawyer services

The role of a lawyer in the debt restructuring process

Debt restructuring is a complex procedure, where every mistake in documents or negotiations can cost success. That is why the support of an experienced lawyer is important.

A specialist will help:

objectively assess your financial situation and choose the right strategy;
prepare a flawless rehabilitation plan or statement of claim;
negotiate with creditors and defend you in court;
monitor the implementation of the decision and prevent new risks.

The lawyers of the company “Prikhodko and Partners” have practical experience in supporting restructurings for both businesses and individuals. This allows clients to avoid bankruptcy, preserve property and restore financial stability.

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1 question

Do you have any loan debts?

Yes

2 question

Do you need help from a loan lawyer?

Yes

3 question

Do you need debt restructuring?

Yes

Is it possible to go through the bankruptcy procedure if the debt is less than 180,000 UAH?

Bankruptcy can be filed regardless of the amount of debt — there are no minimum limits set by law. However, if the amount of debt is less than UAH 180,000, it is usually more advisable to agree on debt restructuring, as bankruptcy may be economically unprofitable.

If I am not in Kyiv, can I cooperate with you?

Yes, we work remotely throughout Ukraine and even with clients abroad! We have many clients from Lviv, Odessa, Dnipro, Kharkiv, Cherkasy and other settlements.

Communication is carried out in any way convenient for you.

Successful cases on the topic: