Recognizing a natural person as bankrupt

The Law on Bankruptcy of Individuals entered into force in Ukraine in 2019. It became a long-awaited tool for full or partial relief from the debt burden for thousands of people who found themselves in a difficult financial situation. The issue of bankruptcy of individuals is relevant for a significant number of citizens, because debts to banks, financial institutions and other creditors often become an unbearable burden.

Grounds for declaring a natural person bankrupt

The Code defines a number of requirements under which an individual can initiate bankruptcy proceedings in court. First, the amount of debt should be at least 30 minimum wages. Second, the debt must be overdue for more than 90 days.

Realization of property and distribution of funds in case of bankruptcy

The court makes a decision to declare the debtor bankrupt if the person has not fulfilled the debt restructuring plan or the meeting of creditors has not approved this plan. Then a debt repayment procedure is introduced, during which the debtor’s property is sold, and the proceeds are directed to settlements with creditors.

The property of the debtor is inventoried, evaluated and put up for sale as a liquidation mass. However, assets defined by law are not subject to sale, in particular:

• Property that cannot be levied according to the list.
• The only dwelling of the debtor of a certain area (apartment up to 60 square meters or a house up to 120 square meters).
• Funds in the accounts of the pension fund and social insurance funds.

Funds from the sale of the liquidation mass are accumulated in a separate account. Then they are distributed among creditors according to the principle of priority:

• Payment of wages, alimony, compensation for damage to health and/or life, payment of social contributions.
• Payment of taxes, other demands of creditors.
• Fines and penalties.

If there are not enough funds for all requirements – after the procedure is completed, they are considered repaid.

Initiation of the bankruptcy procedure of an individual

It is important to understand that only the debtor himself can initiate the procedure for declaring a natural person bankrupt by submitting a corresponding application to the commercial court. Creditors or other persons do not have the right to demand that the debtor be declared bankrupt.

The sequence of stages of the bankruptcy procedure

Bankruptcy is the final stage of the entire procedure. It may not be reached if the person is able to settle the debts in the previous stages. Conventionally, the process can be divided into the following stages:

• Submission of an application by the debtor and initiation of insolvency proceedings in court.
• An attempt to restore the debtor’s solvency without declaring him bankrupt – through debt restructuring.
• Closure of proceedings and discharge of debts in case of successful implementation of the restructuring plan and settlements with creditors.
• Declaring the debtor bankrupt with repayment of debts at the expense of his property – if it was not possible to restore solvency by other means.

Assistance in matters of personal bankruptcy

Do you have difficulties with paying loans? Contact the law firm “Prykhodko and Partners”.

Experienced lawyers will assess your situation, advise on the possibility of bankruptcy and professionally accompany this process – from the preparation of documents to representation in court.

Take advantage of professional help in solving personal bankruptcy issues.