Initiating bankruptcy proceedings is a complex multi-stage legal procedure that businesses often have to face. Do you want the process to go quickly and without serious losses?
Then contact our qualified lawyers who will carry out the procedure, explain to you the advantages of bankruptcy of individuals, and deal with the bankruptcy of a legal entity or individual entrepreneur.
When is it recommended to initiate bankruptcy proceedings?
Despite the detailed description of the procedure in regulations and other documents, it is difficult for a non-specialist to understand all the intricacies, so the help of our bankruptcy lawyer will be very helpful. In what cases can one resort to a process such as initiating bankruptcy?
- The company is unable to fulfill its debt obligations.
- The desire to get rid of the old history of the enterprise and start over with a clean face, since debts do not allow one to cope with the situation and be on the market.
- There is no confidence that the citizen will be able to pay off his creditors; signs of the citizen’s bankruptcy become obvious to him and his environment.
Initiation of bankruptcy by a creditor or debtor:
The reasons may be different, but most often the initiation of bankruptcy proceedings is carried out in connection with the debt of a company or the debts of a citizen that he is unable to repay. After successfully completing the procedure, debts are written off from debtors if there are not enough assets that could be used to pay them off.
The process takes about 4-6 months, but the time frame may increase, depending on specific circumstances. You can learn more about what it means to initiate bankruptcy of a legal entity or citizen during a consultation with our professional bankruptcy lawyer. An application for bankruptcy can be filed by both the debtor, for example, in the bankruptcy procedure of an LLC, and the creditor.
If you want to initiate bankruptcy, contact our law firm, Law Office “Katsailidi and Partners”. Specialists provide various services, helping verbally, providing consultations, and providing an integrated approach.
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Process stages
Bankruptcy is a complex and multi-stage procedure. It can be divided into several stages, each of which performs specific functions:
- observation – stage of analysis and collection of information;
- the work of an external manager - monitoring the implementation of events and the safety of property;
- recovery – measures to normalize the operation of an enterprise through effective management;
- external management – the court appoints a third-party specialist to manage the enterprise;
- bankruptcy proceedings – inventory and sale of assets to pay off debts.
Each stage has many subtleties. Carrying out the full procedure takes a lot of time.
Observation
The stage lasts about six months. Information is collected about the state of the debtor's financial affairs. This is an auxiliary procedure carried out under a special court order.
An important stage of the observation stage is the first meeting of creditors. At this event, further goals and an action plan are determined. At the meeting, an attempt is made to find a solution satisfactory to the parties and conclude a settlement agreement.
Appointment of a manager
Independent managers begin work immediately after the court accepts the bankruptcy petition. For each stage, a separate manager with relevant knowledge and experience can be appointed, but it is possible for a single manager to conduct the business. Since 2015, the debtor has no opportunity to interfere in the process of appointing managers and nominate its candidates.
Health improvement
If, after studying the financial affairs of the enterprise, hidden resources or other favorable circumstances are discovered, the court appoints a procedure for financial recovery. The duration of the stage is limited to 2 years. During this time, the company's management makes decisions only in agreement with the arbitration manager.
The recovery procedure begins if at a meeting of creditors it is decided to give the company a chance to restore solvency. For this period:
- pre-trial measures to repay debts are cancelled;
- all previously issued orders to collect funds from the debtor are stopped;
- penalties and fines are not charged on previous amounts of debts;
- payment of dividends is prohibited;
- mutual work and barter transactions are excluded;
- Any transfer of company shares is prohibited.
The purpose of this event is to protect the interests of creditors. Therefore, the arbitration manager controls that the funds received are not spent on other needs.
External management procedure
The appointed manager has responsibilities regulated by the Bankruptcy Law. He conducts a thorough analysis of activities, draws up a detailed action plan, conducts a complete inventory of assets, and identifies potential resources. Possible actions:
- closure of unprofitable branches, workshops, retail outlets;
- sale of non-core property not involved in the production process;
- re-profiling of production, introduction of new types of services;
- collection of accounts receivable;
- attracting investments.
The manager reports monthly on the work performed to the court and the meeting of creditors. The period of work of an external manager is 1.5 years, sometimes it is extended to 2 years.
Bankruptcy proceedings
This is the last stage aimed at fully satisfying the debtors' demands. At this stage, there are no longer any attempts to save the company. The standard period is 6 months.
At this stage, a ford is created for settlements with creditors. It includes all liquid assets - buildings, working capital, cars, raw materials, etc. The collected assets are sent to auction. The entire amount received from the sale of property goes to cover the debts of the bankrupt company.
Lawyer for initiating bankruptcy proceedings in Yekaterinburg
Our lawyer can provide services to debtors and creditors. Why is it necessary to initiate bankruptcy by a creditor? This mechanism is resorted to if it is necessary to collect debt from an enterprise.
The very threat of declaring a company insolvent is already an incentive for the debtor to pay the debt. The company may lose the right to dispose of certain assets (for example, the court may seize the debtor’s bank account), control is introduced over the debtor company, etc.
Often, the initiation of bankruptcy proceedings by a creditor helps to quickly resolve issues related to non-payment of debts. Therefore, many creditors turn to lawyers who help them collect the necessary documents and start the procedure.
Initiating a bankruptcy procedure by a creditor or initiating a bankruptcy procedure by an employee of an enterprise helps to establish the order of repayment of debts, disclose all information about the company in debt, establish the procedure for the sale of property, etc.
For whatever reason you need to start the bankruptcy process, let's figure out how to do it together with you.
Moratorium on filing bankruptcy cases
On April 3, 2020, Government Resolution No. 428 was adopted, which introduced a moratorium on the initiation of bankruptcy cases against certain debtors. You cannot start a procedure in relation to:
- companies and individual entrepreneurs whose main activities are included in the sphere of those most affected by the spread of the new coronavirus infection (the list is attached to the Resolution and contains household, educational, transport services, catering, hotel business, etc.);
- systemically important organizations and strategic enterprises whose activities affect the sustainability of the Russian economy.
The government has given instructions to implement the moratorium. The resolution comes into force on the date of issue and is valid for 6 months, that is, until October 3, 2020.
What are the bank's actions in bankruptcy proceedings?
Yes, they serve. This happens if two conditions are met simultaneously:
- The debt exceeds 500 thousand rubles;
- The debtor does not repay it within 3 months from the moment when he had an obligation to repay it.
Banks can declare their client bankrupt by filing a claim in an arbitration court. In the application, the bank itself selects a financial manager who will conduct the bankruptcy procedure. If the claim is accepted, paperwork begins on it, and the debtor’s property is seized. He will not be able to give it as a gift or sell it, even if it concerns foreign property. In some cases, the debtor is prohibited from leaving the country.
First of all, the debtor must write a response to the claim, which by its nature is an objection.
This procedure must be completed 10 days after the decision to accept the bank’s application is made. The review is sent by mail or delivered in person to the office of the court that is considering the case. The objection must also be sent to the bank and a copy of it attached to the response to the court. An example of a document can be viewed on the Internet, in the court office, or as a guide when writing Article 47, 213.5 of the Federal Law “On Insolvency”.
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Otherwise, the debtor is required to appear at court hearings and comply with all its instructions. To protect your interests during bankruptcy proceedings, it is better to hire an attorney.
If loan payments are delayed, then, subject to the above two conditions, the bank has the right to ask the court to declare the client bankrupt.
On the one hand, it may seem that this is unprofitable for the bank, since after this fact is recognized by the court, all debts are canceled. However, if, during the bankruptcy of individuals, it turns out that they have property, then loans to the bank are repaid by selling it. And this is the main interest of creditors.
If the debtor has nothing - no funds, no bank accounts, no property - he has nothing to fear. On the contrary, claims against him from the bank will cease. But, as a rule, bankruptcy of individuals at the initiative of the bank occurs only when its management is absolutely sure that it can return its funds.
A legal dispute between a bank and a debtor can be resolved in three ways:
- Debt restructuring;
- Signing a settlement agreement;
- Selling the debtor's property under the hammer.
For the defendant, the first two options are favorable, but if he does not have and does not have funds to repay the debt, then the court will use the third method. This is exactly what the debtor should be wary of.
After the start of the paperwork, the financial manager begins to enter into the register of creditors' claims all creditors who have claims against the defendant. Within 2 months after the court makes a decision to accept the application, the creditor must apply for inclusion in the register. This document is in written form. If the deadline was missed for a good reason, the court can restore it.
In addition, the financial manager organizes meetings of creditors, which must be attended by representatives of the bank.
They can also provide their own debt restructuring project, and if there are several of them (for example, a citizen provides his own option), both will be discussed at the meeting and a vote will be taken. As a result, the project for which the majority of creditors declared in the register votes is selected.
The plaintiff, represented by the bank, must come not only to meetings of creditors, but also to court hearings. After the court makes a bankruptcy decision, meetings of creditors do not stop. They resolve issues regarding the valuation of property, the procedure for its sale and other issues. Participation in these procedures is mandatory for the creditor.
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Thus, banks use in practice the mechanism of bankruptcy of individuals, but only those whose debt has exceeded the half-million threshold should be afraid of it. However, even if the bank has started this procedure, this does not mean that the court will necessarily declare you bankrupt. It all depends on the circumstances of the case and whether you use the help of a qualified lawyer.
