Simplified bankruptcy procedure for individuals

Since September, the MFC has introduced a new service - free bankruptcy. In the law, simplified bankruptcy was called out-of-court, which reflects the difference from the paid procedure - simplified debt write-off takes place outside of court, in an administrative manner - by applying to the MFC.

When the law comes into force is indicated in the text of the draft - from September 1, 2020

.

Let's look at what the new law provides and who can expect free bankruptcy.

We will tell you in detail who the out-of-court bankruptcy procedure is for, how it will proceed, and what consequences it entails.

Basic concepts of bankruptcy

Bankruptcy is a special legal status of a legal entity or citizen who cannot fulfill its obligations and pay off debts. Insolvency is not a guarantee of getting rid of debt, but it is an opportunity to pay off the debt and get a break from impending obligations. If there is sufficient property to pay the claimants, the payment process will continue until the debt is completely closed. The bankruptcy procedure in Russia begins with filing a bankruptcy petition with the arbitration court. Both creditors and the debtor have the right to initiate proceedings.

The main types of bankruptcy include:

• real: lack of capital to run a normal business, as well as the inability to regain solvency on your own;
• conditional: the company has more assets than liabilities (surplus production);
• fictitious: declaring the insolvency of a company or individual in order to defraud creditors (this act is criminally punishable);
• intentional: activity or inaction of managers for the purpose of profit or satisfaction of unlawful interests of third parties.

The arbitration court evaluates all documentation, transactions and other legal documents to determine what type of bankruptcy we are talking about and make a fair decision.

General points

The main reason for liquidating an enterprise through bankruptcy is the presence of unpaid obligations that the enterprise does not have the ability to repay.

This makes it possible to legally write off part of the debt and completely cease the activities of the legal entity.

Liquidation and bankruptcy, of course, are not the best solution for every enterprise. But at the same time, it is important to identify the company’s insolvency in time so as not to fall into an even greater debt hole.

What it is

The simplified bankruptcy system is a procedure for liquidating an enterprise that has unpaid obligations.

It has its advantages, which significantly distinguish it from the full one:

The simplified bankruptcy system also differs from the general one in that the decision to implement it is made by the participants themselves, and not by their creditors or government regulatory authorities.

It also has its disadvantages, which are also worth mentioning:

Despite its name, the simplified bankruptcy system is a complex procedure that requires time, expense and a responsible approach on the part of the participants who decided to liquidate.

What is the current bill?

The simplified bankruptcy procedure is carried out on the basis of the Bankruptcy Law, Chapter 11, paragraph 1.

It allows you to determine the procedure established by law for liquidating an enterprise through bankruptcy proceedings, as well as the priority of settlements with debtors and other features of the process.

According to Article 224 of this normative act, the reasons for declaring a debtor bankrupt are determined if the estimated value of the debtor's property is less than the total amount of debt to individuals, legal entities and budgetary organizations.

If the circumstances correspond to the above, the liquidator applies to the arbitration court in order to declare the LLC bankrupt.

According to this article, the following persons have the right to go to court:

• property owner;
• one of the founders of a legal entity;
• head of the liquidated enterprise.

Article 225 of this law provides for the specifics of consideration of a case regarding the recognition of a liquidated debtor as bankrupt, according to which, when conducting a bankruptcy case of a liquidated person, a procedure for monitoring and financial analysis is not prescribed.

Only bankruptcy proceedings are carried out. The register of creditors is compiled in accordance with the amount of debt.

It is important that, in accordance with this article, if creditors applied to the court to declare the debtor bankrupt earlier than the liquidator, the procedure is carried out on a general basis.

Other regulatory framework

In addition to the “Bankruptcy Law”, Chapter 11, paragraph 1, the features of the simplified bankruptcy system are regulated in the following regulations:

• Federal Law of October 26, 2002 N 127-FZ;
• Federal “Law on Bankruptcy of Individual Entrepreneurs”;
• Art. 65 of the Civil Code of the Russian Federation;
• Art. 446 of the Civil Procedure Code of the Russian Federation;
• Art. 196 of the Criminal Code of the Russian Federation;
• Art. 197 of the Criminal Code of the Russian Federation;
• Resolution of the Plenum of the Supreme Council of December 15, 2004 N 29.

These regulations regulate the procedure for conducting bankruptcy proceedings, including under a simplified system, as well as the Criminal Code of the Russian Federation and the above articles provide for punishment for deliberately conducting bankruptcy proceedings in order to get rid of debt obligations.

Stages of bankruptcy procedure applied in Russia

To ensure all rights and guarantees provided for by current legislation, the legal proceedings are divided into several stages. Each stage of the process can be completed with a settlement agreement, and the procedures themselves are carried out within 9-10 months. The law also allows for a simplified bankruptcy procedure if there are all grounds for this: the management initially decided to liquidate the company, and the remaining stages simply do not make sense. This stage can be applied only after all possible health procedures.

Bankruptcy procedures used in Russia are divided into the following stages:

• Surveillance: analysis of existing property to ensure its safety. This procedure follows the old guidelines but limits some transactions.
• Financial recovery: restoration of the company's solvency and the ability to pay off existing debt.
• External management: the company is managed by a temporary manager who is appointed by the arbitration court. This stage stops enforcement proceedings and introduces a moratorium on satisfying creditors’ claims.
• Bankruptcy proceedings: liquidates an organization and involves the sale of the debtor’s property. It is a last resort and allows to reduce the time for judicial proceedings. Also applies to individuals and their property.

Each of the procedures used in an insolvency case has its own advantages and allows you to resolve a difficult financial situation.

How much does bankruptcy of individuals cost under the simplified system?

According to Article 223.7 of Law No. 127-FZ, an out-of-court procedure is carried out without charging a fee. You will not need to pay a state fee for applying to an arbitration court, publishing information in the EFRSB, or services of a financial manager.

At the same time, a citizen who does not have knowledge of the law may need the help of a lawyer when participating in a case of collecting a debt from him, interacting with the FSSP, and preparing documents at the MFC. You will need to pay for legal services. At the same time, the final cost is much lower than with the standard scheme.

Supervision and settlement agreement

The bankruptcy procedure of an individual in Russia or the insolvency of a company involves the first stage of observation. A temporary manager, who is appointed by the arbitration court, analyzes documentation, contracts, transactions, and also suspends cases related to penalties. Also at this stage, the seizure of property is lifted and all important decisions on the company’s work are made at a meeting of creditors. This stage allows you to fully analyze the financial condition of the organization and make an effective decision regarding the restoration of solvency and the advisability of taking extreme measures in the form of liquidation of the legal entity.

A settlement agreement, as a procedure, allows you to resolve the issue of debt, correctly distribute payments and, by mutual agreement, draw up a repayment schedule for obligatory payments.

Features of the simplified bankruptcy procedure for a liquidated debtor

The simplified bankruptcy procedure acts as the main liquidation scheme for legal entities. It provides an opportunity to liquidate business entities as soon as possible.

At the same time, it becomes possible for owners to minimize risks by reducing the costs associated with the procedure.

It eliminates the need for:

• holding the first meeting of creditors;
• implementation of the observation procedure;
• replacing managers, transferring cases from an administrative manager to a bankruptcy trustee.

The procedure is official in nature, as it is carried out on a legal basis, provides a guarantee of liquidation of a legal entity and exclusion of its Unified State Register of Legal Entities.

Creditors' claims are regarded as repaid if the legal entity's property and funds are not identified during bankruptcy proceedings.

These include claims for which the debtor’s funds were insufficient to satisfy. At the same time, it is not possible to form a bankruptcy estate in order to repay the debtor’s obligations.

The bankruptcy trustee, after carrying out all the procedures under the simplified bankruptcy scheme, draws up a report on his activities.

It reflects the entire course of the procedure and provides its results. The bankruptcy trustee submits the report to the creditors and the arbitration court, which makes a final verdict on the case.

The result of the procedure is a ruling by the arbitration court on the completion of bankruptcy proceedings.

It is sent to the Tax Service, which deregisters the business entity based on a court ruling. Subsequently, an entry is made in the Unified State Register of Legal Entities about the termination of its production activities.

Bankruptcy of legal entities in 2020: step-by-step instructions on how to start the procedure, its stages

The crisis situation in the country largely explains the reasons for the bankruptcy of most companies. Some enterprises have the opportunity to adapt to external changes and get out of a difficult situation with minimal losses. But a larger percentage of companies subject to the procedure draw the court’s attention precisely to the external causes of bankruptcy.

We recommend reading: Personal Bankruptcy Procedure

Currently, the position of such an external manager is still at the stage of formation and there are not enough truly experienced specialists to handle all arbitration cases. His duties are described in detail in the Law “On Bankruptcy”, and the amount of remuneration for work is paid by the bankrupt legal entity to the bank account of the self-governing arbitration organization.

How the bankruptcy procedure of a legal entity occurs - step-by-step instructions in 2020-2020

When no actions or measures taken have helped, the bankruptcy manager develops a plan for the external management of the insolvent organization. It will include various methods, the purpose of which is to identify potential resources (new technologies, personnel reorientation, etc.).

After the claim is accepted, an arbitration manager will be appointed who will oversee the company’s activities until the process is completed. If the hidden resources of the organization are revealed, the court appoints a procedure for the rehabilitation of the legal entity. This stage is necessary for the possibility of restoring the company's activities.

Financial recovery and external management

To prevent the liquidation of a legal entity, as well as to restore the company’s ability to pay off obligations and conduct business, a procedure for financial recovery and external management is provided. The duration of this period ranges from 12 months to 2 years. During the period of financial recovery the following are stopped:

• penalties applied for delays, including penalties;
• seizures of company property;
• payment of dividends on securities.

External management allows you to remove management from performing their duties and appoint a more competent person to this position who can help solve financial difficulties - an external manager.

Bankruptcy proceedings - the final stage of litigation

The bankruptcy procedure for an individual in Russia has a stage that involves the sale of company assets and termination of activities. The property is sold at free auction, and anyone who has submitted an application can buy it. According to bankruptcy law, funds received as a result of such auctions are used to pay off debt and pay legal costs. The person who organizes the tenders and all necessary procedures is called the bankruptcy manager. Bankruptcy creditors receive payments for their recoveries in the order of priority prescribed by current legislation.

This stage occurs most often on online platforms, where participants need to register and receive a special electronic digital signature.

Legal regulation of insolvency

To get full advice on the interpretation of the law, find out the specifics of the application of individual clauses, and also fully understand your legal status (debtor/creditor/third party), you can contact a law firm. Qualified specialists will help answer all questions, draw up an application to the arbitration court, and also receive support at all stages of the judicial review. The insolvency bankruptcy procedure in Russia is regulated by:

• Federal Law of October 26, 2002 No. 127-FZ “On Insolvency (Bankruptcy)”;
• Civil Code of the Russian Federation of November 30, 1994 No. 51-FZ;
• Criminal Code of the Russian Federation of June 13, 1996 No. 63-FZ;
• Labor Code of the Russian Federation dated December 30, 2001 No. 197-FZ.

The procedural side of the issue is regulated by the Arbitration Procedural Code of the Russian Federation dated July 24, 2002 No. 95-FZ. This legislative act describes, explains and clarifies all issues regarding the conduct of judicial proceedings. Each of the legislative acts has chapters, articles and separate rules that are used to vest each party with rights, obligations and guarantees.

When making a court decision, all documents, certificates, reports of managers and other facts used as evidence are necessarily evaluated. This eliminates the possibility of fraud or misleading the parties.

Documents for simplified bankruptcy

The applicant must provide the arbitration manager with irrefutable evidence to confirm the inability to cope with debt obligations. We are talking about a package of documents specified in the laws.

Extrajudicial bankruptcy is carried out on the basis of documents indicating:

• Income received by the citizen (certificate of salary, benefits or pension).
• Existence, amount and grounds for debt (agreements and court decisions).
• Family composition and the presence of dependents in the applicant’s custody (marriage certificate, prenuptial agreement, birth and adoption certificates of children).
• Ownership rights to property and funds (bank deposit agreements, certificates of real estate rights and documents on participation in legal entities).
• The debtor has carried out major financial transactions involving the alienation of property over the past 3 years.

If the arbitration manager considers the list of documents presented to be insufficient, he will have to provide the necessary certificates. A prerequisite is the provision of a passport and various receipts confirming the fact of making payments to repay debts.

The manager is authorized to send requests to various institutions and organizations to obtain answers to questions related to the financial activity of the debtor. In particular, useful data can be provided by credit history bureaus, the Federal Tax Service, various banking institutions and the Federal Bailiff Service.