How to prove your solvency to a lender

How to prove your insolvency to the bank?

Due to the low level of financial literacy of the population and the availability of bank loans, a rather tense situation has been developing in Russia for years with an increase in debtors who are unable to repay the money borrowed at interest. The amount of overdue debt to banks amounts to tens of billions of rubles. This is what at one time was the reason for changes in legislation that allowed any person through the court to have him declared bankrupt and have his debt written off. If a person cannot fulfill the terms of the loan, he should try to negotiate with the credit institution on debt restructuring. This can be done realistically and out of court. The main thing is to prove temporary insolvency.

How to prove temporary insolvency?

To avoid fines, penalties and court proceedings, the borrower files a statement of inability to repay the loan. In this case, banks offer debt restructuring. The procedure represents a change in the terms of the loan agreement. As a result, the client receives a deferment and a new schedule with reduced payments.

To confirm insolvency, the debtor first of all confirms in his good faith:

• agrees to the obligation to repay the debt;
• does not interfere with the measures that the bank takes to collect.

The lender will accommodate a borrower who proves that he is unable to fulfill the terms of the agreement.

We prove insolvency

If you do not want to bring the matter to court, the debtor can contact the bank with a written request to reconsider the terms of the agreement: defer payments, carry out restructuring.
In the first case, the borrower will be obliged to repay only accrued interest, but the body of the loan will remain unchanged. During restructuring, loan terms are revised. Usually they are increased, which leads to a decrease in the amount of the required monthly payment. This allows a person to avoid being assessed various fines. At the same time, restructuring increases the amount of interest that must be paid to the bank; payments are reduced only by extending the term. Thus, this puts a significant burden on the debtor's wallet, but if there is no other option, such a procedure can be useful. In order for a credit institution to accommodate a borrower, he needs to document that he is unable to fulfill the terms of the previous agreement.

The reason for the review should be the temporary insolvency of a person. You can prove it with various documents. For example, bring copies of your work book with a page confirming your dismissal, certificates from the tax service or a certificate of disability. Before submitting an application, you must request the bank to issue a written statement of the amount of debt at the time of application.

The bank has the right to refuse and demand repayment of the debt in accordance with the terms of the previously drawn up agreement. If a person continues to be unable to resolve the issue with a credit institution, it is best for him to seek consideration of the case in court, which banks always agree to with reluctance. The reason for the reluctance lies in the fact that the court, as a rule, makes a decision to collect the debt, taking into account the financial capabilities and financial condition of the debtor, his marital status, and how many people are dependent on him. The court allows you to fix the amount of debt, reduce interest rates and the amount of fines (according to a court decision, fines never exceed the loan amount). How beneficial the decision will be for the borrower also depends on his good faith, which is determined by the court according to the following criteria:

• the debtor did not hide from the creditor, which is documented (presence of notifications with signatures of receipt);
• the debtor tried to resolve the conflict individually by contacting the organization with a request to reconsider the terms of the contract (a written notification from the bank that it had received the borrower’s offer, or an official letter refusing to reconsider the contract terms);
• the debtor informed the organization about all changes in his life that would be significant for the bank: a change of place of residence, a change in family composition, and so on;
• the debtor is not avoiding work, is on the labor exchange or has already found employment.

Based on the results of the hearings, the court assigns the borrower an amount that he is obliged to pay to creditors. This is called outstanding debt. The decision will come into force one month after it is made. You can appeal it before this deadline.

How to prove insolvency through court?

In order for a person to be declared insolvent in court, a number of conditions must be met. The borrower must have an overdue debt (the amount of the debt is at least half a million rubles and exceeds the value of the property, which is confirmed by completed enforcement proceedings). The insolvency of a citizen is considered not only if he has a debt to the bank.

What types of debts can be written off from a citizen if he is declared insolvent (bankrupt):

• debt to an individual, which is confirmed by the presence of a receipt;
• mortgage debt;
• debt to a credit institution;
• debts for utilities.

Insolvency is determined based on an analysis of the following operations and capabilities of a citizen:

• statements of all accounts;
• composition of property;
• transactions of the borrower over a three-year period;
• income of all family members of the debtor;
• monthly personal income;
• the presence or absence of additional types of income.

After a person is declared insolvent (bankrupt), an inventory of all the borrower’s property will be carried out for the purpose of subsequent sale. This money will be used to pay off the debt, and the remainder will be written off. A citizen declared bankrupt ceases to be a debtor, but in return he faces some restrictions. Firstly, the history of bankruptcy filing will be made publicly available for a five-year period. Not a single bank, based on this information, will issue a loan to a citizen. During the same period, the bankrupt will not have the opportunity to get new debts written off through the court. Another feature of this decision is the imposition of professional restrictions on the bankrupt: he will be prohibited from holding high management positions in the enterprise for three years.

conclusions

​Although any bank provides that some of the loans will be unpaid (all risks are taken into account), it is much more profitable for credit institutions not to bring cases to the courts, but to deal with the borrowers personally.
Therefore, there is a high probability that if there are serious supporting facts, a person will not have any problems proving to the organization his temporary insolvency and obtaining a revision of the terms of the loan agreement. Facts are not just words, but documentary evidence. At the same time, it is no less important to negotiate with the bank in writing, to demand additional copies of all drawn up agreements and signed documents for yourself. This may be needed in the future for trial.

Another important note that concerns everyone who is just planning to take out a loan. Before drawing up an agreement with a bank, it is advisable to carefully consider whether credit funds are really needed, or whether the amount can be saved by saving from your salary. In any case, a loan should be taken under the condition that paying interest will not be too burdensome, and work gives confidence that a person will not be left in the future without income and the ability to pay bills.

What to do in case of temporary insolvency?

To prove temporary disability, you will need to contact a bank branch with an application and documents.

You will need to prepare:

• passport and its photocopy
• certificate 2-NDFL for the last year, it will show your entire income before dismissal or layoff
• certificate from the employment center regarding registration
• a copy of the sick leave certificate or disability certificate
• loan documents (certificate of debt balance, copy of agreement)

In your application, you must describe in detail the current situation and why you cannot temporarily pay the loan.

You will need to indicate:

• name of the financial company
• borrower details
• information on the loan agreement
• resulting in difficulties

Additionally, you will need to indicate how long it will take to improve your financial situation and be able to repay the debt. You should also request deferrals for restructuring payments.

Restructuring means that a new loan agreement is concluded with you, where the amount is divided into a longer period or the interest rate is reduced. The latter is less common because banks are not willing to lose profits. The main advantage is a reduction in monthly payments. Disadvantages - often due to an increase in the term, the overpayment on the loan increases.

You can ask for a deferred payment or credit holiday. The essence of the holiday: the bank allows you not to pay the loan for several months, until you are ready to return to work again or find a new one.

Postponement happens:

• Full, when the client pays neither interest nor the principal amount. The payment schedule is changing. The contract is increased by the number of months during which payment has not been received.
• Partial, in which the client pays only interest, and the amount of the principal remains unchanged. The advantage is that the monthly payment is reduced, making it easier for the client to repay the loan.

Note! The bank may refuse to refinance the debt and provide other types of deferments. Then there is nothing left to do but wait to go to court. The credit institution independently files a lawsuit. Your task is to provide in court all the evidence about contacting the bank, so demand written conclusions of all decisions from the bank.

How to prove permanent insolvency?

If a citizen is unable to pay his debts, then he is declared bankrupt, i.e. his permanent insolvency is proven. But the fact of bankruptcy itself still needs to be proven.

This happens through the court. A citizen is declared bankrupt if the amount of all his debts is more than 500 thousand rubles, and the property registered in his name is valued much cheaper.

Also, not only loans can be written off when you declare bankruptcy. Unpaid bills for housing and communal services, mortgages and other debts registered with a receipt are reset.

To declare yourself bankrupt, you must provide the following to the court:

• Statements from all accounts
• Certificate of property ownership
• Income certificates for all family members
• A document confirming the presence or absence of additional income
• Work book with a note about job loss

After a citizen is declared bankrupt, all his property is sold at auction to pay off part of the debt, and the remaining amount is written off. Moreover, debts are paid in the following order:

• communal payments
• credit organizations
• debts on receipt to other individuals

Please note that bankrupt individuals are subject to restrictions. For example, bankruptcy information is publicly available and you will no longer be issued a new loan for 3 years.

How to prove your solvency?

Before applying for a mortgage or large personal loan, you should learn how to prove your solvency. Having confirmed his reliability as a borrower, the client has the opportunity to obtain a loan on favorable terms. Citizens who have a stable source of income, registration, and a good credit history are considered solvent; for men under 27 years of age, a registration certificate from the military registration and enlistment office is required.

Additional “advantages” will be the availability of real estate for rent, confirmed other sources of income (part-time work), old-age pensions. Disability payments should not be specified - disability is perceived by creditors as a red flag. Payments for child benefits do not affect the bank's decision.

What to do if the bank refuses to recognize the client as insolvent?

If the bank does not want to recognize you as insolvent, then the only solution to the problem is to go to court yourself. In addition to evidence of insolvency, you must provide information that you did not hide and tried to resolve the situation peacefully with the credit institution. It is necessary to correspond with the bank and save all materials, and also not to believe verbal notifications, but demand only a written response.

Important! An excellent option to cover debt is insurance. Most people don’t like to register it; they say it’s a waste of money, but in an emergency it can help out. For example, insurance will cover the entire loan if you become disabled. Some types of insurance pay off debt if you lose your job due to layoffs.

The process of declaring insolvency is very long, tedious and entails serious consequences. Before you take out a loan, realistically assess your financial capabilities. You should not take it if you have an unstable situation at work. Before you borrow money, think about whether you urgently need it.

What does the law on personal bankruptcy say?

All features of the bankruptcy procedure for individuals are recorded in the one hundred and twenty-seventh article of the Federal Law. This document is used as a regulation that regulates all legal aspects related to the process under consideration. The law recognizing bankruptcy of citizens was adopted in two thousand and two. Over the past ten years, the normative act has been significantly changed and supplemented.

According to established rules, bankruptcy proceedings can only be initiated if the amount of debt to third parties reaches a certain threshold. It is the achievement of the established value that is the actual proof of financial insolvency.

Today, to declare bankruptcy, you must have a debt of more than half a million rubles.

It is important to pay attention to the fact that this procedure can be initiated not only by the debtor, but also by the control authorities. In addition, this right is granted to persons acting as creditors. When going to court, there are several things to consider. One of them is the duration of debt obligations. You can obtain bankrupt status only if the period of delay on financial obligations exceeds more than three months. The current legislation states that the bankruptcy procedure is mandatory for every citizen who has difficulties repaying a loan. This rule applies to those persons who have several debts for large amounts received from different creditors.

What to do in case of temporary insolvency

Temporary insolvency is a period of time during which a borrower is unable to make loan payments. There may be several reasons:

• job loss;
• serious illness;
• emergency situations with property, for example, fire.

In order to prove that the difficulties are temporary, the borrower should visit the office of the financial company and write a statement. In the application, indicate the reason and attach a supporting document.

Application example:

To the Director of the Samara branch of Bank LLC

Ivanov Igor Valentinovich

From Sidorov Valentin Petrovich

Loan agreement No. 123 dated 01/01/2020

As of June 4, 2020, I had a debt to the bank in the amount of 36,452 rubles 12 kopecks. The debt arose as a result of job loss due to the fault of the employer. Currently, I am officially listed on the labor exchange and am actively looking for work.

I ask you to cancel the accrued fines and reconsider the terms of the contract. I am attaching to the application:

• A copy of the work book.
• Certificate from the employment center.

Borrower: Sidorov Valentin Petrovich (signature) 06/04/2020

How to resolve the issue of loan repayment in case of temporary insolvency

Few people have the opportunity to repay the debt ahead of schedule if the bank makes such a requirement. As a result of this, you should contact the bank as quickly as possible and agree on payment options in case of temporary financial difficulties.

How to prove permanent insolvency

Debt is a real disease of the 21st century.
The borrower can prove permanent insolvency only in court. This procedure is called bankruptcy of an individual. To do this, you will need to fulfill several basic requirements. Requirements:

• debt on loans, borrowings or utility payments of at least 500,000 rubles;
• the presence of overdue debt for at least 3 months;
• lack of permanent work.

The bankruptcy procedure includes:

• payment of state duty;
• filling out the required application form;
• engaging an experienced lawyer;
• filing documents with the court;
• payment for the services of an arbitration manager;
• getting a decision.

If, after studying all the documentation, the bank decides that the client cannot pay the loans, he will be declared permanently insolvent (bankrupt) and all debts will be written off.

When deciding to declare yourself insolvent through the court, you should take into account that you will need to use the help of an experienced lawyer. It is extremely difficult to defend your rights on your own. The bankruptcy procedure is free of charge. The costs of conducting the case will range from 20 to 50 thousand rubles. In terms of time, the court reviews documents, makes requests and examines transactions with the client’s property within 6 months.

What it is?

An outstanding debt is the presence of a court decision that has entered into legal force to collect a debt from a citizen in favor of the creditor of a sum of money.

In order for you to have an outstanding debt, it is necessary that the creditor or other person file a claim with the court to terminate the contract and collect funds.

Failure to provide information and documents to the court and financial manager

In more than 1/3 of cases, the reason for non-release of debts upon completion of the bankruptcy procedure of an individual is the debtor’s ignorance of the bankruptcy process: failure to provide information and documents to the court and the financial manager (at their request).

Having a debt that arose as a result of committing a crime

From the point of view of bankruptcy law, if in the register of creditors there is a creditor to whom the debt arose as a result of a crime, then the citizen is not released from debts upon completion of the bankruptcy procedure of an individual. Moreover, in this case, the citizen must not be released from all debts, and not just from the debt associated with the crime.

However, in practice there are cases of partial non-exemption from debts (they are not released from debt to individual creditors if the court has established that when obligations to these creditors arose, the citizen provided them with knowingly false information and committed a crime).

Let's sum it up

In conclusion, it can be noted that if the client has temporary difficulties, the bank can accommodate and change the conditions. To do this, you must write an application and present documents according to which the creditor will understand that payments were not made for a good reason.

If debts exceed income several times, then the only way out is to declare oneself bankrupt. When deciding to take such a step, you should understand that you will not be able to borrow money afterwards, even from an MFO. The procedure is lengthy, costly and requires the help of a professional.

Conclusions (+ video)

In this article we discussed the bankruptcy of individuals itself. persons, consequences and methods of eliminating them. In conclusion, it should be said that if you do not have a stable income, you should not take out loans. Experts recommend that you compulsorily draw up a financial plan to pay off your debt obligations. According to this plan, monthly payments should not exceed more than fifty percent of income. If bankruptcy proceedings are initiated, it is necessary to try to satisfy all the creditor's requirements at the stage of debt restructuring. This step will significantly improve the financial condition of the citizen.

Comments (8)

Ekaterina, this judicial act is interesting, but still does not correspond to practice. I referred to it to show by example the “variability” of court decisions.

The financial analysis, which served as the main evidence, was not objective.

The debtor, as a matter of principle, did not pay his creditors until the last minute. For example, the Federal Tax Service Inspectorate makes demands on him for 6 thousand rubles, the debtor does not comply, and then the Federal Tax Service Inspectorate compulsorily collects the money from the debtor.

Of course, the bank knew about the requirements of the Federal Tax Service against the debtor (issued collections), and could see in the file cabinet the lawsuits on claims against the debtor, but, at the same time, the bank saw that the debtor made a profit of several hundred million in the 12th year and could, if wanted to satisfy the demands of all creditors and at the same time remain financially solvent

The results of the judicial act are explainable by the fact that the judge in the first instance had no opinion of her own, and the united creditors, together with the emphasis and AU put by the creditors, put pressure on the judge.

From there and regarding my last comment, so that I am understood correctly: “According to paragraph two of paragraph 3 of Article 28 of the Bankruptcy Law, information on the introduction of supervision, financial rehabilitation, external management, on declaring the debtor bankrupt and on the opening of bankruptcy proceedings is subject to mandatory publication in the manner provided for in the said article. In this regard, in the presence of such publications, in the event of a challenge on the basis of paragraph 2 of Article 61.2 of the Bankruptcy Law of transactions completed after these publications, the following must be assumed: unless otherwise proven, any person should have known that the corresponding bankruptcy procedure had been introduced , and therefore that the debtor has signs of insolvency.” Thank you, everything is correct! any court case on file is not in itself evidence of insolvency, even bankruptcy.

I'm glad if I helped in some way. - I can’t quite share the optimism - “everything is true! any court case on file is not in itself evidence of insolvency, even bankruptcy.” On the one hand, from the following quotation from As of M. District, it is clear that many external circumstances may not be recognized by the court as indisputable evidence of insolvency: “The courts correctly indicated that the fact that in relation to the debtor (before accepting the application for declaring the company bankrupt) statements of claim by other organizations does not in itself mean that the creditor should have known about the insolvency of the debtor, since according to paragraph 7 of paragraph 12 of the Resolution of the Plenum of the Supreme Arbitration Court of the Russian Federation dated December 23, 2010 N 63 “On some issues related to the application of the chapter III.I of the Federal Law “On Insolvency (Bankruptcy)”, even the posting on the website of the Supreme Arbitration Court of the Russian Federation in the file of arbitration cases of information about the initiation of bankruptcy proceedings against the debtor does not mean that all creditors should know about it. Submitting claims in a lawsuit does not mean that they will be satisfied by the courts, and if they are satisfied, it does not mean that the defendant does not have enough funds to pay off such claims. CB "European Trust Bank" (CJSC) mistakenly equates insolvency with failure to pay a specific debt to an individual creditor and does not take into account that the creditor is always aware of the fact of non-payment of debt to him. Having examined the evidence referred to by CB "European Trust Bank" (CJSC), the courts rightfully found that they did not confirm the fact that LLC "Profitable Real Estate" was aware of the signs of insolvency and insufficiency of the debtor's property."

Consequences of declaring bankruptcy

The bankruptcy procedure is one of the most complex legal processes, which has a multi-stage structure. There are many different legal subtleties that can affect the course of a trial. These factors can have a significant negative impact on the debtor's welfare.

For an individual

Bankruptcy of individuals consequences for the debtor are expressed in the form of the following restrictions:

1. Prohibition on conducting business activities and partial restrictions on the choice of position.
2. Ban on travel to foreign countries.
3. Loss of property values.
4. Deterioration of financial condition.

It is important to note that the procedure under consideration affects not only the citizen himself, but also his family . Below we propose to talk about the adverse consequences that await the debtor’s family.

The initiators can also be creditors or an authorized body (Federal Tax Service

For relatives

We have already said above that persons who have received bankrupt status face various restrictions in conducting professional activities. This factor negatively affects the financial condition of the citizen and those dependent on him. Another unfavorable factor is the forced confiscation of property values. It is important to note here that these assets can be used not only by the debtor himself, but also by his immediate circle. An example is the seizure of a car registered in the name of the bankrupt’s wife or children. If the asset has the status of “jointly acquired property,” the second owner is partially compensated for the seizure of the asset in the form of a transfer of a share of the funds received from the sale of the property through an auction.

For creditors

Bankruptcy has not only negative consequences for relatives, but also for persons acting as lenders. The main unfavorable factor for creditors is the cancellation of debt by judicial authorities. As a rule, the creditor acting as the initiator of the procedure does not have complete information about the financial situation of the debtor. This factor hinders the analysis of the feasibility of going to court.

It should be noted that the money received through the sale of the debtor's property is not always enough to satisfy the creditor's demands. It should be taken into account here that cases with the presence of only one lender are quite rare in such practice. This means that a creditor filing a claim to declare a debtor bankrupt must take into account both the total number of loans and their value. From all of the above, we can conclude that going to court to forcefully collect a debt can increase both the amount of costs for the applicant himself and reduce the amount of funds received to cover the debt.