The execution of decisions made based on the results of consideration of disputes is carried out by the Bailiff Service. The sale of seized property is one of the measures for forced collection of debts. It is worth noting that in practice it is used quite often. Let us next consider how the sale of seized property by bailiffs occurs.
General information
The procedure for the sale of seized property by bailiffs is regulated by Federal Law No. 229. This regulatory act contains a special article 87. It regulates the main points relating to the sale of material assets belonging to the debtor. Federal Law No. 229 establishes the rules that bailiffs must follow. Seized property for sale is subject, first of all, to an independent assessment. An expert is invited for this purpose. As practice shows, the cost of material assets put up for sale is quite low.
Legal regulation of seizure and sale of property
The main legislative act that is used to provide legal justification for the seizure of property at the time of enforcement proceedings is Art. 87 Federal Law No. 229 dated December 28, 2016. This law provides for certain rights and obligations of the debtor before the law, as well as restrictions on the activities of bailiffs, as well as the reduction of their permissible powers.
In addition, other articles of the above-mentioned Federal Law regulate the entire procedure for seizing property, as well as a description of possible actions of debtors, collectors or bailiffs.
Important fact
Art. 87 Federal Law No. 229 concerns exclusively the sale of property that is already under arrest as part of enforcement proceedings. However, other articles of this law may provide for restrictions on the seizure of property in relation to certain categories of persons and situations, thus providing possible justification for canceling the sale of seized property due to non-compliance with the law of the very fact of seizure.
Preliminary stage
As a general rule, a citizen is given 30 days to repay debt in the event of seizure of material assets. The subject is notified of the existence of an obligation. The notice specifies the period within which he must repay them. After the established period, if the citizen has not taken any action to pay, his property is transferred to specialized institutions, which carry out the implementation. The sale of material assets usually takes place when there is a large debt.
What types of debt cannot be canceled
Although selling property is an effective method of satisfying creditors' claims, bankruptcy may not cancel certain types of debt:
- alimony;
- payments to creditors for compensation of material and moral damage, including in connection with causing harm to life and health;
- wage obligations;
- obligations to pay severance pay;
- subsidiary liability;
- compensation by the bankrupt for losses to a legal entity of which he was a former participant;
- compensation for property damage;
- debt for the consequences of void transactions.
The sale of bankrupt property is a multi-stage process that requires the involvement of many specialized organizations. It is considered completed only after the transfer of funds to creditors. But this scheme in real life is far from ideal. In judicial practice, additional measures are often used to speed up the sale of the bankrupt’s property, including the involvement of qualified lawyers to monitor the progress of the entire process.
Evaluation nuances
As mentioned above, the sale of seized property by bailiffs in St. Petersburg (or another city) begins with an assessment. The expert must draw up a conclusion no later than 1 month from the date of his involvement in the proceedings. It is worth noting that an inventory compiled by FSSP employees without an appraiser may be considered invalid. The sale price of the debtor's owner will depend on the characteristics of the material assets. If the property does not have any specific features (for example, it does not include expensive works of art), the sale will be carried out at the market price.
Determination of the sale value of the pledged property
Determination of the sale price in court
Taking into account the provisions of the current legislation, when foreclosure of mortgaged property in court, the FSSP department determines the initial sale price, taking as a basis the value indicated in the writ of execution, regardless of whether this price corresponds to the market value of the property being sold.
Consequently, if the writ of execution does not indicate the initial sale price of the seized property, then the bailiff, in accordance with Article 32 of the Federal Law, applies to the court to determine the sale price of the debtor’s property.
When determining the initial sale price of property for the purpose of transferring it for re-sale by bailiffs, the following points should be taken into account.
If the announcement of a public auction for the sale of property did not take place due to the attendance of less than two buyers or the lack of a premium on the initial sale price of the seized property, the pledgor or pledgee has the right, before the repeated public auction, to go to court with a request to change the sale price of the property for its sale.
That is, if the initial auction is declared invalid for certain reasons, the bailiff department cannot independently make a decision to reduce the value of the debtor’s seized property. The bailiff must, as soon as possible, explain to the mortgagee his right to apply to the court with the above application.
This application with a request to change the sale price must contain a requirement to reduce by 15% the initial value of the pledged movable or immovable property at the next auction.
As a result of the court's consideration of the corresponding application submitted by the mortgagee, the FSSP department makes a decision, which will indicate the new value of the seized property, changed by the court.
If the mortgagee refuses to apply to the court with such an application when selling the property or if the FSSP department does not have information about filing this application at the end of 1 month after the day of the auction, the enforcement proceedings initiated on the basis of the writ of execution may be considered completed.
Determining the price of property out of court
In accordance with Russian legislation, when establishing the initial price of the pledged property for its sale within the framework of enforcement proceedings, which was initiated on the basis of an administrative signature of a notary, the bailiff will proceed from the value or methods of establishing this value specified in the agreement on the recovery of the seized property in out of court.
The agreement can be concluded either as a separate agreement or included in the pledge agreement. The exception is cases when the involvement of an appraiser is mandatory.
The involvement of an appraiser by the bailiff, who will determine the initial sale price of the property, is considered a mandatory condition for the sale of movable property in accordance with the Pledge Law (Part 11 of Article 28.1) and the debtor’s real estate in accordance with the Mortgage Law (Clause 10 of Article 59).
In the presented cases, the initial sale price of the property, from which the auction begins, is set by the FSSP in the amount of 80% of the market value of the seized property, determined by the appraiser, unless otherwise provided by an agreement of the parties on the recovery of pledged movable property out of court, formalized as a separate agreement, and included in the pledge agreement.
In the process of selling the debtor's property at auctions held after foreclosure on the property out of court, and when the first auction is declared invalid for certain reasons, the bailiff service department, if there is a need for a re-sale, makes a decision to reduce the initial sale price of the property by 15% .
In this case, it must be taken into account that the agreement of the parties on the extrajudicial recovery of seized movable property may indicate a different procedure for reducing the price if the re-tender fails. Then the bailiff of the FSSP department must be guided by the provisions of the agreement.
Since the pledge agreement may include a general assessment of several objects of movable or immovable property that are pledged, their general assessment is allowed. In this case, the specified property cannot be sold separately and is sold as a single lot indicating the total sale price.
Auction
The legislation establishes a certain procedure for the sale of seized property by bailiffs. The sale of the debtor's property is carried out through an auction. For this purpose, territorial authorities are involved. To conduct the auction, a commission of at least five people is formed. Its members include representatives of local authorities, tax authorities, as well as independent experts. The Federal Tax Service approves the structure of the commission. Only those entities that have managed to submit an application, have completed the required documents properly and have paid a deposit may be allowed to participate in the auction. The commission will consider all received applications, but will satisfy only those that comply with legal requirements. Persons who fail the verification have the right to withdraw documents and return the deposit. In some cases, there is only one buyer in the auction. In such a situation, members of the commission negotiate with him to agree on the cost of the objects being sold. The documentation drawn up based on the results of the conversation is sent to the tax office and handed over to the auction organizers.
Bidding for the sale of debtors' property and the procedure for conducting them
After the appraisal work, the sale of the debtor's property begins at open auctions, which are held in the format of auctions.
With each “step” of the auction, the cost of the lot increases. The size of the “steps” is set by the auction organizers; as a rule, it is no more than 10% of the original cost of the item. Every resident of Russia can take part in the auction. The one who offers the highest amount wins.
Financial managers or third-party companies are appointed to be responsible for conducting auctions. Organizational work for holding the auction is paid from the funds of the defaulter.
Auctions of debtors' property are considered invalid if no potential buyer has submitted an application to participate. If the application was submitted by one buyer and the price of the lot was indicated above the original one, the financial manager sells the property of the bankrupt.
If the public auction does not take place, it is held a second time. In this case, the price of lots will be lower by approximately 10% of the original cost. If the second attempt fails, the bankruptcy estate is sold through a public offering. The cost and terms of sale in a public offering are reduced in proportion to the time of sale of the property.
Progress of the process
The sale of seized property by bailiffs in Moscow (as, indeed, in other cities) is carried out through specialized institutions. These organizations conduct tenders within the framework of current legislation. The rules establish certain deadlines for the sale of seized property by bailiffs. The auction must be held within two months from the date of receipt of material assets by the auction organizers. 10 days before their start, an announcement is placed in the media and the Internet. Entities who wish to participate in the auction must submit an application and make a deposit. Its size is no less than 5% of the original cost of the objects being sold. The amount of the deposit is indicated in a message posted in the media and on the Internet. The sale of seized property by bailiffs is carried out at its registration address. Territorial authorities have the right to limit the range of bidders.
Bankruptcy proceedings: sale of the debtor’s property (note 4.1)
ATTENTION: IN CONNECTION WITH THE PUBLICATION OF THE THEMATIC COMMENTARY, WHICH INCLUDES THE SPECIFIED NOTES, THEY ARE PROVIDED HERE IN A TRUNCATED VERSION.
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Table of contents.
Note No. 1 general about the opening of competition production:
Bankruptcy proceedings: discovery and general consequences of this (note No. 1) Note No. 2 on the requirements for bankruptcy
Bankruptcy proceedings: general characteristics of requirements for a bankrupt; current requirements (note 2.1) Bankruptcy proceedings: the procedure for submitting register (register) requirements (note 2.2) Note No. 3 on the formation of the bankruptcy estate:
Bankruptcy proceedings: collecting information about the debtor (note 3.1) Bankruptcy proceedings: algorithm for working with the debts of a bankrupt (note 3.2) Bankruptcy proceedings: challenging the debtor's transactions (note 3.3) Bankruptcy proceedings: recovery of losses from persons who have the right/opportunity to determine the behavior of the debtor (note 3.4) Bankruptcy proceedings: bringing to subsidiary liability the persons controlling the debtor (note 3.5) Bankruptcy proceedings: debtor’s accounts, inventory and valuation of property (note 3.6)
Note No. 4 on the sale of the debtor's property:
Bankruptcy proceedings: sale of the debtor's property (note 4.1) Bankruptcy proceedings: sale of the debtor's property without bidding (note 4.2)
Bankruptcy proceedings: certain issues of the sale of the debtor's property (note 4.3) Note No. 5 on settlements with creditors:
Bankruptcy proceedings: settlements with creditors (note 5)
Note No. 6 about the supervisor of the procedure and the course manager:
Bankruptcy proceedings: control over the activities of the arbitration manager. Suspension, release from duties (note 6.1)
Bankruptcy proceedings: meeting (committee) of creditors (note 6.2)
Bankruptcy proceedings: personal control of the creditor over the bankruptcy manager (note 6.3)
Bankruptcy proceedings: judicial control over the bankruptcy manager and the procedure through the consideration of reports and complaints against him; removal/dismissal of a manager (note 6.4)
Note #7 about completing/terminating the procedure:
Bankruptcy proceedings: termination / completion of bankruptcy proceedings (note 7)
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Standard note: part of the fourth note, from the planned series, on bankruptcy proceedings; They (notes) are of an applied nature and relate to general issues of the bankruptcy procedure, as well as issues that I considered interesting.
As a result, by approximately the end of March, there should be a series of notes with my opinion about the procedure, at all its key stages.
Let me make a reservation right away that the text was written in relation to bankruptcy proceedings in relation to business entities (which are not separate categories of debtors), against which bankruptcy proceedings have been opened according to the general rules.
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Note plan:
I. General overview of methods for selling the debtor’s property
II. Sale of property through auction.
A. Approval by a meeting (committee) of creditors of a proposal to sell the debtor’s property.
B. First/Repeat Bidding.
C. Public offering.
D. Features of concluding a purchase and sale agreement based on the results of the auction.
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I. General overview of methods for selling the debtor’s property
One of the main tasks of bankruptcy proceedings is the sale of the debtor's property on the most favorable terms. This allows you to achieve the main goal of the procedure - the most complete satisfaction of the creditors' requirements.
To obtain maximum revenue within an acceptable period of time, the ZoB provides for the procedure for the sale of the debtor’s property (Articles 110, 132, 139, 140, 148 of the ZoB).
Before proceeding with the sale of property through one method or another, the following conditions must be present:
1) the results of an inventory of the relevant property on the EFRSB must be carried out and published (paragraph 3, paragraph 2, article 129 of the Zob);
2) its (property) assessment must be carried out by an independent appraiser if required by law (in particular, in relation to pledged property or if, within the prescribed period, a bankruptcy creditor (authorized body) [1] or without involving one (p 5 Article 130 ZoB);
3) an appropriate decision must be made by the meeting (committee) of creditors (on approval of the proposal to sell the debtor’s property, on determining the procedure for the sale of property with a book value of less than 100,000 rubles as of the last reporting date before the opening of bankruptcy proceedings, on approval of the agreement on compensation, offset).
As a general rule, property is subject to sale through auction (exceptions are discussed below).
The procedure for selling the debtor's property can be schematically presented as follows:
1) first auction;
2) repeated auctions (if the property was not sold based on the results of the first auction);
3) public offer (in case the property was not sold based on the results of the first auction);
4) offer to creditors of unsold property (if previous procedures for the sale of property did not allow it to be sold);
5) transfer of unrealized property to the debtor's participants at their request (if previous procedures for the sale of property did not allow it to be sold);
6) transfer of unrealized property to local government bodies (transfer to federal ownership if it cannot belong to self-government bodies).
Trading may not be held in relation to:
1) in relation to property that is a finished product of the debtor - it is sold in the manner at the discretion of the bankruptcy trustee;
2) in relation to property, the book value of which is no more than 100,000 rubles as of the last reporting date before the introduction of the bankruptcy procedure (property that is not a finished product) - is sold in the manner determined by the meeting (committee) of creditors, which may provide for a different procedure for sale (for example , by concluding direct sales and purchase agreements, without tendering).
At the same time, the sale of property, the book value of which is no more than 100,000 rubles as of the last reporting date before the introduction of the bankruptcy procedure (property that is not a finished product), must be preceded by the publication of inventory results on the EFRSB and the deadline for possible presentation by creditors (authorized authority) requirements for carrying out its assessment (clause 1 of article 139 of the Zob).
If a request has been received to conduct its assessment, then it must be assessed and the results of such an assessment must be taken into account when implementing it; such behavior will comply with the principle of good faith.
II. Sale of property through auction.
The most common procedure for selling property during bankruptcy proceedings is sale through electronic trading.
The rules governing the procedure for conducting auctions during bankruptcy proceedings are established in Art. Art. 110, 111, 138, 139 ZoB; The general rules of the Civil Code of the Russian Federation on auctions are also subject to application - Art. Art. 447 - 449.1 Civil Code of the Russian Federation.
Bidding is a special procedure for concluding a contract, consisting in the fact that the owner of a thing or another authorized person organizes a competition between persons for the most acceptable (favorable) terms of the contract. The contract is concluded with the person who wins the auction.[2]
Bidding can be held in the following forms: auction, competition and in another form as provided by law (clause 4 of Article 447 of the Civil Code of the Russian Federation as amended by the Federal Law of 03/08/2015 No. 42-FZ). For bankruptcy proceedings, this “other form” of bidding is a public offer (clause 4 of article 139 of the Zob).
The auction is a bid to increase the price, the participants of which do not have to undertake obligations to fulfill any conditions in relation to the property being traded; The winner is the person who offered the highest price during the auction[3].
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[1] Art. 130, paragraph 1, art. 139 ZoB
[2] Commentary on the Civil Code of the Russian Federation. Part one of November 30, 1994 N 51-FZ (Ageshkina N.A., Barinov N.A., Bevzyuk E.A., Belyaev M.A., Biryukova T.A., Vakhrusheva Yu.N., Grishina Ya.S., Zakirov R.Yu., Kozhevnikov O.A., Kopiev A.V., Kukharenko T.A., Morozov A.P., Morozov S.Yu., Serebrennikov M.M., Shadrina E. G., Yudina A.B.)
(Prepared for the ConsultantPlus system, 2014)
[3] clause 5 art. 110 ZoB, paragraph 4 of Art. 447 Civil Code of the Russian Federation
Completion of trades
The entity that offers the highest price for the objects put up for auction is recognized as the winner of the auction. He and the organizer of the sale must sign the protocol. Within five days after the end of the auction, the winner must pay the amount for the objects he purchased, minus the deposit. If he does not do this, the payment made will not be refunded. After full payment, a purchase and sale agreement is concluded with the auction winner. From the moment of its registration, the subject is considered the owner of material assets. If real estate is sold, the agreement is subject to state registration. Ownership will be recognized after this procedure is completed in the prescribed manner. Persons who do not win the auction will have their deposit returned.
In what cases does the law provide for the sale of a citizen’s property?
According to Art. 213.6 of the Federal Law, the court, when considering an application to declare an individual bankrupt, may make one of the following determinations:
- on accepting the application and introducing a debt restructuring procedure;
- about leaving the application without consideration;
- to terminate the proceedings.
But debt restructuring may not always be possible. This is discussed in Art. 213.24 Federal Law. According to its rules, the decision to introduce a procedure for the sale of property is made by the court in the following cases:
- The persons participating in the process did not submit a restructuring plan within the deadlines established by law.
- The restructuring plan has not been approved by creditors.
- The plan was canceled by the court.
- The proceedings in the case were resumed due to the fact that the terms of a previously concluded settlement agreement were violated, the ruling on the introduction of a restructuring procedure was canceled or in other cases provided for by law.
Practice shows that, often, the initiator of the procedure for the sale of property is the debtor himself or a financial manager friendly to him. Why is this happening. The fact is that debt restructuring implies their repayment, but on simpler terms. For example, for a longer period.
After the sale of property and the transfer of the proceeds to creditors, the debtor is officially declared bankrupt, against whom no further claims of a financial nature can be made. If a person does not have expensive property, then, relatively speaking, having lost a TV and a microwave oven, he cannot get rid of a debt of several million rubles.
Let us note that the debtor filing an application with the arbitration court has the right to petition specifically for the conduct of the procedure for the sale of his property, without considering the possibility of introducing a restructuring procedure. The basis for the petition is a difficult financial situation.
Failed auctions
At least one buyer must participate in the auction. Otherwise, the auction will be considered invalid. In this case, the seized property will be re-sold by bailiffs. As mentioned above, in such situations the cost of material assets is reduced by 15%. The longer the sale takes, the lower the price of the property will be.
Appraisal work
Valuation of the debtor's property is the most important stage in enforcement proceedings. The effectiveness of enforcement measures depends on its outcome. The bankrupt is interested in high property valuations, and creditors are interested in real ones.
The assessment of the defaulter’s property in accordance with Article 85 of the Law “On Enforcement Proceedings” is carried out by bailiffs in accordance with current market prices. Bailiffs, as a rule, involve appraisers in this, since debtors and collectors often disagree with the results of the procedure. The party that disputes the results of the work pays the full cost of the appraiser's services.
The assessment of the value of securities is carried out by requesting bailiffs to the organizers of trading on the relevant market. The price of shares in investment funds is determined by requesting the price to the management organization.
What valuables can be seized?
Collection under IL is primarily provided for funds in foreign currency or rubles, including those available in the debtor’s accounts, deposits, or deposits in credit or other financial institutions. If they are not enough to pay off the debt, other valuables held by the citizen are subject to seizure. management, ownership, operational management. The exception is for objects that are withdrawn from circulation, and also for which, in accordance with regulations, foreclosure cannot be applied, regardless of who owns or actually uses them.
Powers of the financial manager
The financial manager has full control over the bankrupt's property. All operations are carried out under his leadership, including the sale of debtors’ property at auction. Transactions that are carried out by the bankrupt personally are considered void.
The manager can:
- manage the defaulter’s money in his bank accounts;
- carry out transactions on these accounts;
- comply with the defaulter's legal rights;
- attend and accompany court proceedings (this also includes the arrest and sale of the debtor’s property).
Additionally
If there are grounds for completing enforcement proceedings established by the legislation of the Russian Federation, and also if the period of suspension or postponement of the action exceeds the period of sale of the property, the bailiff withdraws material assets from the auction. To this end, he issues a corresponding resolution. This act serves as the basis for termination of the agreement for the sale of seized objects. Within 3 days (working days), the auction organizer must transfer the valuables to the FSSP employee, and he, in turn, accepts them. In this case, a transfer and acceptance certificate is drawn up.
Suspension/postponement of enforcement proceedings
In such situations, within 1 working day, the bailiff must send a copy of the ruling or resolution to the department for organizing enforcement proceedings and sale of seized property. The documents are then transferred to the institution directly conducting the auction. A copy of the resolution/ruling shall also be sent within one business day. After receiving the documents, the auction organizer is obliged to immediately stop all actions related to the procedure for selling the property.
Sale of the debtor's seized property
The sale of seized property (with the exception of property that has been withdrawn from circulation by law) occurs through its sale no later than 2 months from the date of seizure of the debtor’s property, unless otherwise provided by federal law. The regulations on methods of organizing sales in Federal legislation are, as a rule, of a referential nature. To determine the procedure for the sale of seized property, it is necessary to conduct a comprehensive analysis of the legislation of the Russian Federation.
The bailiff service does not have the right to independently sell the debtor’s seized property.
Sales should be carried out only by an appropriate organization that has the authority to trade in the relevant type of goods, which should increase the professional level of this type of activity.
A specialized organization can sell the debtor's property (with the exception of real estate) on commission and other contractual basis as provided by law. In this case, one should take as a basis the general procedure for this type of sale in accordance with the rules of trade in certain products.
For example, to sell motor vehicles, you need an organization with a special license that gives the right to trade in motor vehicles, and to sell precious products, you need a company licensed to trade in these products. If a gold bar is recovered from the debtor, the sale will take place through an organization that has a license to carry out transactions with precious metals, since only banks have the right to sell and buy such property. The sale of shares is carried out only by the Russian Federal Property Fund.
The sale of the debtor's real estate occurs with the help of specialized organizations that conduct public auctions. Trade is carried out not only in the form of an auction, but also a competition. The winner of the auction will be the person who names the highest price. The competition is won by the person who offers the best conditions. He will be recognized as the winner by a competition commission pre-appointed by the organizers. According to the law, the sale of property must be carried out only in the form of open tenders, excluding any abuse.
