The process of recognizing financial insolvency is a rather vague procedure, the specifics of which are unknown to many, despite the fact that there is a lot of information on this topic on the Internet. The process is covered in general terms, but many do not go into its subtleties, and this is a big mistake, since it is the nuances of the bankruptcy procedure that should be studied in order not to lose the case if you decide to go to arbitration court.
When someone owes me, I remember very well, but if I owe, I don’t remember, even if I kill you (Aristophanes)
Voluntary bankruptcy can be recognized by individuals, legal entities or individual entrepreneurs. At their core, the processes are the same in all cases - the borrower or his representatives apply to the arbitration court and demand recognition of their financial insolvency. Appointed specialists evaluate the property of the debtor (debtor company), sell it at auction and return the creditors' funds.
The peculiarities of consideration of bankruptcy cases are quite numerous, so you should familiarize yourself with them in more detail.
Which court hears bankruptcy cases?
Disputes regarding bankruptcy are within the competence of arbitration courts. It does not matter who is a participant in the legal relationship. Arbitration considers cases of insolvency of both entrepreneurs and organizations, and individuals without the status of an individual entrepreneur (clause 1 of part 6 of article 27 of the Arbitration Procedure Code of the Russian Federation).
An application to declare a debtor insolvent must be submitted to the arbitration court of first instance. If participants in the process do not agree with judicial decisions, they can appeal them to the appellate and cassation instances. The final decision is made by the Supreme Court of the Russian Federation. The deadlines for appeal can be found in the Arbitration Procedure Code of the Russian Federation and Law No. 127-FZ.
According to territorial jurisdiction, a bankruptcy case against a debtor is considered at its location (Article 35 of the Arbitration Procedure Code of the Russian Federation). The judge is obliged to accept the application for proceedings if it is established that the amount of claims against the organization is from 300,000 rubles, against a citizen – from 500,000 rubles.
Important! Courts of general jurisdiction and arbitration courts are not authorized to hear insolvency cases. In the event of an erroneous filing of a claim with the wrong judicial body, the documents are returned to the plaintiff with a recommendation to apply, taking into account the rules of jurisdiction.
Rules for accepting applications
First of all, you should understand that not everyone can file for bankruptcy. In any case, 90 days must pass from the date of the last payment of the debt. Individuals have the right to declare themselves bankrupt if their debt amounts to 500 thousand rubles, and for legal entities this threshold is 300 thousand rubles. The total amount of debt is taken into account.
In addition, along with the application to the arbitration court, it is necessary to submit a package of documents (relating directly to the identity of the debtor or company, debt and other additional information).
The application should be submitted at the place of residence of the debtor or at the place of registration of the individual entrepreneur or legal entity, to the arbitration court (as a rule, such authorities are represented only in regional centers).
The submitted application must be considered in court within a month from the date of its filing.
Insolvency cases are considered in the same manner if the initiators of the process are creditors. They can submit an application on the same grounds as debtors, and the petition that is registered first in court is accepted. The plaintiff will receive some advantages in the process.
The plaintiff must also make certain mandatory payments when filing an application with the arbitration court. This is a state duty, the amount of which is fixed and amounts to 6 thousand rubles, as well as remuneration to the arbitration manager, the minimum amount of which will be 10 thousand rubles - this amount must be in the plaintiff’s bank account.
Who takes part in bankruptcy litigation?
A limited number of persons have the right to participate in an insolvency dispute. In accordance with Article 34 of the Bankruptcy Law (127-FZ), the participants in the legal process are:
- debtor (organization, entrepreneur or citizen without registration as an individual entrepreneur);
- creditors who have a right of claim against the debtor that arose before filing a petition for insolvency with the court;
- arbitration manager;
- tax service;
- Rosreestr;
- local government bodies.
A representative of the owner of the debtor’s property, a representative of employees, self-regulatory organizations of arbitration managers, creditors for current payments and other persons specified in Article 35 of Law No. 127-FZ may participate in the arbitration process.
Procedure and stages of consideration of bankruptcy cases
Consideration of bankruptcy cases in an arbitration court is carried out according to the rules of the Arbitration Procedure Code of the Russian Federation and Law No. 127-FZ. The trial takes place in several stages.
Stage 1 – Applying to the arbitration court for bankruptcy
To initiate a legal dispute regarding the debtor's insolvency, a package of documentation is prepared, which includes an application with attachments.
The application can be submitted by the following persons:
- debtor (Article 37 of Law No. 127-FZ);
- creditor (Article 39 of Law No. 127-FZ);
- an authorized body, for example, the Federal Tax Service, the Social Insurance Fund, the Pension Fund of Russia (Article 41 of Law No. 127-FZ).
The application must be drawn up in accordance with the rules established by articles , , Law No. 127-FZ. If you need to draw up an application on behalf of the creditor and debtor, we suggest using samples prepared by practicing lawyers.
Sample application from a creditor to declare a debtor bankrupt
Sample statement from a debtor declaring himself bankrupt
List of documents
The application must be accompanied by the documents listed in articles of Law No. 127-FZ.
The documentation package includes:
- evidence of debt (court decisions, writs of execution, invoices, invoices and other accounting documents);
- postal receipts for sending the application to the debtor and creditors;
- payment order or receipt for payment of state duty;
- TIN and OGRN certificates;
- extracts from the Unified State Register of Legal Entities and the Unified State Register of Individual Entrepreneurs in relation to the applicant and debtor;
- list of creditors;
- list of property;
- other documents.
15 days before the date of filing the application, the debtor is obliged to publish information about the intention to apply to the arbitration court on the EFRSB website.
If the interested party has submitted documents in compliance with the requirements of the law, the court issues a ruling to accept the bankruptcy petition and sets a date for the first court hearing.
You should know! The application must indicate the candidacy of an arbitration manager who carries out professional activities in organizing and supporting bankruptcy procedures (Article 20.3 of Law No. 127-FZ). He must comply with the requirements of Article 20 of Law No. 127-FZ and is appointed by the arbitration court from among the candidates proposed by the self-regulatory organization of arbitration managers, of which he is a member (Article 45 of Law No. 127-FZ).
For his work, the arbitration manager receives remuneration from the debtor’s funds. The remuneration amount ranges from 15,000 to 45,000 rubles. (Article 20.6 of Law No. 127-FZ).
If the application is submitted by the debtor, then the candidacy of the arbitration manager is determined by random selection (clause 5 of Article 37 of Law No. 127-FZ). The selection procedure has not yet been determined. In practice, this issue is dealt with by a self-regulatory organization of arbitration managers.
Stage 2 – Introduction of bankruptcy proceedings before the debtor is declared insolvent
At the first hearing, the court checks whether the application for insolvency is justified.
To introduce the first procedure, the following conditions must be met:
- the presence of outstanding debt from a legal entity from 300,000 rubles, from an entrepreneur or individual from 500,000 rubles, confirmed by accounting documentation, judicial acts and executive documents;
- delay in fulfilling obligations to pay debts for more than three months;
- insufficiency of funds and other property to repay the debt (documents about the debtor’s property are provided to the court when considering the application).
If the application is recognized by the court as justified, bankruptcy proceedings are introduced. For legal entities, the first stage of the process begins - observation, which is supervised by a temporary manager appointed from among the candidates of insolvency administrators proposed when submitting an application.
During the monitoring process, the temporary manager searches for the debtor’s property, creates a register of creditors’ claims, finds out whether it is possible to restore solvency, and identifies signs of deliberate and fictitious bankruptcy.
Debt restructuring is being introduced for entrepreneurs and citizens. A financial manager is appointed from among the proposed candidates for arbitration managers. Debt restructuring is carried out to restore the debtor's solvency and pay off existing debts.
Thus, the goal of the first stage is to help the debtor get out of the crisis situation and repay the debt that caused the insolvency. If the debts are paid off or the debtor and creditors reach a settlement agreement, the bankruptcy case is dismissed. If, following the results of the first bankruptcy procedure, it turns out that the debts cannot be repaid, the court recognizes the debtor as insolvent and introduces the following procedure.
Reference! In relation to organizations, after completion of observation, financial rehabilitation or external management may be introduced. In the process of financial recovery, measures are taken to restore the company's solvency and repay its debts on schedule. The head of the organization continues to exercise his powers under the control of an administrative manager appointed from among the candidates proposed by the first meeting of creditors.
External management also allows you to restore the debtor's solvency. In contrast to financial recovery, the head of the company resigns and his powers are transferred to an external manager appointed by the arbitration court based on the decision of the first meeting of creditors.
In case of successful financial rehabilitation and external administration, the bankruptcy case is terminated. In practice, these procedures are rarely adopted, since in most cases the debt is uncollectible.
Stage 3 – Adoption of a court decision to declare the debtor bankrupt
By the next meeting, the temporary manager must hold the first meeting of creditors and create a register of claims of creditors of the debtor organization. Also, on the basis of accounting documentation, he analyzes the financial condition of the debtor in order to determine the possibility of restoring solvency (Article 70 of Law No. 127-FZ).
During the debt restructuring, the financial manager of a citizen or entrepreneur must organize the drawing up of a restructuring plan, which is approved at a general meeting of creditors and in court. The plan is drawn up in the form of a document that indicates a list of all creditors with the amount of debt, a debt repayment schedule, and the period for implementing the plan.
If signs of bankruptcy of the organization persist and the restructuring plan is not implemented, then at the next court hearing the issue of declaring the debtor insolvent is decided.
The court makes a decision that introduces the following procedures:
- bankruptcy proceedings against the organization;
- sale of property in relation to a citizen or entrepreneur.
The purpose of this stage is to identify the debtor’s property for the purpose of selling it and repaying debts to creditors using the proceeds.
We must remember! After a debtor is declared financially insolvent, he has no right to independently carry out transactions. The director of the legal entity is dismissed and his functions are transferred to the bankruptcy trustee. The citizen and entrepreneur also lose their independence. Control over the accounts passes to the financial manager, who conducts all affairs on behalf of the debtor.
Stage 4 – Completion of the bankruptcy procedure
After all measures have been taken to identify the debtor’s property and repay debts, a final meeting of creditors is held, at which a decision is made to apply to the arbitration court to complete the insolvency procedure.
The consideration of bankruptcy cases in the arbitration court ends with the issuance of a ruling to terminate the proceedings. Typically it takes 2-3 years to complete all activities. Specific deadlines are prescribed in Law No. 127-FZ.
Courts in insolvency proceedings
The key role in the process of recognizing a company as a debtor belongs to arbitration courts.
Chapter 28 of the Arbitration Procedural Code directly regulates the conduct of proceedings in cases the subject of which is the recognition of a legal entity with certain amounts of debt as bankrupt.
This Chapter of the federal normative legal act was created for the purpose of implementing the provisions of Federal Law No. 127-FZ “On Insolvency (Bankruptcy)”, since Part 1 of Article 6 of the latter states that the consideration of cases related to the recognition of a legal entity or individual as insolvent occurs only in arbitration courts.
Arbitration courts consider issues related to the need to accept an application to recognize a specific company as a debtor, to introduce the stages of the bankruptcy process provided for by law, to recognize creditors' claims as justified and to include them in a special register of claims, as well as to declare a company bankrupt, which entails the termination of the organization's existence , as a participant in existing legal relations.
In addition, it is the arbitration court that is considering the issue of approving a special settlement agreement, with the help of which the parties participating in the bankruptcy process can resolve existing disputes and terminate bankruptcy proceedings on the terms that will be beneficial to such parties.
