Decrees and orders of the President of the Russian Federation on the agrarian and industrial complex of the Russian Federation
Bankruptcy Law for considering a bankruptcy case could not serve as a basis for a court decision to declare the debtor bankrupt.
Bankruptcy Law, in connection with which I considered it possible to apply the provisions of paragraph 2 of Article 75 of the Bankruptcy Law.
The norms of the laws on insolvency (bankruptcy) are of a special nature and are applied by arbitration courts in addition to the norms of the Arbitration Procedure Code of the Russian Federation, taking into account the specifics of these cases.
The Tax Code of the Russian Federation in tax accounting includes reasonable legal expenses and arbitration fees in non-operating expenses. To choose the most profitable bankruptcy scheme, prepare and submit the necessary documents to the courts, it makes sense to use the services of lawyers.
Debts related to current claims in bankruptcy
If we analyze the situation more carefully, then, according to Article 5 of the Federal Law on Bankruptcy, current claims in bankruptcy include only those payments that arose after the entity was declared insolvent. That is, if a person worked at the enterprise for several years before the initiation of insolvency proceedings and continues to work after the announcement of the new status, then the payment for his work from the moment the business entity is declared insolvent will relate to current debts and be paid out of turn. The debt on his wages before the start of the trial relates to register payments, and will be repaid in order of priority during bankruptcy proceedings.
The same applies to rent and payment of utility bills - debt accumulated before the start of the procedure will be repaid by the arbitration manager in accordance with the priority established by law, while debts arising during the trial period are subject to compensation out of turn.
Also, the current requirements in a bankruptcy case that are satisfied out of priority include expenses that ensure safety standards during the operation of the enterprise - prevent the occurrence of a man-made disaster or are used to preserve the life and health of citizens. This can be seen more clearly with an example. When an iron ore processing plant goes bankrupt, treatment facilities operate until it stops completely, preventing substances hazardous to the environment and human health from entering the water and atmosphere. Funds for the maintenance and upkeep of such facilities will be considered current requirements and must be paid out of priority.
The claims of creditors for current payments, according to the Bankruptcy Law, also include the costs of paying for the services of an arbitration manager. Moreover, the first amount for his work must be deposited into the judicial deposit account by the time the application for declaring the debtor bankrupt is filed.
What is the time limit for considering a bankruptcy case?
The court has the right to remove the head of a legal entity from office and approve an administrative manager. The duration of rehabilitation is two years.
The approximate time frame for selling property in bankruptcy is 6 months. But at the request of the parties, the court can increase them, and one should not forget about a number of factors:
- formation of a register of creditors' claims in a bankruptcy case. On average, this takes 2.5 months;
- possibility of challenging transactions. If the financial manager discovers fictitious agreements or transactions that infringe on the rights of creditors, he can challenge them. The term for challenging transactions can be up to 1–2 years;
- the work of a financial manager: identifying the bankrupt’s property and accounts, assessing property that is subject to sale, organizing auctions of the debtor’s property and much more.
Selection of an arbitration manager for the following procedure. Additional requirements for the arbitration manager.
He is obliged to go to court no later than 30 days after the occurrence of a situation that satisfies the conditions of bankruptcy.
How is the procedure done?
Bankruptcy of a legal entity occurs in 3 main stages:
- Consideration of the application - the application can be considered in court from one to seven months, the court assesses the legality of the debt, examines the main facts and evidence (reasons for the formation of the debt, inability to satisfy the demands of creditors, availability of property from the debtor, certificates from government agencies, documents confirming notification of the parties files, extract from the Unified State Register of Legal Entities and other documents proving insolvency);
- Supervision - this procedure is appointed for a period of 4 to 6 months and a temporary manager is approved, who conducts an analysis of the debtor’s financial condition to present it to a meeting of creditors and discuss the issue of declaring the debtor bankrupt or introducing other procedures that can resuscitate the debtor’s solvency;
- Bankruptcy proceedings - usually introduced for 6 months; at the request of the bankruptcy trustee, the procedure can be extended if during the specified period there is not enough time to carry out all the activities: compiling a register of creditors' claims, searching and selling property through auctions, challenging transactions, bringing the director to subsidiary liability etc.
After completion of bankruptcy proceedings, the legal entity is considered officially liquidated, and outstanding claims are considered fulfilled.
Judicial practice under Article 51 of the Bankruptcy Law:
A deadline for closing the register missed by a creditor for a valid reason may be restored by an arbitration court.
Next, we will step-by-step analyze the average time frame for a bankruptcy procedure: from the thought of bankruptcy to “writing off debts.”
For the first meeting, the arbitration manager prepares a financial analysis, an analysis for the presence of signs of deliberate and fictitious bankruptcy, an analysis of transactions, and proposals for the further development of the bankruptcy case.
This stage may occur if a petition has not been filed to introduce a procedure for the sale of property bypassing the debt restructuring procedure. Or if the petition was filed, but the court did not satisfy it.
Terms of bankruptcy procedure
It takes quite a decent amount of time for an individual borrower to become bankrupt. How long does the bankruptcy procedure last?
- from 30 to 90 days – to collect all the required documentation.
- a week to analyze the documentation and complete the application.
- from 14 days to 90 days – to submit an application and documentation to the court.
- 15 days – 90 days – to appoint an arbitration manager.
- from 90 days to three years – to restructure the debt.
- The deadline for holding the first creditors' meeting is six months from the date the application was submitted.
- Six months are given to sell personal property.
- to complete the financial insolvency process – 30 days.
In other words, the bankruptcy procedure for individuals lasts differently for everyone. But, as a rule, at least one year.
Recognition of bankruptcy is not a free procedure
Article 223 of the Arbitration Procedure Code of the Russian Federation. Procedure for considering insolvency (bankruptcy) cases
Bankruptcy of individuals implies recognition by the arbitration court of a citizen’s inability to fulfill financial obligations and make settlements with creditors.
After the documents are received by the arbitration court expedition, employees register them, and the materials are assigned a case number.
The general meeting is prohibited from making decisions on liquidation and reorganization. But it has the right to change the charter, legal address and change the director.
However, judges often leave applications for declaring citizens bankrupt without moving forward. This happens if the debtor has not collected all the documents or has not paid the state fee for considering the bankruptcy application. If the application is immobilized, the debtor will need to send to the court the documents that the judge requested in the ruling on immobilization within the time limit set by him.
The temporary manager gets access to all financial information of the debtor - he has the right to request and receive any documents and explanations from the debtor’s management, counterparties, banks, government agencies, etc. All these persons are obliged to provide him with information within 7 days without charging any fee.
In paragraph 10 of the Supreme Arbitration Court Resolution No. 51 it is noted that in relation to the bankruptcy of individual entrepreneurs, the terms of the observation procedure should be minimal. At the same time, they must be sufficient to assess the amount of debt, the amount of assets, etc.
Maximum terms for bankruptcy of an individual
Based on paragraph 1 of Article 26 of the Bankruptcy Law, the amount of remuneration to the arbitration manager cannot be less than 10,000 rubles per month. The main purpose of the procedural part of bankruptcy legislation is to establish in court proceedings the fact of bankruptcy (insolvency) of a participant in economic turnover, entailing special conditions for its further functioning.
The maximum time period during which arbitration considers an application to declare a company financially insolvent is determined according to the rules of the APC. According to Part 1 of Art. 152 of the APC, the maximum time period for considering the plaintiff’s application and issuing a judicial ruling is set as 3 months.
Based on Article 59 of the Bankruptcy Law, legal costs are to be covered from the debtor’s property and are reimbursed out of turn. If the debtor's property is not enough to pay the expenses, the unpaid portion is covered by the applicant's funds.
The main link in the process of recognizing the bankruptcy of a participant in economic relations in the status of a legal or natural person is the court.
Preparation of documents for bankruptcy
The initial stage of the insolvency procedure does not necessarily imply declaring the debtor bankrupt. This decision is made by the court.
According to the law, the period for consideration of an application by the court is no more than 5 working days. But, depending on the workload of the judges and the completeness of the collected package of documents, the case may remain without progress for up to 1 month.
The term depends on the legal skills of the potential bankrupt, or on the competence and efficiency of the employees of the law firm you decide to contact.
The duration of the property sale procedure is on average 6 months. The minimum period is 3-4 months. Maximum - not limited. There are bankruptcy procedures for individuals that were launched in October 2020 and have not yet been completed, but not in our practice!
Time limit for consideration of a bankruptcy case
After the debtor has collected all the necessary documents, it will be necessary to prepare a citizen’s application for declaring him bankrupt, an inventory of the debtor’s property and a list of his creditors.
In Part 1 of Art. 223 of the Federal Law “On Insolvency (Bankruptcy)” talks about the systemic connection in the application of the Code and the Insolvency Law, while drawing attention to the special nature of the law, which, in accordance with the general legal principle of lex specialis derogat generali, allows in practice to correctly and consistently apply both normative legal act.
The bankruptcy service can be used by individuals and individual entrepreneurs with a debt amount of 500,000 rubles and overdue for payments of at least three months.
The Bankruptcy Law does not directly indicate the possibility of extending the period for consideration of a bankruptcy case.
How to start and file bankruptcy?
The most correct and first step to start and competently file a legal bankruptcy. the person will be looking for a manager, without him you will not be able to carry out the procedure, but with him you will be able to avoid negative consequences and save on paying for services. After all, if you work with intermediary lawyers, then no matter how much their services cost, overpayment is inevitable.
“The Netdolgoff Law Firm provides bankruptcy services for legal entities directly from insolvency practitioners without intermediaries.”
After the first (correct) step has been completed - advice has been received from a professional, the company has been prepared for litigation, you can begin collecting documents and preparing an application to the Arbitration Court to declare the legal entity insolvent (bankrupt). The court will consider the application and issue one of the following judicial acts:
- Refuse to introduce surveillance;
- Leave without moving;
- Accept for production;
- Introduce an observation procedure.
Read What documents are needed for bankruptcy of an individual
Duration of other stages of the bankruptcy procedure
In a normal situation, it is more profitable for the debtor to immediately introduce the sale of property, since this will significantly reduce the duration of the procedure. But sometimes it is advisable to start with a debt restructuring procedure.
Cases of insolvency (bankruptcy) are considered by a single judge, unless otherwise provided by Article 17 of this Code. Arbitration assessors cannot be involved in the consideration of such cases.
The public has received mixed reactions to the law on bankruptcy of individuals. By declaring his financial insolvency, a citizen risks completely losing even minimal savings. Experts also expressed concern that this could result in financial insecurity for borrowers and losses for lenders. Nevertheless, the advantages are also obvious.
The procedure for considering cases of insolvency (bankruptcy). Commentary to Art. 223 Arbitration Procedure Code of the Russian Federation. Arbitration Procedural Code in the current edition.
