Anna Zanina’s column about the struggle of creditors to launch insolvency proceedings

As judicial practice shows, against the backdrop of a constant increase in bankruptcies of citizens, competition between creditors is intensifying. The competition is intensifying over who will be the first to initiate a case—this makes it possible to choose an arbitration manager and control the procedure, at least at the initial stage. Banks have the advantage of the right to immediately file for bankruptcy of the borrower without first collecting the debt in court. For other creditors, lending is mandatory. But now the balance of power may change.

The Supreme Court (SC) has been asked whether to expand the circle of creditors with the right to quickly start the procedure or, on the contrary, reduce their number. Kommersant wrote about the first case on October 25 – we are talking about the extension of banking benefits to microfinance organizations. In the second dispute, the banks will have to defend their privileges.

Initially, the story looked banal: Norvik Bank filed for bankruptcy of the borrower due to late payments on a loan secured by an apartment. But the debtor began to object, citing “the conclusion of an agreement under the influence of deception” and a certain criminal case in which she was recognized as a victim. Having indicated that the agreements with the bank were not invalidated, and the allegations of deception were “not confirmed,” the Moscow Arbitration Court declared her bankrupt.

But the appeal was alarmed by arguments about deception and the lack of “evidence of the actual transfer of funds to the current account” of the debtor. The court decided that if there is a dispute between the bank and the borrower and in the absence of a judicial act confirming the debt, bankruptcy cannot be accelerated. The existence of such a dispute “can be evidenced by any objections of the debtor about the existence of the debt, its size and the deadline for fulfilling the obligation.” As a result, the appeal left the bank’s application without consideration. But the cassation court resumed the procedure. Recently, the borrower succeeded in transferring the dispute to the Economic College of the Supreme Court.

Lawyers are confused by the fact that only eight months passed from the date the loan was issued to the filing for bankruptcy, and the procedure can take years. It would be faster to foreclose on the apartment. But, my interlocutors emphasize, when foreclosure, the court carefully examines all the circumstances of the debt and the legality of transferring the property as collateral. In bankruptcy, the requirements are checked “more superficially”, taking into account the simplified procedure for banks.

This case calls into question the absoluteness of banking privilege. It depends on the decision of the Supreme Court whether they will be able to continue to quickly bankrupt borrowers or will have to pay off the debt if there are certain or even any objections from the debtor. The last option will obviously be welcomed by other creditors.