Bankruptcy for salvation: how to legally get rid of the burden of unsustainable debt

During the first months we managed to make ends meet and repay the debt, but then Ivan Nikolaevich, a man approaching retirement age, was laid off at work. The bank still had to pay, and the borrower was advised to borrow money from a microfinance organization. There were no difficulties finding microfinance organizations: their advertisements hung on almost every pole in the city.

The money, as promised, was transferred on the same day; no documents other than a passport were required. True, the rate immediately alerted me: 0.8% per day, but there was nowhere to go.

First, Ivan Nikolaevich borrowed 30 thousand rubles. More than 50 thousand had to be returned in three months. “We’ll manage,” he thought optimistically. But the reality turned out to be different: in addition to the loss of work, unexpected expenses were added to the purchase of expensive medications for my wife. There was no way to pay off creditors again.

It was decided to extend the existing loan and borrow more money from the microfinance organization. This is how he has lived since then: he takes out new loans and repays, as far as he can, his existing debts, which have grown significantly due to endless prolongations. By the way, my son has already divorced, but there are still debts for the wedding. There is no visible light.

There are many similar stories. For now, the only legal way to write off debts for people who cannot pay their creditors is to file for bankruptcy.

This sounds unpleasant and even scary. But in fact, there is nothing wrong with bankruptcy – anyone can overestimate their strength and borrow more than they can actually pay back.

It is no coincidence that the number of bankrupts is growing every year. According to Fedresurs, in 2022 the number of judicial bankruptcies of individuals exceeded 278 thousand rubles. In 2021, there were approximately 193 thousand. In the first half of this year, this figure was already 163 thousand. Moreover, almost all bankruptcy proceedings are initiated by the borrowers themselves. More than 90% of applications were filed by people who cannot repay debts, not their creditors. It is important that after going to court, late fees are no longer charged to the person, and collectors are deprived of the right to demand the return of money.

According to our estimates, half of borrowers in Russia are now at risk. These are people who give more than a third of their income to creditors and may at any time face problems paying off their debt. It clearly makes sense for such borrowers to study the issue of bankruptcy and stop being afraid of this procedure. After all, constantly borrowing everything from new creditors, paying off existing debts with this money, is a dead-end story. Especially now, when after the Bank of Russia increased the key rate, interest rates on loans have increased. If you reborrow in the current situation, you will have to pay lenders 15–20% more than borrowers are paying now.

Bankruptcy can be judicial or extrajudicial. In the latter case, the borrower only needs to submit an application to the MFC. This option is certainly simpler, but it can only be used when the enforcement procedure against the debtor has already been completed.

As for the first option, the borrower himself can file an application for bankruptcy with the arbitration court if he understands that he will not be able to repay his debts. If a person owes creditors more than 500 thousand rubles. and does not return them for more than three months, then it is his responsibility to file for bankruptcy. Moreover, this half a million is only the amount of debt, without fines or penalties.

There is a short test that will help you determine whether you should consider bankruptcy. Calculate how much money it takes you to pay off all your debts. If it is more than 30% of the total family income, then you belong to the category of vulnerable borrowers and you should probably carefully study what bankruptcy is and begin to gradually prepare for it – morally and financially.

The bankruptcy procedure does not mean that your last plate will be taken away. Yes, you will have to give away the car, but no one will take the sofa with the TV or household appliances. Property worth up to 10 thousand rubles. few people are interested.

No one will touch the only apartment. The exception is real estate purchased with a mortgage (if we are talking about the mortgage borrower).

A misconception is the idea that only wealthy people can go bankrupt, and that “banks won’t just let go” of an ordinary person.

The most unpleasant thing about judicial bankruptcy is the costs that the borrower will have to bear. This is a state duty (300 rubles), remuneration to the financial manager (about 25 thousand rubles), publication in the Unified State Register of bankruptcy information (approximately 17-25 thousand).

In addition, you need to enlist the support of loved ones in advance. During the bankruptcy procedure, which lasts approximately 10 months, you will have to live on a subsistence level. Currently, the average in Russia is 14,375 rubles. All income exceeding it will be taken by the financial manager and directed to the bankruptcy estate. That’s how it’s supposed to be by law. Once the debtor is declared bankrupt, all restrictions will be lifted.

From the very beginning, it is important to understand that bankruptcy is not a way to borrow money with the deliberate goal of not paying it back. It is almost impossible to deceive the court by hiding your property and income. So during bankruptcy there is no need to hide your property. If this fact becomes known, the court may declare you bankrupt, but the debts will still remain with you. If the truth is revealed when the debtor has already been declared bankrupt, then the creditor has the right to apply to the court to review the case. Then the debts written off earlier will be restored.

During bankruptcy, the financial manager must find out whether the debtor has signs of fictitious bankruptcy. He draws up a report and places it in the public domain – in the Unified Federal Register of Bankruptcy Information (EFRB). Anyone can see it and get acquainted with the progress of the bankruptcy procedure. If any controversial circumstances arise, they will definitely be submitted to the court for consideration.

Even the fact that he has real estate that he rents out, but hides this fact from the insolvency administrator, can become a reason for refusing to declare a debtor bankrupt. The same applies to open deposits.

Anyone who has decided to take the path of bankruptcy must take into account that there are many unscrupulous law firms that want to profit from a borrower in a difficult situation. They offer the services of so-called debtors. These are people who supposedly guarantee that your loans will be written off for money. They usually take a percentage of the amount owed. There are cases when scammers offer to invest in high-yield instruments so that the borrower has funds to pay creditors. Be aware: this is a scam! Only the court can write off debts.

Well, after completion of the procedure, several temporary restrictions will apply to the bankrupt:

— for 3 years you cannot be a founder of legal entities, register as an individual entrepreneur and hold senior positions in companies;

— within 5 years it is necessary to warn your counterparties about bankruptcy;

— within 5 years you cannot re-file for bankruptcy (in case of extrajudicial bankruptcy this period is 10 years).

Millions of citizens in other countries go bankrupt every year. Some famous people have undergone this procedure: Mike Tyson, Nicolas Cage, Johnny Depp. And if you dig deeper into history, you can add Mark Twain, Walt Disney, and many other stars to this list who are associated exclusively with success and wealth.

So if you are absolutely sure that there will be nothing to repay your debts in the near future, then it is better to declare yourself bankrupt than to continue crawling towards the debt hole.