The Supreme Court limited the actions of managers in the debtor’s apartment

The Supreme Court of the Russian Federation (SC) clarified the powers of the financial manager (FinU) to search for assets in the apartment of a bankrupt citizen and protected the human right to the inviolability of housing. Thus, the Financial Institution does not have the right to conduct an inventory and inventory of all the debtor’s property if he, together with the bailiff, entered the apartment to seize a specific item. Otherwise, the Supreme Court emphasized, it would be arbitrariness and abuse of power, despite the fact that a complete inventory of assets would help pay off more debts. Lawyers and managers consider the decision fair, emphasizing the importance of respecting the rights of the debtor with his family and the high likelihood of abuse.

The Supreme Court outlined the limits of the manager’s powers when inspecting the debtor’s home. The precedent-setting decision was made in the bankruptcy case of Evgeny Bernshtam, the founder of the Home Money MFO (bankrupt in 2020). The court ordered the debtor to transfer to FinU a private collection of figurines “We all come from childhood” worth 201.6 million rubles, which he did not do, and the manager requested the right of access to Mr. Bernshtam’s apartment. But the court did not allow it, since the debtor was under house arrest and was prohibited from communicating with strangers.

In March 2022, as part of the execution of a judicial act on the seizure of the collection, the bailiff, in the presence of the manager, inspected the debtor’s apartment, but neither the citizen nor his collection was found there. Considering that the businessman was then released on his own recognizance (in July 2023, the court sentenced him to five years in prison for fraud and put him on the wanted list), the Financial Institution again went to court and in August 2022 received permission to conduct a full inventory of the property in the bankrupt’s apartment .

One of the bankrupt’s creditors was dissatisfied with this behavior of the manager. Sovcombank decided that the Financial Institution, even during the first inspection of the apartment, should have described all the property that could be recovered, and complained about the manager’s inaction, believing that it caused “significant harm to the property rights of creditors.” The Moscow Arbitration Court admitted that the Financial Institution did not have grounds to conduct a complete inventory of assets, but the appeal and cassation sided with the bank, deciding that the law does not limit such actions of the manager in the interests of creditors (see Kommersant on August 23).

The manager complained to the Supreme Court, insisting that he did not have the right to take an inventory of all the property in the debtor’s home without the permission of the court. The case was transferred to the economic board, which supported the Financial Institution, upholding the decision of the first instance.

The Supreme Court explained that the presence of the Financial Institution in the debtor’s apartment was due “solely to the right of the creditor to be present during the execution of enforcement actions to inspect the apartment and search for a collection of figurines.” In such a situation, the board clarified, holding other events would go “beyond the scope of authority” and could even be “regarded as arbitrariness,” given the existence at that time of a judicial act denying the Financial Institution access to the apartment. Thus, failure to make an inventory of property “cannot be blamed” on the manager. Subsequently, FinU again asked for access to the apartment and received it. The Supreme Court found “the chosen model of behavior, taking into account the personal rights of the debtor” and court orders, “reasonable and conscientious.”

David Kononov, head of the bankruptcy practice of Lemchik, Krupsky and Partners, considers the case “important not only for bankruptcy practice, but also for the entire legal system as a whole.” Since bankruptcy directly affects the constitutional rights of citizens, including the inviolability of home, the law provides for a mechanism of judicial control, notes AU Alexey Antonov. Thus, he explains, without the debtor’s permission, the right of access to the home can only be obtained with the sanction of the court.

“Now the community places not only hopes on AU, but also imaginary obligations – supposedly he must act like a superhero who can “break into a building burning with debt” and take from there everything that can be sold,” says Mr. Kononov. “But superheroes, often act in circumvention of the law, and such an assumption is possible only in cinema or literature.” Alexey Antonov adds that “you cannot violate the rights of the other for the benefit of one side of the case,” just as “you cannot, under the threat of liability, force a manager to violate the law and anyone else’s rights and legitimate interests.” In the work of the AU, adds David Kononov, “it is important to strictly and strictly observe the balance of rights of all participants in the case, especially when it comes to the bankruptcy of citizens.” Moreover, members of the debtors’ families also have the right to expect “publicity and legal predictability,” the lawyer clarifies.

According to the AU and the head of the “Bankruptcy Fairly” project, Pavel Zamalaev, the Supreme Court made a fair decision: “In this case, the AU was balancing between two evils and was forced to choose the lesser, primarily for itself, because, having carried out an inventory without the court’s sanction, the manager then I would receive a complaint from the debtor or, even worse, from the prosecutor.” Such actions by the manager “could be regarded not only as arbitrariness, but also as illegal entry into the home,” says David Kononov.

If the Supreme Court supported the bank’s position, it would be a “Trojan horse”, creating a way to bypass the constitutional right of a citizen-debtor, warns Mr. Antonov. Mr. Kononov adds that this could give the green light for various abuses using the mechanisms of the bailiffs.

Considering the large number of disputes about the rights and responsibilities of an insurance company, according to Pavel Zamalaev, it makes sense to “clarify its powers in the bankruptcy law, harmonizing them with the norms of other federal laws.”

Ekaterina Volkova, Anna Zanina