Often, citizens are faced with the fact that they draw up a large number of loans without assessing their own financial situation. This leads to the fact that they can no longer cope with the credit burden. Delays appear, penalties and interest are charged, and creditors are also sued. Therefore, often citizens decide to start bankruptcy proceedings. The process can even be initiated by lenders. It is necessary to understand how the process is implemented, what are the consequences of declaring an individual bankrupt, and also what difficulties will have to face.
Can a person be declared bankrupt?
The possibility of applying this process to citizens has been introduced recently. Based on the decision of the arbitration court, a person may be declared insolvent. The legal consequences of such a decision are considered not too attractive for a citizen, but at the same time it becomes possible to cope with the credit load or even write off some of the debts.
The procedure is initiated only if there are suitable conditions:
- the citizen has large debts to banks, management companies or other people;
- transfers of funds for repayment of debt on various grounds cease, and the delay must exceed three months;
- bailiffs cannot collect money on their own, as the debtor does not have property that could be sold at auction to pay off debts;
- there is no likelihood that in the future a citizen will be able to establish a financial situation and cope with debts.
The consequences of declaring an individual bankrupt suggest that a person is declared insolvent, therefore, cannot legally pay off existing debts. In this case, his personal property is used for sale, which allows you to pay off debts in whole or in part. If all measures of influence do not help to achieve the desired result, then the remaining debts are written off.
Legislative regulation
The procedure is fully regulated by the provisions of the Federal Law "On Insolvency". In 2015, significant changes were made to this legislative act, on the basis of which the recognition of an individual as bankrupt was allowed.
The process of filing an application and its consideration by the arbitral tribunal is regulated by procedural legislation.
What documents are needed?
The procedure and consequences of declaring an individual bankrupt are described in the Federal Law “On Insolvency”. It indicates that initiating this process requires the preparation of certain documents. The applicant to the court may be the direct debtor, government agencies, private creditors or banks.
To start the process, the following papers are prepared:
- correctly drawn up statement of claim with the requirement to declare a particular citizen insolvent;
- documentation confirming that a citizen has debts, and this includes various contracts, receipts or court decisions;
- papers confirming that the person is engaged in entrepreneurial activity or is working officially in a company;
- list of all creditors;
- a list of debtors not returning funds to a citizen;
- information on what property belongs to the debtor, and for this, information from Rosreestr and other state institutions is used;
- extract from the company register, if the person is a member of any company;
- certificates and other papers with the help of which a citizen’s income for three years is determined, and this includes not only 2-NDFL certificate, but also documents from the Federal Tax Service, PF and other funds on the payment of taxes and insurance contributions;
- certificates from banks where a person has accounts, since with their help it is determined how much money is deposited with a citizen;
- information on transactions conducted over three years, and their subject should be real estate, securities or vehicles, and the value of such transactions should exceed 300 thousand rubles .;
- if the debtor is non-working, an appropriate certificate from the employment service is required;
- if a citizen is officially married to a woman, then a marriage certificate is prepared.
Additionally, the court may require documents for the children or dependents of the debtor. This information allows you to understand what income should remain with a person so that he can support his family. In this case, the consequences of declaring an individual bankrupt will not be negative for all family members.
The process of declaring a person insolvent
The procedure by which a person is declared bankrupt is considered not too complicated. To do this, the steps are:
- an application is submitted with other documents to the arbitration court;
- the statement of claim lists the reasons on the basis of which it is required to initiate bankruptcy proceedings;
- paid state duty, equal to 300 rubles in 2018;
- to ensure the activities of the manager, 25 thousand rubles are transferred to the court's deposit, since this amount is the minimum wage of a specialist;
- All creditors of the citizen are notified of the beginning of the bankruptcy process, for which they are sent personally or by mail appropriate notifications;
- in court, all circumstances of the case are studied, and if there are really no signs that a person can improve his solvency, a decision is made to declare him bankrupt;
- a specific financial manager is appointed with numerous powers and capabilities to conduct the case;
- a meeting of creditors is held, at which the debtor may be present, but he does not have voting rights;
- the issue of the possibility of formalizing a restructuring or drawing up a settlement agreement is being decided, after which a specific decision is made by voting;
- the developed restructuring plan is accepted or rejected;
- if the debtor fails to return the funds on his own, then bankruptcy proceedings begin, on the basis of which all property owned by the person is sold, for which open bidding is held;
- the debtor can independently redeem the valuables sold, and he has a preemptive right to purchase;
- if even after that debts remain, they are written off;
- the court makes a decision on the basis of which the person is declared bankrupt.
At the end of the process, remuneration to the manager is transferred.
Bankruptcy Results
The consequences after the bankruptcy of an individual are considered not too pleasant. The most important minus is the fact that due to bankruptcy proceedings expensive personal items of a citizen are sold. He is deprived of real estate, vehicles, luxury goods or jewelry.
But at the same time there are positive consequences of declaring an individual bankrupt. All existing debts are paid off, and some of them can simply be written off. After this process, lenders cannot present any claims or claims against a citizen.
What debt actions can be performed?
It is the manager who is engaged in all activities aimed at working with the debts of a citizen. Different legal actions may be used for this.
For this, restructuring or bankruptcy proceedings are used.
Debt Restructuring Rules
The most commonly used debt restructuring. Such a decision is made only if the citizen has a constant and high income. He should not have a criminal record for economic crimes, nor should he be allowed to go bankrupt over the past five years. As much as possible debts are distributed evenly for three years.
What are the consequences of declaring an individual bankrupt and drawing up a restructuring plan? These include:
- no interest and penalties are charged;
- A citizen cannot make any transactions with his property without the approval of the managing director;
- it is forbidden to invest property in shares or draw up a gift agreement for third parties;
- every half a month a person must notify the manager of various changes in his financial situation.
Using this method, it is possible to cope with debt without bankruptcy and loss of property.
Nuances of bankruptcy proceedings
Another way of working with property is the use of bankruptcy proceedings. It applies when there is no opportunity for the debtor to cope with debts independently. In this case, his property is sold at public auction. The consequences of declaring the debtor bankrupt and conducting bankruptcy proceedings are as follows:
- all transactions with property are made exclusively by the appointed manager;
- restrictions on values represented by arrest, bail or other encumbrances are removed;
- it is forbidden to open new bank accounts;
- a citizen loses his property, as it is sold at auction.
The debtor has a preemptive right to purchase his valuables at auction. If he can find money for these purposes, then he will avoid the unpleasant consequences of declaring a person bankrupt.
The consequences of the procedure
Any debtor is faced with the negative consequences of declaring a natural person bankrupt before a bank or other creditors. They negatively affect his reputation and cooperation with other individuals and organizations.
What are the consequences after a natural person is declared bankrupt? These include:
- over the next three years, it will not work to occupy any leadership position;
- a person does not have the right to become a founder of an organization or to be a member of directors for three years, to have a share in a business or to engage in entrepreneurship;
- for 5 years you can not re-apply to the court to declare a citizen insolvent;
- a bankrupt is obliged to report to each potential lender within 5 years that he went through a bankruptcy procedure, so it is almost impossible to get a loan under such conditions.
The consequences after bankruptcy of an individual are truly negative and numerous. You can count on obtaining a loan only on the condition that any property of the citizen will be pledged to the bank.
If during the process it becomes clear that the debtor has no personal valuable property, then the debts are written off, but other unpleasant restrictions may be applied by the court to the citizen.
Cons Bankruptcy
Every person planning bankruptcy must be aware of the consequences of declaring a natural person bankrupt. Reviews of citizens indicate that there are not only advantages, but also negative aspects of the process.
The disadvantages include:
- all transactions are conducted only with the permission of the manager;
- after the procedure, you will have to notify, when applying for an installment plan or loan, a future lender within 5 years that a person has been declared bankrupt before, so you should not rely on favorable credit conditions;
- a person loses personal property;
- it will not be possible to open an account with a bank or receive a bank card without the approval of the manager;
- limited ability to travel outside the country.
Therefore, it is important to responsibly apply for various loans.
Process advantages
The positive aspects of bankruptcy of an individual include:
- financial losses are reduced;
- different penalties or forfeits are canceled;
- after the sale of the property, the remaining debts are written off;
- the process is carried out promptly, so it usually does not take more than 7 months.
As a result, a citizen is completely exempted from all existing debts.
Duration and cost of the procedure
Typically, it takes about 7 months to declare a person bankrupt, but this period may increase if there are good reasons for this. An application for an extension of the term is submitted by the manager or creditors. Therefore, it can be spent on the procedure for 10 months.
For filing a lawsuit, 300 rubles are paid. The minimum manager receives a fee in the amount of 25 thousand rubles, and 7% of the funds received from the sale of property are also levied. The specialist is paid money to all creditors.
Conclusion
Bankruptcy of individuals was introduced relatively recently. Such a procedure is considered popular among many citizens due to numerous advantages. With its help, you can get rid of many debts.
People planning the process should be aware of the legal consequences of being declared bankrupt, which are not only positive, but also negative. These include deprivation of property, lack of opportunities to get a managerial position and difficulties in obtaining loans and installments.