Individual bankruptcy is your opportunity to get rid of “stuck” and “problem” debts, arrests and other unpleasant restrictions on the part of the state. This procedure appeared in the legislation in 2019, and over time has become a profitable alternative to traditional methods of closing debt.
Who is bankruptcy good for?
Bankruptcy proceedings are available to individuals who have debts to:
- banks (under loan agreements, loans and mortgages);
- organizations (for monetary obligations);
- other individuals (if you have collaborated with other citizens or entrepreneurs).
Important: it is worth noting that not only citizens, but also entrepreneurs can use the opportunity to start an insolvency case. If you, as a merchant, are experiencing financial difficulties due to unpaid loans or taxes, then you also have the opportunity to free yourself from obligations and start conducting financial activities without looking back at past mistakes. Thus, bankruptcy for entrepreneurs is a second chance to successfully start a new business. In accordance with the introduced Code, in order to initiate the procedure, the amount of debt must be more than 30 minimum wages. However, this requirement is not necessary if there are other signs of insolvency.
What are the conditions for declaring yourself bankrupt?
Of key importance in determining the conditions for starting an insolvency case is the Code of Ukraine on Bankruptcy Procedures, specifically – Book Four of the legislative act. Article 115 of the Code of Ukraine on Bankruptcy Proceedings establishes the following conditions, the presence of which allows the commencement of proceedings:
- the amount of debt exceeded 30 minimum wages (for 2021 the amount is more than 180 thousand hryvnia). In this case, the debt must be current (overdue);
- the debtor has not paid off more than 50% of the monetary obligations, which are set monthly;
- in relation to the debtor, enforcement proceedings were terminated due to the lack of property for collection;
- the existence of a threat of insolvency (that in the future an individual will not be able to fulfill his obligations and make payments).
It should be noted that for the commencement of bankruptcy proceedings, at least one of the specified conditions must be present. Thus, you can become bankrupt without exceeding the established amount of debt, but only if other criteria for insolvency are established. The threat of insolvency deserves special attention. If you have suspicions that you will not be able to pay off your existing obligations in the near future, then you have the right to go to court with a statement. This potentially means that you can enlist the support of the court and gain financial independence even with a small amount of debt (if there is a good reason, which can be confirmed with the help of competent representatives).
What are the benefits of bankruptcy?
As a debtor, you can try to find a compromise solution with claimants and creditors. But negotiations, as a rule, do not end in success – your counterparties will strive to get maximum satisfaction of their own requirements. You will have to make concessions to creditors, which will negatively affect your financial situation and interests. The financial insolvency of individuals does not have such a drawback – you will not have the need to infringe on your rights and interests when interacting with claimants. Specific benefits of bankruptcy for individuals:
- relief from the vast majority of debts;
- the opportunity to start financial activities from scratch;
- getting rid of obsessive claimants and creditors;
- protection of their rights and interests in a legal way, without pressure from third parties and unnecessary proceedings.
The main advantage of initiating an insolvency case for an individual is the ability to write off most of the existing debts. In practice, citizens and entrepreneurs most often suffer from debt on loans, loans, fines and taxes. All these items of expenditure can be written off. As an alternative to write-off, the reorganization of an individual is also provided – the restoration of his solvency, which is also called restructuring. The debtor, when introducing this procedure, will not write off the debts, but will change the conditions for the payment of the initial obligations (receive a deferral or installment plan). For the implementation of the reorganization, the applicant is required to draw up a draft restructuring plan, with which Lawrange representatives can help. Thus, bankruptcy also allows you to find the best way out of the situation without direct debt write-off. At the same time, all your property will be preserved and protected from foreclosure. However, when drawing up a draft restructuring plan, it is important to contact professional representatives who know the specifics of the document’s design and its content. The court will pay attention to the legal literacy of the submitted documentation and prefers to interact with professionals. Important: if the debtor does not have enough property to pay off the claims, then the claims will be recognized as extinguished automatically. This is an extremely beneficial option, since you get rid of all obligations, and they will not be legally binding in the future. Upon completion of the bankruptcy proceedings, all legal restrictions on the debtor, including arrest, are removed. You will be able to dispose of your property again without hindrance.
What are the disadvantages of bankruptcy?
During bankruptcy proceedings, legal restrictions may be applied to the debtor: a ban on transactions and the seizure of property. However, the court introduces these interim measures only if there are compelling reasons (for example, if there are suspicions of evasion and concealment of assets by the debtor). In most cases, the court does not impose any prohibitions if the debtor behaves in good faith and does not clearly demonstrate his own intentions to hide the property. Already after the completion of the insolvency case, restrictions will also be introduced in relation to the bankrupt: a ban on re-bankruptcy upon its application for 5 years and the obligation to report its own bankruptcy status when concluding transactions. These limitations, however, are easily offset by the benefits of financial insolvency. You get complete relief from unbearable debt and can start your financial life from scratch.
What are the consequences of being declared bankrupt for an individual?
The key consequence is the release from the vast majority of debts (loans, taxes, loans, fines and other obligations). Specific consequences specified in the Code:
- the obligation to report on one’s own bankruptcy status when concluding loans, credit agreements, sureties or pledges – within 5 years;
- impeccable business reputation limitation – within 3 years;
- prohibition on re-bankruptcy upon one’s own application – within 5 years.
These prohibitions, however, have practically no effect on the future activities of the bankrupt. At the same time, an individual completely clears his own “financial biography” and provides himself with the opportunity to forget about past mistakes and debts. It is important to understand that you will still have the opportunity to conclude profitable loan agreements and enlist the support of guarantors. Contrary to common misconception, bankruptcy status is not legal bondage and has almost no effect on your financial activities.
What debts are not written off as a result of bankruptcy?
As a general rule, bankruptcy allows you to write off all debts, with the exception of:
- alimony obligations;
- compensation for harm to health;
- compensation for harm from causing death.
These obligations cannot be written off – in any case, they will have to be fulfilled. However, the listed debts represent only a small part of the actual debt that can be freed from.
How long does an individual bankruptcy procedure take?
The average duration of a bankruptcy procedure is 3 months. The specific duration of the insolvency case depends on:
- the circumstances of the debt;
- the debtor’s property;
- the presence of additional and hidden obligations.
If you own an extensive list of property, or you have a large list of creditors, then these factors, of course, will affect the delay in bankruptcy proceedings. Nevertheless, with competent legal support, it is possible to reduce the production time to the minimum possible. Of course, the duration of bankruptcy also largely depends on the availability of competent representatives in your case. If you, as a debtor, started the procedure on your own and without the support of professional lawyers, then you should not count on a three-month completion of the insolvency case. It is important to enlist the help of an experienced attorney who knows the specifics of bankruptcy management and court practice in this industry. The task of Lawrange lawyers and attorneys is to take into account all the variables and minimize the duration of bankruptcy in your interests. We guarantee the successful completion of the procedure as soon as possible.
How much does an individual bankruptcy service cost?
The cost of the work of lawyers and attorneys of the law firm LAWRANGE in support of bankruptcy proceedings for an individual is 1999 USD *. The service price includes comprehensive legal support, which includes:
- preparation of the necessary documentation (application, draft restructuring plan, annexes to the application);
- representation of interests in court (acting on behalf of the principal);
- refutation of creditors’ arguments;
- protection of property from unjustified collection.
A separate deposit is paid to the settlement account of the court for the services of an arbitration manager in the amount of about UAH 32,000. The participation of an insolvency administrator in an insolvency case is a prerequisite, since this specialist controls the course of proceedings, establishes the debtor’s property and interacts with creditors. Obviously, when appointing a worthy candidate for bankruptcy commissioners, you get maximum respect for your own interests, and not the whims of creditors and claimants. * the cost may vary, depending on the complexity of the case and the details of a particular case
Why should we be entrusted with the accompaniment of this procedure?
Since the introduction of bankruptcy for individuals, Lawrange has started to use the new rules for the benefit of its clients. Our services are used by both ordinary citizens who cannot cope with debts on loans and borrowings, and entrepreneurs who have financial problems due to taxes and fines from the regulatory authorities. We are trusted because we:
- we provide reliable arbitration managers. We have specialists on our staff who can be excellent candidates in your business;
- we provide professional legal support. Lawrange is thousands of hours of litigation and legal analytics that are available to every client;
- we have a proven track record in bankruptcy management. Our lawyers know the specifics of bankruptcy legislation and regularly face extraordinary bankruptcy cases in courts.
If you are interested in the support by our specialists of the bankruptcy procedure of an individual, you can leave an application on our website to receive a free initial consultation.