A debtor cannot pay the loan due to lack of funds. In order to pay off the debt and avoid liability, the citizen applied to the court to confirm insolvency by declaring bankruptcy. What this procedure should be and what grounds should be taken into account – read further.
Features of the bankruptcy procedure
The purpose of the bankruptcy procedure of an individual is to help pay off debts, not to get rid of them.
If a natural person no longer fulfills obligations and does not see an opportunity to settle the situation peacefully, this may be grounds for opening bankruptcy proceedings.
According to part . 2, 3 Art. 8 of the Code of Ukraine on Bankruptcy Procedures, both the debtor and the creditor have the right to apply to the commercial court with a request to open bankruptcy proceedings.
Article 1 of the Code of Ukraine on Bankruptcy Procedures defines the concept of insolvency, which is the inability of the debtor to fulfill monetary obligations to creditors after the set deadline, only through the application of the procedures provided for by this Code.
Insolvency proceedings are opened if there are grounds provided for by the Code of Ukraine on Bankruptcy Procedures (Article 115), and the debtor submits an application to open proceedings in the case of insolvency of the debtor - a natural person.
Grounds for opening proceedings
According to part 2 of Art. 115 of this Code, it is possible to open proceedings on the insolvency of a natural person, if:
- the amount of overdue obligations of the debtor to the creditor (creditors) is at least 30 times the minimum wage, which is more than UAH 240,000;
- the debtor stopped repaying loans or making other scheduled payments in the amount of more than 50% of monthly payments for each of the credit and other obligations for two months;
- the resolution was passed in the executive proceedings that the physical person does not have property that can be charged;
- there are other circumstances that confirm that in the near future the debtor will not be able to fulfill monetary obligations or make regular current payments (threat of insolvency).
Risks of the bankruptcy procedure
Debtors should approach the bankruptcy decision carefully, taking into account all the legal consequences.
The start of the procedure does not guarantee instant relief from debts, and persons who want to apply for the opening of an insolvency case should remember the risks defined in the Code of Ukraine on Bankruptcy Procedures, namely:
- within the next five years, the person will not be able to use the bankruptcy procedure again;
- within the next five years, a person is obliged to notify in writing of the fact of their insolvency before entering into loan agreements, guarantees, pledges, credit agreements;
- within the next three years, the person will not have an impeccable business reputation, the debtor cannot independently dispose of their property and enter into new loan agreements, etc.) and about the rather strict legal consequences of declaring bankrupt.
