When a duty to file for bankruptcy arises
When the law requires you to go to court. If debts total at least RUB 500,000 and it is no longer possible to pay all creditors, the individual must file a petition with the commercial (arbitrazh) court within 30 working days (Article 213.4 of the Insolvency Law). This is an obligation, not a choice, and failure to comply carries a fine.
Voluntary filing. A petition can be filed earlier, on the debtor’s own initiative, if the debtor foresees insolvency and understands that current income and assets will not allow payment on schedule. The RUB 500,000 threshold does not apply to such a filing.
Simplified procedure through the MFC. Out-of-court bankruptcy was introduced in September 2020, and since November 2023 it has been available for debts from RUB 25,000 to RUB 1,000,000. The main case: the bailiffs have closed enforcement proceedings because there is nothing to recover. Pensioners, recipients of the unified child allowance and participants in the special military operation have separate grounds.
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What the court weighs when choosing the procedure
A steady income. Restructuring is introduced only for those with a source of earnings sufficient to repay the debt on a new schedule. The plan is approved for a term of up to five years. Without confirmed income, the court moves straight to the sale of assets.
The creditors’ position. The restructuring plan is approved by the creditors at a meeting. If the majority disagrees with the proposed schedule, the plan does not take effect, even when the debtor formally has the income to perform it.
The debtor’s good faith. The court assesses whether the individual tried to conceal income or assets, or took out new loans while aware of being insolvent. This affects not only the choice of procedure but also whether the debts will be discharged at all.
The size and make-up of the debt. If current business expenses outweigh consumer loans among the claims, the court looks more closely at the link between the personal bankruptcy and the activity the individual carried on as an entrepreneur or company director.
The choice of procedure does not depend on the debtor’s own preferences. The petition may ask for restructuring, but the court decides in any event on the basis of the circumstances above.
How the court procedure works: four stages
Each stage ends with a court ruling, and it is these documents that determine when restrictions are actually lifted and debts written off.
Filing the petition
The court checks whether the debtor is genuinely insolvent and introduces one of the procedures. At this stage the candidate for financial manager is approved.
Debt restructuring
Introduced if the individual has a steady income sufficient to repay the debt on a new schedule of up to five years. The plan is approved by the creditors and the court.
Sale of assets
Applied if restructuring is impossible or the plan has failed. The financial manager forms the bankruptcy estate, holds the auctions and distributes the proceeds among the creditors.
Completion of the procedure
The court issues a ruling completing the sale of assets and, separately, a ruling on release from the creditors’ remaining claims. The court is entitled not to issue the second part of the ruling.
What the debtor keeps in any event
The only home. It is not included in the bankruptcy estate unless it is mortgaged or otherwise pledged. This rule does not protect a mortgaged flat: the bank, as a secured creditor, may demand its sale even if the debtor has no other home.
Personal belongings. Clothing and household items are not taken from the debtor, except for jewellery and other luxury items. The law sets no clear monetary limit, and in practice the financial manager decides, or the court in the event of a dispute.
Tools of the trade. Equipment the debtor needs for professional work is protected from recovery up to 100 statutory minimum monthly wages. A car is kept on this ground only if it is itself such a tool.
Subsistence minimum. Out of the debtor’s income and that of the family, an amount not below the subsistence minimum for the individual and each dependant must remain every month, in both restructuring and the sale of assets.
Debts bankruptcy will not write off even after completion
Maintenance and harm to health. Claims for compensation for harm to life or health and maintenance (alimony) obligations cannot be discharged under any circumstances, regardless of whether the debtor has completed the whole procedure.
Subsidiary liability. The debts of a company’s manager or participant to that company’s creditors, and losses caused intentionally or through gross negligence, remain with the debtor after personal bankruptcy.
Current payments. Obligations arising after the bankruptcy case has been opened, for example utility costs for the retained home, are not entered in the register and must be paid in the normal way.
Claims lost through the debtor’s own fault. If a creditor was not notified of the bankruptcy and could not assert its rights because the debtor concealed information about it, that claim is not treated as discharged.
Dishonest conduct. If the court finds that the debtor concealed or destroyed assets, or knowingly gave false information when obtaining credit or during the procedure itself, it may refuse discharge of the debts entirely.
Personal bankruptcy in numbers
Benchmarks worth knowing before filing, rather than learning them as the procedure goes on.
Common mistakes when preparing for bankruptcy
Transferring property to relatives before filing. The financial manager and creditors may challenge transactions made in the last three years, and the very attempt to hide an asset gives the court grounds to refuse discharge of debts.
Applying to the MFC without checking the grounds precisely. The simplified procedure is available only if specific statutory conditions are met, and an error in the application means not a chance to correct it but a refusal and a return to ordinary enforcement.
Trying to run the case without a financial manager. In the court procedure the manager’s participation is mandatory: the manager compiles the register of creditors, holds the auctions and prepares the documents on which the court bases its decision to release the debtor from debts.
Underestimating the real cost of the procedure. Since September 2024, an individual who files personally has not paid the state duty. But the financial manager’s fee (RUB 25,000 paid into the court deposit), mandatory publications and postage for notifying creditors add up to a noticeable sum that is worth calculating in advance.
Frequently asked questions
Will my only home be taken in bankruptcy?+
No, unless it is mortgaged or otherwise pledged. This rule does not protect pledged housing.
Can I go through bankruptcy again?+
Yes, but not sooner than five years later. This period applies after both the court procedure and the out-of-court procedure through the MFC.
Need help preparing for bankruptcy?+
Leave a request, and the partner in the bankruptcy practice will assess your situation and advise which procedure suits you.