Russians’ Rub1.6 bn debt to be written off

The debts of Russians of over 1.6 billion rubles worth will be written off under the extrajudicial bankruptcy mechanism.

This shows that the new institution of bankruptcy is already in place in Russia, Deputy Minister of Economic Development Ilya Torosov told Izvestia.

According to him, in the first year of the simplified bankruptcy procedure in effect, 12 thousand applications were received, with the extrajudicial bankruptcy procedure being initiated for 5 thousand of them. The procedure was fully completed in respect of 2.5 thousand citizens – those who were the first applicants.

As for the rest, they will be recognized as released from obligations in respect of the submitted list of debts upon expiration of the six-month period stipulated by the procedure, the deputy minister said. In total, the amount of citizens' debts exceeding 1.6 billion rubles will be written off.

Now experts are working to improve the procedure for out-of-court bankruptcy. Russians will be able to apply online through the Public Services portal – the Ministry of Economic Development has drafted a respective law. Also, it was proposed to increase the amount of debt subject to the out-of-court bankruptcy procedure to 1 million rubles per person.

According to Fedresurs head Alexey Yukhnin, 12 thousand applications for out-of-court write-offs is the number comparable to the number of bankruptcies in the first year of the judicial mechanism operation (about 14 thousand). The adoption of the simplified bankruptcy procedure was restrained by the RUB500 thousand cap and the need to complete the enforcement proceedings due to the lack of foreclosable property, said Yukhnin. The higher debt threshold proposed by the Ministry of Economic Development will boost demand for the free out-of-court procedure, he noted.

Small income debtors cannot be declared bankrupt without a trial at present, Eduard Olevinsky, head of the Olevinsky, Buyukyan and Partners legal affairs bureau said. It is impossible to complete the enforcement proceedings until there are constant, albeit scanty, earnings, for example, a pension, the expert explained.

Lenders note that they have not yet seen a large number of out-of-court bankruptcies among their clients. At Sberbank, about 700 clients are undergoing this procedure. In Rosbank, over 100 out of 7.3 thousand pending insolvency cases are referred to the new mechanism. At Otkritie, the simplified bankruptcy mechanism is used by 79 clients.

Source: Izvestia 

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