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Publication date: 03.09.2024
I am studying in the third year of the State University of Economics and Technology.I specialize in contractual, economic and corporate law, in particular, I provide consultations and write articles.
The procedure for repaying the debts of a debtor-individual in Ukraine, as the final stage of the proceedings, aims to satisfy the demands of creditors at the expense of the sale of the debtor's property.
Key stages of the procedure:
Here is a detailed review of the key stages and procedures that occur after a debtor is declared bankrupt:
- Resolution on recognition of bankruptcy and introduction of debt repayment procedure. According to Article 130 of the Code of Civil Procedure, the commercial court passes a resolution declaring the debtor bankrupt and introducing the debt repayment procedure, if: within 120 days from the opening of insolvency proceedings, a decision was not made to approve the debtor's debt restructuring plan and a decision was made to proceed to the procedure repayment of debts.
- Disclosure of information. After the adoption of the decision on bankruptcy and the introduction of the debt repayment procedure: Information on the recognition of the debtor as bankrupt and the introduction of the debt repayment procedure is published on the official web portal of the judiciary of Ukraine within three days from the date of adoption of the relevant court decision. This ensures transparency and availability of information for all interested parties.
- Inventory and determination of liquidation mass. After the debtor is declared bankrupt, an inventory of the debtor's property is appointed. This is necessary for the formation of the liquidation mass, which includes all the property of the debtor, which is in his possession at the time of declaring bankruptcy.
Question
What is included in the liquidation mass?
Answer
The liquidation mass consists of property that the debtor has at the time of bankruptcy and property that the debtor will acquire after being declared bankrupt, but before the debt repayment procedure is completed.
- Realization of property and satisfaction of creditors' demands. The debtor's property is assessed to determine its market value. This ensures that the property will be sold at a fair price. The liquidator organizes the sale of the debtor's property through an auction or other methods of sale determined by law. Proceeds from the sale of property are distributed among creditors in accordance with their requirements and the order of priority determined by legislation.
- Closure of proceedings. After completion of all stages of property realization and distribution of funds, the court proceedings in the bankruptcy case is closed. This may include the cancellation of residual debts, if this is provided for in the terms of the procedure.
Exclusion from the liquidation mass:
The debtor's liquidation assets do not include funds held in the debtor's accounts in pension funds and social insurance funds. Here is an explanation of this aspect:
- Funds held in the debtor's accounts in pension funds are usually not subject to realization or use to repay debts. This is due to the fact that these funds are intended to provide pension payments and cannot be directed to satisfy the demands of creditors.
- Similarly, funds held in the debtor's accounts in social insurance funds (for example, social security or unemployment insurance funds) are also not included in the liquidation mass. These funds are intended for social protection and cannot be used to repay debts.
Question
What is this exception related to?
Answer
Funds in pension funds and social insurance funds have a clear purpose. They are used to provide social guarantees and payments to citizens, which does not allow their use to cover the debtor's debts. The exclusion of these funds from the liquidation mass helps protect citizens' rights to social benefits and pensions, even in the event of bankruptcy of their employer or the person who paid the contributions.
The procedure for meeting creditors' demands
The procedure for satisfying the demands of creditors in the procedure for repaying the debts of a debtor-individual is determined in accordance with the legislation of Ukraine and is established taking into account the priority of different categories of debts. This is how funds are distributed between creditors:
- First priority: Creditors' claims for alimony have the highest priority. Alimony is money that the debtor is obliged to pay for the maintenance of his children or other persons in need of assistance. This includes claims for damages caused by disability, other bodily injury or death of an individual. It is important that these claims are satisfied before other debts, as they relate to compensation for physical or moral damage caused. The requirements for the payment of insurance premiums for mandatory state pension and other social insurance also belong to the first tier. This is important for ensuring social rights and guarantees.
- Second priority: Requirements for payment of taxes and fees (mandatory payments) have second priority. This includes all types of taxes and fees that the debtor is required to pay to the government, such as personal income tax, VAT and other taxes. After meeting the requirements for the payment of taxes and fees, settlements are made with other creditors, which can be included in the register of requirements.
- Third tier: Claims for the payment of penalties, such as fines and penalties, which have been entered in the register of creditors' claims, are satisfied in the third tier. This includes additional payments arising from breach of contractual obligations, but these claims have a lower priority compared to the first and second priority claims.
Services of a lawyer during the bankruptcy procedure:
The assistance of a lawyer in the bankruptcy procedure is critical to ensuring compliance with all legal requirements and streamlining the process. Here are the main types of legal services:
Lawyer consultation and legal analysis of the situation: The lawyer conducts a consultation to assess the financial condition of the debtor and determines the expediency of filing for bankruptcy. Lawyers online explains the rights and obligations of the debtor, creditors and other participants in the bankruptcy procedure, as well as possible consequences and risks.
Legal services for the preparation and submission of documents: The lawyer prepares the application for the opening of bankruptcy proceedings, as well as other necessary documents (for example, the register of creditors' claims, reports). The lawyer submits documents to the commercial court and interacts with judicial authorities to open proceedings.
Lawyer services for representation in court: A lawyer represents the interests of the debtor or creditors in court, presenting evidence, arguments and petitions. The lawyer participates in court hearings related to bankruptcy and provides effective protection of the client's interests. A lawyer can help assess the debtor's property and determine its value for further sale. If the procedure involves the possibility of restructuring, the lawyer advice prepares a debt restructuring plan and coordinates it with creditors and the court.
The procedure for paying off the debts of an individual debtor is a complex and multi-stage process that includes legal, financial and administrative aspects. The lawyer help is critical to ensure the correctness and legality of each stage of this process. A lawyer is a key figure in the bankruptcy process, providing assistance at every stage and ensuring legal protection and effective management of the procedure.
