Bankruptcy of Individuals

The draft law on the bankruptcy of natural persons - the government has been labouring on it for over eight years - may be adopted this spring.

When the bill becomes a law, an individual will be able to file for bankruptcy if the debt is over 50,000 roubles (app. $1,700) and is outstanding for six months. Then, the loan is restructured for up to 5 years, or the debtor's property is sold at an auction and the debt still outstanding is written off.

The declaration of bankruptcy will be considered if the debtor still has the money to pay the liquidator.

According to the Central Bank, about $10 billion of consumer debt is behind in payment for more than six months. This is slightly over half a percent of total banking sector. Put this way, non-paying individuals do not pose a problem to banks. Put another way, there are several million people who do not pay their debts already and there are millions more who can’t.

Swift to approve other institutions of a market economy, Russia has been reluctant to take on this one. Those with back-breaking debt can be haunted to the rest of their lives. There is no law to force creditors to restructure the debt or cancel it.

The law puts the individual insolvency within the competence of commercial courts. Today, disputes over consumer debts are considered by the courts of general jurisdiction.