Bankruptcy of an individual: consequences, procedures and court practice

Bankruptcy of an individual is a legal procedure that allows citizens who cannot fulfill their financial obligations to write off or restructure their debts through the courts. It is regulated by the Bankruptcy Code of Ukraine and acts as a kind of “financial rescue” for those who find themselves in a difficult life situation.

What does the bankruptcy procedure entail?

Bankruptcy proceedings can only be initiated by the debtor himself, either an individual or a sole proprietor. To do so, the debtor must file a petition with the commercial court, a debt restructuring plan, and a declaration of property status. The law requires that the total amount of overdue debts be at least 50% of all monthly payments and that the delay last at least two months.

The procedure is divided into two main stages:

1. Debt restructuring — the debtor is given a chance to negotiate with creditors, draw up a payment schedule and partially pay off the debts. This is the best scenario, as it allows the debtor to preserve property and gradually restore financial stability.
2. Declaring the debtor bankrupt — if restructuring is not possible or is not being implemented, the court will declare the debtor insolvent. In this case, property that is not protected by law (in particular, not housing, which is the only place of residence) may be sold to repay debts.

Consequences and limitations

After the procedure is completed, most debts are written off. This allows you to start your financial life from scratch. At the same time, the debtor may face some consequences:

• restrictions on obtaining new loans;
• complicated access to financial services;
• the obligation to report one’s bankruptcy status when entering into certain transactions.

The law also stipulates that the debtor must act in good faith. If concealment of assets or abuse of the procedure is proven, the court may refuse to write off the debts.

What changed during the war?

Martial law has introduced a number of changes to bankruptcy practice. In particular:

• insolvency officers are released from liability if they cannot perform their duties due to hostilities;
• fines and penalties on debts are suspended;
• the time limits for consideration of cases may be extended.

In addition, the Supreme Court has repeatedly emphasized that in bankruptcy cases, the impact of hostilities on the debtor’s financial condition must be taken into account. For example, in its decision No. 916/2372/20, the court directly linked the principle of good faith to the extent to which the debtor has honestly declared its property, even if it is destroyed or lost due to the war.

Legal advice

The bankruptcy procedure is not an “easy way out” but a complex legal process that requires a competent approach. If you are facing financial difficulties, do not hesitate to consult a lawyer before filing a lawsuit. Proper preparation is the key to successful debt relief or restructuring.

If you have any questions or need legal support, don’t hesitate to contact our team. We will help you assess your prospects, collect the necessary documents and go through the entire bankruptcy process confidently and legally.