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Recent Developments In Consumer Insolvency Regulation In Russia Ministry of Economic Development of the Russian Federation Insolvency (Bankruptcy) division.

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Presentation on theme: "Recent Developments In Consumer Insolvency Regulation In Russia Ministry of Economic Development of the Russian Federation Insolvency (Bankruptcy) division."— Presentation transcript:

1 Recent Developments In Consumer Insolvency Regulation In Russia Ministry of Economic Development of the Russian Federation Insolvency (Bankruptcy) division 2008

2 Regulation of consumer debts discharge Chapter X of the Federal Act On Insolvency (Bankruptcy ) 2002 Provisions on insolvency of non-trading individuals have non come into force yet Now creditors can collect their debts from consumers through court in executory process Disadvantages: A debtor cannot take advantage of rehabilitation Recovery on debtor’s assets can be carried out by a first creditor whose claim is enforceable in court, other creditors can miss the chance of lodging their claims Private enforcement of contracts problem

3 Consumer insolvency regulation – International practice International experience considers consumer insolvency proceedings as a benefit for the debtor because it gives an opportunity of rehabilitation in insolvency procedure A “fresh start” principle, which means that a debtor can be relieved from his debts in insolvency proceeding

4 Consumer insolvency regulation – International practice Rehabilitation proceeding is usually opened on a basis of the plan agreed upon by creditors and approved by the court Legislation of such countries as USA, Sweden and Germany provides for opportunity for a debtor with regular income to develop a plan to repay all his debts

5 The main goals of the draft law worked out by the Ministry to protect a debtor’s interests, to enable him to access rehabilitation proceedings, and to distribute the debtor’s assets fairly amongst creditors to provide favourable economic conditions for development of consumer and hypothecary credits markets through consumers’ debts settlement in insolvency proceedings

6 Main provisions of the draft law An opportunity for a debtor to file a rehabilitation proceeding Debt restructuring plan is approved by the court at creditors’ consent Arbitration court is entitled to approve the plan offered by the debtor regardless of creditors’ consent if: -if it provides full secured creditors’ claims satisfaction -creditors will get not less than they would if debtor’s assets were sold immediately plus 6 months income

7 The major improvements of the draft law A debt restructuring plan proposed by the debtor may be approved by the arbitration court without creditors’ consent if: -the plan provides full satisfaction of secured creditors’ claims; and -creditors get no less than would be the case if the debtor’s assets were sold immediately plus 6 months income The term of the plan cannot exceed 5 years The plan may be cancelled by the arbitration court where infringements are committed by the debtor if they are not corrected before the date of the court sitting If the debtor does not offer a debt restructuring plan or if the plan is cancelled then the arbitration court opens liquidation proceeding

8 The major improvements of the draft law There is a list of extra assets, which are excluded from the debtor’s bankruptcy assets to enable a “fresh start” The rights and duties of the insolvency practitioner can be carried out by the debtor personally, if the creditors’ consent The creditors’ meeting can be held in the creditors’ absence by postal voting; and, Where the bankruptcy estate is less than 100,000 rubles and unsatisfied debts remains on completion of liquidation proceeding, the debtor is not relieved from his debts unless he proves that the failure to pay is because of unfavorable life circumstances

9 Ministry of Economic Development of the Russian Federation


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