Bankruptcy procedures through government service centers Automatic translate

Extrajudicial bankruptcy for individuals is a simplified mechanism for relieving debt obligations without resorting to arbitration court. The procedure is available to individuals with a certain level of debt and financial situation, is completely free, and takes a fixed period.

Legislative framework and conditions of application

The procedure is regulated by the Federal Law on Insolvency and is available to individuals with total debts between 25,000 and one million rubles. The law establishes clear criteria for declaring a person bankrupt through a simplified procedure.

The first mandatory requirement is the existence of completed enforcement proceedings due to the lack of assets subject to recovery. Furthermore, no new proceedings should be opened after the previous ones have been completed.

The second reason applies to pensioners and recipients of social benefits. If the primary income comes from a pension or monthly child allowance, and the writ of execution was filed no later than one year prior to filing the petition, the individual may apply for bankruptcy.

The third option is applicable in cases of protracted debt collection — enforcement proceedings have been ongoing for more than seven years, the document was presented for enforcement, but the demands remain unfulfilled. In all cases, the lack of assets to satisfy the debt is mandatory.

Required documentation package

The basic set of documents is minimal and accessible to every citizen. The primary document is a passport or other identification document with a registration stamp at the place of residence. When applying at the place of temporary residence, a corresponding registration certificate is required.

The application is completed using a strictly established form approved by departmental order. The form contains sections for personal information, creditor information, and financial status. The center’s specialists can assist with this based on the documents provided.

The applicant independently compiles a list of creditors using the established template. The list must contain details of all known creditors, indicating the principal amount, interest, penalties, and fines. The amount of the debt does not require documentary confirmation — the center will independently verify the information through government systems.

Additional documents depend on the applicant’s category. Pensioners require a certificate of receipt of their pension from the relevant authority. Recipients of child benefits require a document from the Social Fund. Certificates of the presentation and non-enforcement of writs of execution are requested from bailiffs.

Step-by-step procedure for submitting an application

The process begins with checking for any open registrations of individual entrepreneurs. This information can be obtained through government electronic services. Having valid entrepreneur status precludes the extrajudicial procedure.

After collecting the documents, the applicant contacts the center at their place of permanent registration or temporary residence. Appointments can be made online or in person at the office. A specialist accepts the documents, checks their completeness, and assists with completing the forms.

How to go through the bankruptcy process step by step through the MFC is a question that concerns many debtors. After accepting the application, the center sends inquiries to the bailiff service, credit institutions, and courts to verify the information. The verification process takes several business days.

If all conditions are met, information about the commencement of the procedure will appear in the Unified Federal Register of Bankruptcy Information within three to four business days. Debtors can independently check the status on the official registry portal by entering their personal information in the search form.

Legal consequences of initiating the procedure

Once information is published in the registry, all enforcement proceedings are suspended. Bailiffs cease property enforcement, and banks are unable to debit accounts to pay off debts. Interest, fines, and penalties on overdue debts are no longer accrued.

The debtor is subject to a number of restrictions for the duration of the procedure. Taking out new loans or credits from any organization is prohibited. Acting as a guarantor or co-borrower for someone else’s obligations is prohibited. Transactions involving real estate, vehicles, and other valuable property are prohibited.

A critical responsibility is to notify the center of any change in your financial status within five business days. If sources of income or valuable assets become available that allow you to pay off your debts in full or in part, the procedure is terminated. The center publishes information about the termination in the registry within three days.

Duration and completion of the procedure

Extrajudicial bankruptcy proceedings have a strictly fixed duration — exactly six calendar months from the date of publication of information in the register. The law does not provide for a reduction or extension of this period. After six months, the register operator automatically records the completion of the procedure.

The debtor independently monitors the status through the electronic registry. The appearance of a completion record signifies the official recognition of the individual as bankrupt and release from all obligations specified in the application. No further action is required on the part of the debtor.

Long-term restrictions after the procedure

Once the procedure is completed, statutory restrictions of varying duration apply. The basic obligation — notifying potential creditors of one’s bankruptcy status when applying for financial products — is valid for five years.

Management restrictions affect the right to hold leadership positions in various organizations. The ban on managing ordinary legal entities is valid for three years after bankruptcy. For credit institutions, this period is extended to ten years.

Insurance companies, pension and investment funds, and microfinance organizations are subject to restrictions for five years. The ban applies to positions with managerial powers. A second application for extrajudicial bankruptcy is only possible five years after the previous procedure was completed.

Impact on credit history

Bankruptcy information is recorded by credit bureaus and affects the borrower’s assessment by financial institutions. However, overdue debts are cleared, improving the overall picture. After a certain period of time, the credit score is restored to a level that makes it possible to obtain approval for applications.

Information is published publicly in the federal registry with no retention period. Any interested party can find information about a specific individual’s bankruptcy. This creates reputational risks in employment and business relationships.

Categories of liabilities that cannot be written off

The procedure does not relieve all types of debt. Child support obligations to minor children and disabled family members remain in full. Compensation payments for damage to life and health are also not subject to write-off.

Employee wages, claims for moral damages, and current liabilities remain in effect after bankruptcy. Fines and administrative sanctions imposed by government agencies remain in effect. The debtor is obligated to pay these categories of claims, regardless of bankruptcy status.

Differences from judicial procedure

Judicial bankruptcy is used when debt exceeds one million rubles or liquid assets are available. The procedure involves the appointment of a financial manager who oversees all of the debtor’s operations. The assets are included in the bankruptcy estate and sold at auction.

The court process requires payment of a state fee and a manager’s fee. The process lasts from six months to two years, depending on the complexity of the case. A comprehensive documentation package is prepared, demonstrating the inability to repay the debt.

The out-of-court option is completely free, does not require a manager, and is completed within six months. However, it is only applicable if strict criteria regarding the debt amount and financial situation are met. The choice of option depends on the individual’s specific financial situation.

Risks and possible complications

The main risk is the discrepancy between the actual situation and the stated terms. If hidden assets or income are discovered, creditors have the right to initiate legal proceedings. Transactions concluded by the debtor prior to bankruptcy may be challenged and declared invalid.

If the debtor fails to notify the center of an improved financial situation, creditors can file a bankruptcy petition through the courts. Transaction control remains in effect for three years after the bankruptcy petition is completed. Large cash inflows or the acquisition of expensive assets will attract the attention of creditors.

Alternative ways to solve the debt problem

If the criteria for out-of-court bankruptcy are not met, there are other debt resolution options. Debt restructuring through the courts allows for a repayment plan based on actual income. A settlement agreement with creditors provides the opportunity to agree on a deferral or reduction of payments.

Refinancing your debt with another organization can reduce your interest rate and monthly payment. Selling your property at market value before foreclosure begins allows you to repay your debt on more favorable terms. Each situation requires an individual analysis and selection of the optimal strategy.