How Citizens Can Resolve Their Debts — Judicial Bankruptcy and Restoration of Solvency

The second bankruptcy procedure is judicial bankruptcy. This procedure is carried out through the court and applies in cases provided for by law, including when the amount of debt exceeds 1,600 MCI.

Unlike out-of-court bankruptcy, judicial bankruptcy may cover debts not only to banks and microfinance organizations, but also to other creditors, such as tax debts.

It is important to understand that judicial bankruptcy may involve the sale of the debtor’s property. The procedure also involves expenses related to the payment of the state fee and the services of a financial manager.

The third procedure is restoration of solvency. This procedure is intended for citizens who have a stable income and are able to repay their debts gradually. In this case, the court may approve a debt repayment plan for a period of up to 5 years.

The main advantage of this procedure is that the citizen does not acquire bankrupt status and may settle their debts in accordance with the approved plan.

Another important point is the consequences of bankruptcy. After a citizen is declared bankrupt, certain restrictions apply:

• new bank loans and microloans cannot be obtained for 5 years;

• bankruptcy procedures may be used again only after 7 years;

• the citizen’s financial condition is monitored for 3 years.