Rehabilitation and Bankruptcy

The institution of rehabilitation and bankruptcy in the Republic of Kazakhstan is regulated by the Law of the Republic of Kazakhstan "On Rehabilitation and Bankruptcy" and is aimed at protecting the rights of debtors and creditors in conditions of financial insolvency.

The Law of the Republic of Kazakhstan "On Rehabilitation and Bankruptcy" governs public relations arising in case of a debtor’s failure to satisfy creditors’ claims in full, establishes the grounds for applying the debt restructuring procedure, rehabilitation procedure and declaring the debtor bankrupt, liquidating the debtor without initiating the bankruptcy procedure, and also determines the procedure and conditions for their implementation.

Rehabilitation

Rehabilitation is a set of measures implemented to restore the debtor's solvency and prevent bankruptcy. The main stages include:

• Development of a rehabilitation plan
• Restructuring of debt obligations
• Optimization of financial and economic activities
• Temporary suspension of creditor claims

Bankruptcy

Bankruptcy is the insolvency of a debtor recognized by the court to fully repay financial obligations. The procedure includes:

• Filing an application by the debtor or creditor
• Appointment of a temporary and bankruptcy manager
• Inventory of property
• Sale of assets
• Satisfaction of creditor claims

Bankruptcy of individuals

The Law On Restoring Solvency and Bankruptcy of Citizens of the Republic of Kazakhstan governs public relations resulting from the insolvency of a citizen of the Republic of Kazakhstan, specifies the grounds for the application of the solvency recovery proceeding, and out-of-court and court bankruptcy proceedings, as well as the order and conditions of their conduct.

Who can declare bankruptcy in the Republic of Kazakhstan

Bankruptcy of individuals is a civilized way to pay off the debts that citizens have, to rid themselves of threats from collectors and a constant feeling of hopelessness, the result of which, with conscientious behavior on the part of the debtor, is a complete write-off of the debt in the event of the impossibility of its repayment.

A person who is unable to pay off their debts within the established time frame due to their insolvency, i.e. their income or property is not sufficient to satisfy the demands of creditors, can declare themselves bankrupt in Kazakhstan.

Non-judicial bankruptcy

Kazakhstanis can apply for extrajudicial bankruptcy in accordance with the Law of the Republic of Kazakhstan "On Restoring Solvency and Bankruptcy of Citizens of the Republic of Kazakhstan" on the eGov.kz portal and in the SalyqAzamat mobile application.

The extrajudicial bankruptcy procedure is intended for individuals - citizens of the Republic of Kazakhstan, whose debt to creditors does not exceed 1,600 MCI (5,907,200 tenge). In addition, to apply this procedure, it is necessary that the individual does not have property on the right of ownership, as well as in common joint ownership, and has not repaid the debt for more than 12 months. It should be noted that this procedure can only be applied to individuals who are debtors to second-tier banks, microfinance organizations/microfinance organizations and collection agencies.

For citizens receiving targeted social assistance for a period of 6 months before filing for bankruptcy, they can use the bankruptcy procedure under special conditions, that is, the condition regarding the period of non-payment of the debt will not be taken into account.

An important point is that in the case of debt, the obligations for which have not been fulfilled for more than five years, none of the above criteria are mandatory. The term of this procedure is 6 months.

Consequences of recognition as bankrupt: - a ban on receiving loans and credits for 5 years (except for receiving microloans from pawnshops); - repeated bankruptcy is possible only after 7 years; - the financial condition of the bankrupt will be monitored for 3 years after bankruptcy.

Judicial bankruptcy

If a citizen of the Republic of Kazakhstan has debts exceeding 1,600 MCI and obligations on them are not fulfilled within 12 months, then it is possible to apply judicial bankruptcy.

The Department appoints a financial manager who conducts an inventory of the debtor's property within ten working days from the date of the court's decision to initiate a case on the application of the procedure for restoring solvency or judicial bankruptcy.

During judicial bankruptcy, the debtor's property is sold at auction, and the proceeds are used to pay off debts.

The bankruptcy period is no more than six months from the date the court decision comes into force, with the possibility of extending it for another 6 months. If the only housing is the subject of collateral, then the creditor will have the right to seize it during judicial bankruptcy, but if it is not collateral, then creditors cannot claim it.

A financial manager is appointed. Payment for the services of the financial manager is made at the expense of the debtor's property (1 minimum wage per month).

Limitations during the application of the procedure:

It is prohibited to carry out transactions involving the alienation of property or the assumption of new obligations (obtaining loans, issuing guarantees and sureties)

Prohibition on traveling abroad during the procedure.

Insolvency restoration procedure

Citizens who have a stable income and the amount of all loan obligations does not exceed the value of their property can apply the procedure for restoring solvency.

Considered in court

The application is submitted to the court at the place of residence of the debtor.

The procedure provides for the possibility of obtaining an installment plan for paying off debts for up to 5 years in court.

The advantage of this procedure over others is that after its implementation the debtor is not assigned the status of "bankrupt" and the consequences provided for a bankrupt do not apply to him, and there is no ban on traveling abroad. No negative consequences (financial monitoring is not carried out, there are no restrictions on obtaining a loan) Possibility of writing off part of the debt.

Recovery activities:

1. Sale of part of the property, transfer of property for rent
2. Sale of housing with the purchase of a new one, exchange for housing of lower value, collection of accounts receivable, employment of the debtor, etc.

Amendments and additions to legislation

On June 19, 2024, the Law of the Republic of Kazakhstan "On Amendments and Additions to Certain Legislative Acts of the Republic of Kazakhstan on Minimizing Risks in Lending, Protecting the Rights of Borrowers, Improving the Regulation of the Financial Market and Enforcement Proceedings" was signed.

The said Law provides for amendments to the Law of the Republic of Kazakhstan "On Restoring Solvency and Bankruptcy of Citizens of the Republic of Kazakhstan".

The introduction of the amendments will allow:

1. in extrajudicial and judicial bankruptcy procedures

- when calculating the period of non-payment of debt, not to take into account the payment on obligations less than 1 monthly calculation indicator;

- the period of non-payment of contracts assigned to a collection agency, to be calculated from the date of the last payment until the assignment of the right (claim);

- not to require confirmation of the adoption of measures to settle unfulfilled obligations, in the event of non-payment of payments on them for more than 12 months.

In addition, it will allow the application of the extrajudicial bankruptcy procedure for obligations to all organizations that own the rights of claim under bank loan agreements, loan (credit) agreements and agreements on the provision of microcredit to individuals.

That is, if an organization has rights of claim under the relevant agreements, regardless of its status (license revoked, in the liquidation stage, excluded from the register) and form (collection agency, microfinance organization, special financial company, etc.), the debtor has the right to apply for the application of the extrajudicial bankruptcy procedure.

2. in the procedure for restoring solvency

- apply the procedure in the absence of delay in obligations and in the absence of property, but with a stable income;

- the debtor leaves the country after the approval of the solvency restoration plan.

A number of clarifying amendments are also provided. In particular, when filing an application for the application of the extrajudicial bankruptcy procedure, the debtor does not indicate information about the creditor and the amount of debt, and is also not required to attach documents to the application. At the same time, the consent of the spouse is required to apply the relevant procedure.

The amendments came into force on August 25, 2024.