On December 30, 2022, the Law "On Restoration of solvency and bankruptcy of citizens of the Republic of Kazakhstan" was approved.
The aim of the development of this legislation is to reduce the debt burden of citizens, return productive economic activity, alleviate social tensions and stimulate debt payments.
The legislation of the Republic of Kazakhstan on the restoration of solvency and bankruptcy of citizens of the Republic of Kazakhstan is based on Constitution of the RK and consists of the Civil Code of the Republic of Kazakhstan, this Law and other regulatory legal acts.
This Law shall apply to relationships generated from insolvency of a citizen of the Republic of Kazakhstan who is not registered as an individual entrepreneur.
The law will come into effect at the expiration of 60 days after its official publication, i.e. citizens with debts will be able to file for bankruptcy from March 3, 2023.
The legislation on the bankruptcy of individuals provides for three bankruptcy procedures, they are out-of-court bankruptcy, judicial bankruptcy and restoration of solvency.
It should be noted that all three procedures are initiated only by the debtor, that is, the creditor does not have the right to file for bankruptcy of the debtor.
The first procedure:
Out-of-court bankruptcy procedure is a extrajudicial procedure concerning a debtor in order to terminate obligations to second-tier banks, organization, carrying out specific types of bank operations, microfinance organizations or collection agencies.
That is, out-of-court bankruptcy can be applied only for debts to banks, MO and collection agencies.
The grounds for filing an application to the authorized body for applying out-of-court bankruptcy procedure are the presence of obligations not exceeding 1600 times the monthly calculation index (5.5 million tenge) established by the law on the republican budget and effective on the date of filing the application, if the following conditions are met:
1) absence of property on the right of ownership, including property in common ownership;
2) lack of repayment for obligations to creditors within twelve consecutive months from the date of filing such an application;
3) conducting the bankruptcy proceeding in respect of the debtor to settle or recover unfulfilled obligations under a bank loan agreement and (or) the microcredit contract;
4) lack of application of out-of-court or judicial bankruptcy procedure for 7 years on the date of filing the application.
Out-of-court bankruptcy can also be applied to by individual borrowers who didn't made payment on the debts for more than 5 years on the date of filing the application. At the same time, the listed conditions do not apply to such a debtor.
A debtor who has been a recipient of targeted social assistance (TSA) for six months can as well apply for the application of the procedure without taking into account the delay period.
After applying this procedure, the debtor is assigned the status of "bankrupt".
The application can be submitted through web portal of "electronic government" www.egov.kz from March 3, 2023. Through the information system, which is currently being tested, an automatic reconciliation with the data of interested state and other bodies will be performed for compliance of the debtor with the necessary criteria.
The application shall be attached a list of creditors indicating their name, the amount of debt, location; a copy of the document confirming acceptance by the debtor measures to settle and (or) recover debt under a bank loan agreement and (or) the microcredit contract;
The second procedure:
Judicial bankruptcy procedure is a procedure concerning the debtor in court in order to the purpose of satisfying requirements of the creditors at the expense of property mass. In the judicial bankruptcy, the debtor's property is sold from public auctions.
The grounds for filing an application to the authorized body for applying judicial bankruptcy procedure are the presence of obligations exceeding 1600 times the monthly calculation index (5.5 million tenge) established by the law on the republican budget and effective on the date of filing the application, if the following conditions are met:
1) lack of repayment for obligations to creditors within twelve consecutive months from the date of filing such an application;
2) conducting the bankruptcy proceeding in respect of the debtor to settle or recover unfulfilled obligations under a bank loan agreement and (or) the microcredit contract;
3) lack of application of out-of-court or judicial bankruptcy procedure for 7 years on the date of filing the application.
If the only housing is the subject of pledge, then the creditor shall be entitled to withdraw it during the bankruptcy proceedings.
If the only housing is not a pledge, creditors will not be able to apply for it.
The remaining outstanding loan amount is subject to write-off, if there is lack of fraudulent actions of the debtor, we mean concealment of property or information about the property, providing false information.
During the procedure, the debtor is prohibited:
- to contract for the alienation of their property or the acceptance of new obligations (obtaining loans, issuance of guarantees and warranties,);
- go abroad.
After applying this procedure, the debtor is assigned the status of "bankrupt".
Applications applying judicial bankruptcy are accepted from March 3, 2023 by the court at the place of residence of the debtor. The term of bankruptcy is 6 months, with possibility of extension for another six months.
The procedure of judicial bankruptcy is carried out by financial managers (after the notification), which may include:
Administrators who carry out the legal entity's bankruptcy procedure and sole proprietors;
Professional accountants;
Legal consultants;
The services of financial managers are paid. Payment for their services is made at the expense of the debtor's property (1 MW per month, this is 70 thousand tenge in 2023). For socially vulnerable groups of the population with no property, the services of financial managers are free.
The third procedure:
The procedure for restoring solvency is a procedure applied in court, within the framework of which financial, legal and other measures aimed at restoring the debtor's solvency, that do not contradict the legislation of the Republic of Kazakhstan, are applied to the debtor, i.e. restoration of solvency - provides for the possibility of payment for debts in installments provided by the court to pay (up to 5 years), if there is a steady income.
The plan for restoring solvency is developed with the financial manager and approved in court. The measures include:
- selling part of the property;
- transferring property to rental use;
- selling housing and purchasing a new one;
- exchange for housing of smaller value and other
The only condition for a debtor who plans to apply for restoration of solvency is that the amount of debt should not exceed the value of the property belonging to the borrower.
The advantage of this procedure is that a person does not acquire the status of "bankrupt", therefore, the consequences provided for a bankrupt do not apply to the person.
Consequences after declaring a citizen bankrupt:
1) a ban on obtaining loans and credits for 5 years (except for obtaining micro-loans from pawnshops);
2) repeated bankruptcy is possible only after 7 years;
3) the financial condition of the bankrupt will be monitored for 3 years after the bankruptcy.
Debts on alimony, compensation for harm to the life or health of another person, as well as compensation for damage caused in criminal offenses are not subject to write-off