On December 30, 2022, the Head of State signed the Law of the Republic of Kazakhstan "On Restoration of Solvency and Bankruptcy of Citizens of the Republic of Kazakhstan" (hereinafter – the Bankruptcy Law). But it will begin to operate after 60 days after its official publication. This means that citizens who have debts that they are unable to repay will be able to file for bankruptcy from March 3, 2023.
The Bankruptcy Law provides for three types of procedures – out-of-court bankruptcy, judicial bankruptcy and restoration of solvency. Only the borrower himself can initiate these procedures, that is, the lender does not have the right to file for bankruptcy of the debtor.
When is out-of-court bankruptcy applied?
If an individual borrower has debts to banks, microfinance organizations, collection agencies that do not exceed 1,600 monthly calculation indices (in 2023 it is 5 million 520 thousand tenge), then he may consider an out-of-court bankruptcy procedure. But some conditions must be met by the borrower:
- there should be no property registered on it, including property in common ownership;
- at the date of filing the application, within 12 consecutive months, he must have no repayment of obligations to creditors, collectors;
- procedures have been carried out with respect to the debtor to settle or recover outstanding obligations under the loan agreement within a period not exceeding 18 months from the date of occurrence of overdue debt;
- bankruptcy has not been applied by him for 7 years at the date of filing the application.
Out-of-court bankruptcy can also be applied to by borrowers-individuals who have not repaid their debts for more than 5 years at the date of filing the application. At the same time, the listed conditions do not apply to such a debtor.
Attention! A debtor who has been a recipient of targeted social assistance (TSA) for six months can apply for the application of this procedure without taking into account the delay period.
After applying this procedure, the debtor is assigned the status of "bankrupt".
How do I apply?
The application can be submitted from March 3, 2023 through the e-government web portal www.egov.kz . Through the information system, which is currently being tested, an automatic reconciliation with the data of interested state and other bodies will be carried out for compliance of the debtor with the necessary criteria.
The application is accompanied by a list of creditors indicating their name, the amount of debt, location; a copy of the document confirming the debtor's acceptance of measures to settle and (or) recover debts under a bank loan agreement and (or) a micro-loan agreement.
When does judicial bankruptcy apply?
Citizens can apply this procedure for debts over 1600 MCI (in 2023 – 5 million 520 thousand tenge) and for all types of debts to creditors.
In the course of judicial bankruptcy, the debtor's property is sold at auction. There are also nuances here. The creditor has the right to withdraw the debtor's only dwelling in the course of bankruptcy proceedings only on condition that it is the subject of collateral.
The remaining outstanding amount is subject to write-off, provided there are no signs of dishonesty of the debtor, we are talking about hiding property or information about it, providing false information, etc.
The procedure of judicial bankruptcy is carried out by financial managers, which will include:
- administrators who carry out the bankruptcy procedure of legal entities and sole proprietors;
- professional accountants;
- legal consultants;
- auditors.
The services of financial managers are paid. Payment for their services is made at the expense of the debtor's property (1 minimum wage per month, in 2023 – this is 70 thousand tenge) For persons belonging to socially vulnerable segments of the population who do not have property, the services of financial managers are free of charge.
Attention! During the application of this procedure, the debtor is prohibited:
- to make transactions on the alienation of property or the acceptance of new obligations (obtaining loans, issuing guarantees and sureties);
- travel abroad.
After applying this procedure, the debtor is assigned the status of "bankrupt".
How do I apply?
The application is accepted from March 3, 2023 to the court at the debtor's place of residence. The term of bankruptcy is 6 months, with the possibility of extension for another six months.
Attached to the application are:
- a list of all creditors and debtors, indicating the amounts owed and the date of their formation, address of residence or location, e-mail addresses and contact phone numbers (if such information is available) for their subsequent notification;
- an inventory of the debtor's property with an attached report on its assessment (if any), compiled no later than six months before applying for bankruptcy recognition;
- a list of civil and (or) other obligations, including obligations, the claims of which are secured by a pledge of the debtor's property, for the last three years prior to filing an application for the application of the judicial bankruptcy procedure;
- a copy of the document confirming that the debtor has taken measures to settle the debt under the bank loan agreement and (or) the micro-loan agreement.
When is the procedure for restoring solvency applied?
Citizens with a stable income can apply this procedure, which provides for the possibility of obtaining installments in court to pay debts up to 5 years. 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 owned by the borrower.
The recovery plan is developed jointly with the financial manager and approved in court. Wellness activities include:
- sale of part of the property;
- transfer of property for rent;
- sale of housing with the purchase of a new one;
- exchange for housing with a lower cost and more.
Attention! The advantage of this procedure is that after it the debtor is not assigned the status of "bankrupt", therefore, the consequences provided for the bankrupt do not apply to him, and there are no restrictions in the form of a ban on traveling abroad.
How do I apply?
The application can be submitted from March 3, 2023 to the court at the debtor's place of residence.
Attached to the application are:
- a list of all creditors and debtors with the necessary information;
- a list of civil and (or) other obligations, including obligations, the claims of which are secured by a pledge of the debtor's property, for the last three years prior to filing an application for the application of the procedure for restoring solvency;
- a copy of the document confirming that the debtor has taken measures to settle the overdue debt.
What are the consequences for "bankrupts"?
Debtors who have decided to apply the procedure of out-of-court or judicial bankruptcy should be aware of the following:
- within 5 years, a ban on obtaining loans and microcredits will be in effect (except for obtaining microcredits from pawnshops);
- repeated bankruptcy is possible only after 7 years;
- the financial condition of the bankrupt will be monitored for 3 years after bankruptcy.
Attention! Alimony debts, compensation for damage caused to the life and health of another person, as well as compensation for damage caused by criminal offenses are not subject to write-off.
Where can I get detailed advice on bankruptcy procedures and restoration of solvency?
More detailed information on the bankruptcy procedure of an individual will be published on the Internet resources of the Ministry of Finance of the Republic of Kazakhstan and the State Revenue Committee of the Ministry of Finance of the Republic of Kazakhstan.
For more information, you can contact the contact center of the NGO "GC "Government for Citizens" 1414 (extension number 3), or on the Telegram chat https://t.me/SalyqBot .
What is the debt settlement procedure?
Since October 1, 2021, Kazakhstan has a procedure for settling overdue debts of citizens experiencing difficulties in repaying the loan. It applies to all credit organizations – banks and MFOs.
In accordance with legal requirements, the lender is obliged to notify the borrower of the delay within 20 days from the date of its occurrence. In the notification, credit organizations inform citizens that it is necessary to make payments on the loan and repay the overdue debt, indicating its size, otherwise it threatens unpleasant consequences for the borrower, as well as that you can contact the lender on the issue of restructuring.
In turn, borrowers who have a delay must apply to a credit institution for loan restructuring within 30 days from the date of its occurrence.
The borrower's application is subject to mandatory acceptance, registration, accounting and consideration by the bank and the MFO. In his application, the debtor must indicate what caused the delay, offer his options for possible restructuring and provide supporting documents indicating a decrease in income and the inability to pay for his obligations.
It is the borrower who must provide the lender with information about his financial and social situation, document the fact of a decrease or lack of income, which does not allow him to fulfill his obligations in full. Failure to submit the requested documents is the basis for leaving the borrower's application without consideration.