About bankruptcy procedures of individuals

The Head of State signed the Law "On Restoration of solvency and bankruptcy of citizens of the Republic of Kazakhstan" on December 30, 2022.

The law will take effect 60 days after its official publication. This means that citizens with debts will be able to file for bankruptcy from March 3, 2023.

The law provides for 3 types of procedures - out-of-court bankruptcy, judicial bankruptcy and restoration of solvency.

All three procedures are initiated only by the debtor himself, that is, the creditor does not have the right to file for bankruptcy of the debtor.

 

The first procedure: Out-of-court bankruptcy can be applied exclusively for debts to banks, MFOs and collection agencies.

Out-of-court bankruptcy, citizens will be able to apply under the following conditions:

debt to Banks, microfinance organizations and collectors does not exceed 5.5 million tenge (1600 MCI);
there is no repayment for obligations to banks, microfinance organizations, collectors within 12 consecutive months as of the date of filing the application;
there is no registered property, including property that is in common ownership;
the settlement of overdue debts with the bank has been carried out;
bankruptcy has not been applied for 7 years.

In addition, the bill provides special conditions for:

- TSA recipients within 6 months;

- citizens whose debt has not been repaid for more than five years.

 

Out-of-court bankruptcy will begin on the e-government web portal. Then, through the information system, an automatic reconciliation will be carried out with the data of interested state and other bodies for compliance of the debtor with the input criteria.

 

For debts over 5.5 million tenge and for other types of debts, citizens will be able to apply the second procedure - judicial bankruptcy.

The purpose of judicial bankruptcy is to maximize the satisfaction of creditors' claims at the expense of the bankrupt's estate.

If the only housing is the subject of collateral, then the creditor will have the right to withdraw it during the bankruptcy proceedings.

If the only housing is not a pledge, creditors will not be able to claim it.

The remaining outstanding amount is subject to write-off, provided there are no signs of dishonesty of the debtor (concealment of property or information about it, provision of false information, etc.).

The procedure of judicial bankruptcy is carried out by financial managers, which may include:

Administrators who carry out the bankruptcy procedure of legal entities and sole proprietors;
Professional accountants;
Legal consultants;
Auditors.

Taking into account that not all debtors will be able to pay for the services of financial managers, the bill provides for payment at the expense of the state to persons belonging to socially vulnerable segments of the population who do not have property.

The third procedure – restoration of solvency, provides for the possibility of obtaining installments in court to pay debts (up to 5 years), if there is a stable income.

The recovery plan is developed jointly with the financial manager and approved in court.

The advantage of this procedure is that after it a person does not acquire the status of "bankrupt", therefore, the consequences provided for a bankrupt do not apply to him.

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.

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.