Consumer Bankruptcy Circles the Globe


Peace around the worldAs of 2015, for the first time, laws providing for insolvency relief to natural persons (consumers) now form an unbroken chain around the world (at least on the land masses of the Northern Hemisphere). North America has been covered for some time now, of course, and individual debt adjustment laws have been spreading across Europe for three decades. The big missing link was Russia. On 29 December 2014, the final legislative steps were taken in the adoption of a long-pending bill to incorporate procedures for natural persons into the 2002 law "On Insolvency (Bankruptcy)". The new Russian law will become effective on 1 July 2015.

I have not had time to analyze the new law in detail yet, but it appears to provide for a liberal "fresh start" liquidation very much in line with the US approach, though with a minimum debt limit qualification of 500,000 Rubles (currently only about US$7500, but surely substantially more on a PPP basis). I understand that many Russian consumers are struggling with debts of at least this size, so it will be very interesting to see how the courts deal with the burden of this new procedure and how the process plays out, especially the provisions on suspending the liquidation proceedings if the debtor and creditors hammer out an agreed composition. I anticipate that real or imagined debtor fraud and "abuse" of this new relief process will be a big issue, and agreed compositions will be as rare as coconuts in Krasnoyarsk. We'll see.

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