THE LAW PROTECTING THE INTERESTS OF FOREIGN CURRENCY BORROWERS IS ABOUT TO EXPIRE IN UKRAINE.
AFTER APRIL 21, 2021, BANKS, FINANCIAL INSTITUTIONS AND OTHER CREDITORS WILL BE ENTITLED TO FORECLOSE ON THE PROPERTY MORTGAGED UNDER A FOREIGN CURRENCY LOAN.
WHAT ARE THE POSSIBLE SCENARIOS FOR FOREIGN CURRENCY BORROWERS? In general, we are talking about thousands of our citizens who are left face to face with problem loans.
Interestingly, neither the National Bank nor the Deposit Guarantee Fund knows the exact number of such borrowers.
Of course, many loans were sold to financial companies during bank liquidation procedures.
Will the moratorium be extended?
This is unlikely and inexpedient.
Any moratorium can be viewed as an exceptional temporary measure adopted by the legislator to find an effective way to solve the problem.
The moratorium has been in effect for more than 6 years.
What is the way out?
In 2019, the Bankruptcy Code introduced a new bankruptcy mechanism for individuals, and special preferential terms are provided for foreign currency borrowers, which they can use until October 21, 2024.
However, we have not seen a large number of bankruptcies of foreign currency borrowers.
Why?

• High cost of bankruptcy proceedings.
  The applicant must pay an advance fee for 3 months of the insolvency officer’s work and pay a lawyer for legal services to prepare the necessary documents.
  On average, you should expect expenses in the amount of UAH 50,000 or more.
• A huge number of documents required to submit an application.
• The complexity and length of the procedure.
  On average, the procedure lasts 7 months or more.

In an effort to address this problem, the Verkhovna Rada adopted draft laws No. 4398 and No. 4399, which have been sent to the President of Ukraine for signature.
They provide for mandatory restructuring of consumer loans granted in foreign currency, provided that such loans are secured by property that a) is the debtor’s only home and is used as a permanent residence or b) is an object of unfinished construction and is / or is to become the borrower’s only home.
Restructuring in this case means that the debt amount is recalculated at the “average” rate, i.e. calculated as the average value between the rate set as of the date of the agreement and the rate set as of the date of restructuring.
In essence, the debtor’s property must meet the same criteria as the property subject to the above moratorium.
We also note that as of the date of entry into force of the new law, the obligation must not have become due and there must be no debt under the loan as of January 1, 2014.
If the above conditions are met, a person is entitled to file a petition with the commercial court to initiate insolvency proceedings.
The procedure for filing such an application is governed by the bankruptcy law of Ukraine.
The aforementioned draft laws provide for the establishment of a special type of proceedings, which will be slightly different from general insolvency proceedings.
Let us briefly consider the proposed innovations.
So, the first step is to file an application with the commercial court with attachments: documents confirming the property and financial status of the person and his or her relatives, and other documents specified in Article 116 of the Bankruptcy Code of Ukraine, in particular, a draft debt restructuring plan is submitted with the application.
If the application meets all the legal requirements and the circumstances set forth in it are sufficient to open insolvency proceedings, such proceedings are opened by a court order.
From that moment on, a moratorium on satisfaction of creditors’ claims is imposed, i.e., the fulfillment of obligations is suspended and no penalties are charged for a period of 120 days.
As a result of such proceedings, a person’s debts are subject to restructuring, i.e., changing the terms of fulfillment of obligations, installment plans or debt forgiveness.
The draft laws state that the insolvency officer does not participate in these proceedings, unlike in general proceedings.
This significantly reduces the cost of the procedure.
Once the proceedings are opened, the debtor must agree on a restructuring plan with the creditor.
If such a plan is agreed upon, the commercial court approves it.
In addition, at the debtor’s request, the court may set a minimum monthly amount for the implementation of the restructuring plan.
Once the restructuring plan is approved, enforcement proceedings to recover property under the loan in question (if any) are suspended.
If the restructuring is not approved or executed, the debtor is declared bankrupt and all its debts are subject to write-off and its property is subject to sale.
Such property must be evaluated by an independent expert and sold at an online auction.
Anyone can purchase such property by offering the highest price. Thus, a loan in foreign currency is converted into hryvnia, the lender receives at least part of the funds provided, and the debtor is able to repay the debt.
The lender receives real money, and the debtor gets the opportunity to start a new financial life. Roman Chumak, coordinator of the Kharkiv Regional Council for Justice Reform of the EU Project Pravo-Justice, attorney, managing partner of Ares Law Firm for Borg.Expert