WITH THE ADOPTION OF THE CODE OF UKRAINE ON BANKRUPTCY PROCEDURES (CUP), THE INSTITUTION OF BANKRUPTCY OF INDIVIDUALS WAS LAUNCHED IN UKRAINE.
ITS APPEARANCE CAUSED A GREAT RESONANCE IN THE LEGAL COMMUNITY.
MANY EXPECTED THAT AFTER THE ENTRY INTO FORCE OF THE BEP, COMMERCIAL COURTS WOULD RECEIVE NEW APPLICATIONS FOR OPENING INSOLVENCY PROCEEDINGS AGAINST INDIVIDUALS ALMOST EVERY DAY.
AND NOW MORE THAN A YEAR HAS PASSED SINCE THE CEPB CAME INTO FORCE, AND THE INSTITUTION OF BANKRUPTCY OF INDIVIDUALS IS NOT IN THE DEMAND THAT WAS EXPECTED.
WHY DID THIS HAPPEN, AND INSTEAD OF STARTING THEIR FINANCIAL LIFE FROM SCRATCH, INDIVIDUAL DEBTORS CONTINUE TO LOOK FOR WAYS TO AVOID PAYING THEIR DEBTS? There are many reasons for this: the high cost of the procedure and the lack of public awareness of the advantages and disadvantages of the institution of bankruptcy of individuals.
But the main reason is the complexity of the legal regulation of this procedure. Thus, in accordance with the provisions of the BIPB, the debtor must file a petition for the initiation of insolvency proceedings against an individual and prepare the relevant annexes thereto.
As for the application itself, the BIPB seems to describe the requirements for it very simply, setting them out in only four paragraphs of Art.
2 Art.
116:

1. Name of the commercial court to which the application is submitted.
2. The debtor’s name, place of residence, taxpayer registration number and passport number (for individuals who, due to their religious beliefs, refuse to accept the taxpayer registration number and have officially notified the relevant supervisory authority and have a note in their passport), the debtor’s means of communication, and his or her e-mail address (if any).
3. A statement of the circumstances that gave rise to the application to the court.
4. List of applications.

As for the attachments to the application.
Their list is given in part.
3 of Art.
116 of the Code of Ukraine on Administrative Offenses.
However, paragraph 14 of this part specifies “other documents confirming the existence of the grounds specified in Article 115 of this Code”.
And it is up to the debtor and the commercial court to determine what kind of documents these are, which will decide whether to accept such an application for consideration.
It is not uncommon for applications for commencement of insolvency proceedings to be left without motion on the grounds that these “other” documents are not available.
Some courts leave applications without motion on the grounds that they do not contain the applicant’s confirmation that no other claim(s) have been filed against the same debtor with the same subject matter and on the same grounds as provided for in the Commercial Procedure Code of Ukraine, although this is not required by a special act – the CUPB.
There are also still cases where courts require debtors to prove payment of the court fee for filing an application for opening insolvency proceedings, although the Law of Ukraine “On Court Fees” does not provide for this. Another problem is filling out the debtor’s declaration. More precisely, three declarations for the three years preceding the application to the court.
These declarations must contain detailed information about all members of the debtor’s family, to whom the CUZPB refers:

• persons who are married to the debtor (including if the marriage was dissolved within three years prior to the date of filing the declaration);
• their children, including adults;
• parents;
• persons under the debtor’s guardianship or custody;
• other persons who live together with the debtor, are connected by common life, have mutual rights and obligations (except for persons whose mutual rights and obligations with the debtor are not of a family nature), including persons who live together but are not married.

Unfortunately, the BEP does not offer a mechanism that would allow a commercial court or insolvency officer to verify information about the exact circle of the debtor’s family members.
For example, how can one detect the fact that the debtor has concealed information about the presence of persons with whom he or she cohabitates or even adult children?
The debtor’s declaration should also include information about all open accounts and funds in these accounts of both the debtor and all members of his or her family. However, if a family member does not wish to disclose such information, it will be problematic for the insolvency officer or the commercial court to obtain such information, since under the current legislation, the insolvency officer may obtain information that constitutes bank secrecy by decision of the commercial court, but only in relation to the debtor, not in relation to his family members.
These issues are only a part of the problems faced by debtors, their lawyers, insolvency officers and judges in applying the relevant provisions of the BIP.
Unfortunately, the practice of applying the BIPU has revealed a number of conflicts and gaps in the legal regulation of bankruptcy of individuals, which are usually eliminated by the practice of the Supreme Court.
However, due to the relatively small number of such cases throughout Ukraine, relatively few individual bankruptcy cases reach the Supreme Court.
As a result, the courts have to be guided by their own vision of resolving conflicts of law or by the practice of the relevant appellate court within whose jurisdiction the court of first instance is located.
The practice of commercial courts of appeal in different districts may also differ.
In view of the above, there is a need for interregional discussions, forums, seminars, roundtables, etc. to exchange experience in the application of bankruptcy procedures to individuals between judges, insolvency officers and attorneys from different regions.
Such communication will help to achieve several goals at once: to exchange views and experience with colleagues from other regions and to come to “common denominators” in resolving conflict issues arising in insolvency proceedings against individuals.
Thus, one of such events was an expert discussion on “Bankruptcy of Individuals: Current Problems of Application Practice and Ways to Solve Them“, held by the EU Pravo-Justice Project on March 22, 2021, with the participation of representatives of the Regional Justice Reform Councils (RJCs), the Verkhovna Rada and the Ministry of Justice of Ukraine.
This event provided an opportunity to exchange experience in applying bankruptcy procedures to individuals between judges, insolvency officers and lawyers from different regions and to jointly identify possible ways to improve bankruptcy legislation in this area.
The participants of the event also emphasized the overregulation of the issue of opening insolvency proceedings against an individual.
Thus, discussing the problems of bankruptcy of individuals, experts agree on the need to clearly regulate the requirements for filing an application for opening insolvency proceedings.
This will help to avoid ambiguous interpretation of legal provisions regarding the requirements for this application and, as a result, will simplify the mechanism for opening insolvency proceedings against an individual. In our opinion, the list of requirements for an application for commencement of insolvency proceedings should be formalized and clearly defined, similar to the requirements for a statement of claim under the Commercial Procedure Code of Ukraine.
In furtherance of this point, we note that all additional documents that may be required in the course of the proceedings should be collected by the insolvency officer. Iryna Butyrska, Coordinator of the Chernivtsi Regional Branch Office of the EU Project Pravo-Justice, for Borg.Expert