The top 10 myths that hold debtors captive, point by point

Myth 1: bankruptcy means losing all your property

The truth. In fact, the law (Article 446 of the Civil Procedure Code) protects a number of assets from enforcement. The following cannot be seized:

• your only home and the land under it (provided the home is not mortgaged)
• personal belongings (except luxury items)
• property needed for your professional activity
• food and money up to the subsistence minimum
• a vehicle needed for health reasons
• alimony, social pensions and benefits

An important addition: since 8 August 2024, Federal Law No. 298 has made it possible to keep a mortgaged home in a personal bankruptcy if certain conditions are met.

Myth 2: you cannot travel abroad during or after bankruptcy

The truth. This is not so. Bankruptcy does not restrict a citizen's freedom of movement. On the contrary, once a court declares a person bankrupt, restrictions on travelling abroad may be lifted.

The court may restrict travel abroad only in exceptional cases — if the debtor is suspected of bad faith. In practice, this is extremely rare.

Myth 3: bankruptcy takes away the right to work or prevents you from getting a job

The truth. Bankruptcy is not grounds for dismissal or refusal of employment. Under Article 64 of the Labour Code, such a refusal can be challenged in court. There are, however, restrictions (Article 213.30 of Federal Law No. 127-FZ "On Insolvency (Bankruptcy)"):

• for 3 years you may not hold management positions in legal entities
• for 5 years — in insurance companies, pension and investment funds and microfinance organisations
• for 10 years — in credit institutions
• for 5 years you may not register as a sole proprietor if you went through bankruptcy as a sole proprietor

Myth 4: you cannot take out loans after bankruptcy

The truth. The law does not prohibit a bankrupt from applying for new loans. There is, however, an important nuance: for 5 years after the bankruptcy is completed, you must tell the bank about your bankruptcy status when applying for a loan.

The decision to grant a loan remains at the bank's discretion; it assesses income, credit history and other factors.

Myth 5: bankruptcy ruins your credit history forever

The truth. Information about a bankruptcy stays in your credit history for 7 years. But a credit history can be gradually restored — it is enough to take out small loans and repay them on time.

Myth 6: relatives or a spouse will have to pay the bankrupt's debts

The truth. Relatives are not liable for a bankrupt's debts unless they acted as guarantors or co-borrowers. Heirs are liable for the debts of a deceased bankrupt only up to the value of the inheritance they receive.

Myth 7: bankruptcy takes away your right to a pension

The truth. A pension is one of the payments that cannot be seized in full during bankruptcy. The debtor is guaranteed to keep the subsistence minimum, and once the procedure is completed the pension is paid in full.

Myth 8: every transaction from the last 3 years will be challenged

The truth. Only suspicious transactions that may have been aimed at avoiding paying debts are challenged:

• selling property below value
• giving property to relatives while insolvent
• transferring money to third parties' accounts without a business purpose

Myth 9: bankruptcy can restrict or terminate parental rights

The truth. Bankruptcy is not grounds for terminating or restricting parental rights. Children cannot be taken from a family because of a parent's financial problems.

Myth 10: bankruptcy is very expensive

The truth. The procedure does involve certain costs: the state duty, the financial manager's fees, publications in the register and so on. But these costs are often incomparable with the amount of debt that will be written off at the end of the procedure.

Bankruptcy as a legal mechanism for protecting the debtor — key takeaways

Myths about bankruptcy create unfounded fear of a procedure that in some cases may be the only lawful way to resolve debt problems. Before making a decision, it is important to consult a lawyer, who will help you assess all the risks and consequences in your specific situation.

If you still have questions about personal bankruptcy, C Cases lawyers will gladly answer them. Protect your nerves and your finances — make decisions based on reliable information!