Personal bankruptcy: debunking popular myths
Contents
We analyze the top 10 myths that hold debtors captive point by point
Myth 1: bankruptcy will take all property
It's true. In fact, the law (Article 446 of the Code of Civil Procedure of the Russian Federation) protects a number of assets from collection. It is impossible to remove:
- the only home and the land under it (provided that the property is not mortgaged)
- personal items (excluding luxury goods)
- property necessary for professional activities
- food and cash in the amount of the subsistence minimum
- transport necessary for health reasons
- alimony, social pensions and benefits
An important addition: Federal Law No. 298 has been in force since August 8, 2024, which makes it possible to maintain mortgage housing in the event of bankruptcy of an individual, subject to certain conditions.
Myth 2: You can't travel abroad after and during bankruptcy proceedings
It's true. This is not true. Bankruptcy does not restrict a citizen's freedom of movement. On the contrary, after a ruling is made to declare a citizen bankrupt, restrictions on traveling abroad may be lifted.
The court has the right to restrict travel abroad only in exceptional cases — if there is a suspicion of the debtor's unfair behavior. In practice, such situations are extremely rare.
Myth 3: Bankruptcy deprives you of the right to work or prevents employment
It's true. Bankruptcy is not a reason for dismissal or refusal of employment. According to Article 64 of the Labor Code of the Russian Federation, such a refusal can be appealed in court. However, there are restrictions (Article 213.30 of the Federal Law “On Insolvency (Bankruptcy)” No. 127-FZ):
- you cannot hold senior positions in legal entities for 3 years
- within 5 years — in insurance organizations, pension and investment funds, MFIs
- within 10 years — in credit institutions
- it is forbidden to register an individual entrepreneur for 5 years if a citizen has undergone bankruptcy proceedings as an individual entrepreneur
It's true. Myth 4: You can't take out loans after bankruptcy
The law does not prevent a bankrupt from applying for new loans. However, there is an important caveat: within 5 years after the end of the bankruptcy procedure, when applying for a loan, you must inform the bank about your bankrupt status.
The decision to issue a loan is at the discretion of the bank; it assesses income, credit history and other factors.
Myth 5: Bankruptcy ruins your credit history forever
It's true. Bankruptcy information is kept in the credit history for 7 years. However, credit history can be gradually restored. To do this, it is enough to take small loans and repay them in a timely manner.
Myth 6: relatives or spouse will pay the bankrupt's debts
It's true. Relatives are not responsible for the bankrupt's debts if they did not act as guarantors or co-borrowers. The heirs are liable for the debts of the deceased bankrupt only up to the value of the inheritance received.
Myth 7: Bankruptcy makes you ineligible for a pension
It's true. A pension refers to payments that cannot be fully withdrawn during bankruptcy proceedings. The debtor is guaranteed to be left with a living wage, and after the procedure is completed, the pension is paid in full.
Myth 8: All deals over the past 3 years will be challenged
It's true. Only questionable transactions that could be aimed at evading debt payments are being challenged:
- selling property at a reduced price
- donating real estate to relatives during insolvency
- transferring money to third party accounts for no business purpose
Myth 9: Bankruptcy can limit or deprive parental rights
It's true. Bankruptcy is not a reason for depriving or restricting parental rights. Children cannot be removed from the family due to the parent's financial problems.
Myth 10: Bankruptcy is very expensive
It's true. The procedure does require certain costs: it is necessary to pay the state duty, the services of a financial manager, publications in the register, etc. However, these costs are often not comparable to the amount of debt that will be written off as a result of the procedure.
Bankruptcy as a legal mechanism for protecting the debtor are key findings.
Bankruptcy myths create an unreasonable fear of the procedure, which in some cases may become the only legal way to solve debt problems. Before making a decision, it is important to get legal advice — he will help you assess all risks and consequences, taking into account your specific situation.
If you still have questions about personal bankruptcy, C Cases' lawyers will be happy to answer all your questions. Take care of your nerves and finances — make decisions based on reliable information!