Illia Сhernohorenko: introduction of individual bankruptcy is a win-win for debtors, creditors, and public
Nov 12, 2018 | Justice, Property rights protection
The Code of Ukraine on Bankruptcy Procedures, adopted on October 18, provides for the possibility of bankruptcy of individuals who are not entrepreneurs.
Individual bankruptcy is a new concept for both society and professional legal community. That was announced by Illia Chernohonenko, Director General of the Directorate of Justice Sector Institutions under the Ministry of Justice, in his column on “Ekonomichna Pravda”.
According to Illia Chernohonenko, the conceptual difference between a bankruptcy of a legal entity and a bankruptcy of an individual consists in the fact that the bankruptcy of a legal entity is caused by purely economic factors, while the bankruptcy of an individual is caused both by economic factors and humanitarian empathy – attempt by the state to protect a particular individual from financial tragedy.
"According to the World Bank, the introduction of individual bankruptcy appears to be a win-win for both creditors, debtors, and society as a whole. The creditors have better opportunities to save their financial and time resources. Without individual bankruptcy, each creditor has to collect the debt independently, while spending money and time. While, within the framework of the bankruptcy procedure, the creditors can coordinate their actions, which allow them not spending extra money and avoiding duplication of expenses and debt collection efforts. In addition, individual bankruptcy of is aimed at fair distribution of the debtor’s property among creditors, which would be impossible through independent uncoordinated debt collection efforts of various creditors”, said Illia Chernohonenko.
For individuals, such bankruptcy is a possible salvation from a financial tragedy. First, it will reduce the level of threat to mental health (depression, social self-isolation, suicidal attitudes) of debtors who are unable to escape from the debt pit. Second, an adequate procedure for the exit from a debt pit will prevent psychological disorders to debtors themselves, but also to their children, who would otherwise live, since early childhood, under pressure of creditors and, as a result, would adopt negative attitude to complying with their financial obligations, tax payments etc.
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