The Supreme Court of the Russian Federation (SC) continues to take a socially oriented position in cases of bankruptcy of individuals. So, the court allowed the debts of a bankrupt pensioner to be written off, despite a number of violations on his part. According to the Supreme Court, the unreasonable behavior of a citizen-debtor and even his ignorance of the law does not prevent release from obligations, and professional market participants should bear the risks. Moreover, creditors who have inexpensively bought rights of claim against the debtor may be limited in their ability to collect the entire amount of the debt. In general, lawyers support the “Dolovnikovsky” approach of the Supreme Court, but warn of the risk of infringing the rights of buyers of receivables.
The Supreme Court allowed the cancellation of debts in bankruptcy of a citizen who violated a number of rules because of his ignorance of the law and unreasonableness. Upon completion of Tamara Volkonskaya’s bankruptcy, her financial manager and the only registered creditor (demanding 3.7 million rubles) asked the court not to release her from her debts. They referred to the fact that the pensioner sold her son-in-law for 25 thousand rubles. her old car (at the same market value), and also spent pension and contribution funds in excess of the subsistence minimum (in the total amount of 260 thousand rubles).
Nevertheless, the courts of first instance and appeals wrote off the pensioner’s debts, indicating that the creditor’s claims were repaid by 725 thousand rubles – more than 20%, which is higher than the average level in bankruptcy (4-5%).
Excessive expenditure of funds and the sale of the car took place, but the resulting losses were recovered from the manager and the bank that committed violations, that is, the damage was fully compensated, the courts decided. But the cassation recognized the debtor as dishonest, noting the concealment of property from the manager and considering the behavior of the pensioner when selling the apartment, which caused her debt, to be dishonest (see Kommersant on March 15).
Tamara Volkonskaya complained to the Supreme Court, explaining that she sold the apartment to help her disabled son, and after the termination of the transaction (due to the fact that the debtor did not leave the apartment), she could not return the money already spent on her son’s treatment to the failed buyer. At the same time, since 2008, she has been conscientiously paying off this debt little by little.
The applicant indicated that at the age of 76 she did not know the intricacies of bankruptcy, therefore she did not transfer part of the pension above the subsistence minimum to the bankruptcy estate, but she lived far from luxuriously, satisfying only the minimum living needs.
The case was referred to the Economic Collegium of the Armed Forces, which canceled the decision of the cassation.
The Board recalled that the goal of bankruptcy of citizens is to help “conscientious citizens get rid of excessive debt”, but at the same time “protect the interests of creditors”. Here, the only creditor (a professional arbitration manager) acquired the rights of claim against a pensioner from the company that bought the apartment, paying only 10 thousand rubles, and as part of the recovery received more than 1 million rubles, that is, “compensated for the funds spent on repurchasing the debt,” emphasized Sun. Moreover, the debt of 1.95 million rubles. over the years has grown with interest, reaching 3.69 million rubles. In this regard, the preservation of Tamara Volkonskaya’s obligations to the only creditor “creates an unbearable burden in the absence of damage from this creditor,” the board decided.
The Supreme Court also considered that the “forcedness” of selling the apartment for the sake of treating her son and then the impossibility of the debtor to move out of this only housing excludes the possibility of qualifying her behavior as “malicious evasion” of repaying the debt. According to the board, it should be taken into account that the buyer of the apartment is a company engaged in the construction and sale of real estate, which “could not have been unaware of the risks associated with the difficulty of returning these funds.” Any “reasonable buyer must make sure” that in the event of the alienation of the only housing, “the seller has a different place of residence, that is, he will fulfill the terms of the agreement to vacate the housing,” the ruling says.
“The unreasonable behavior of a citizen” does not prevent the release from obligations, and it is impossible to draw a conclusion about the dishonesty of this bankrupt, the board of the Armed Forces concluded, allowing the pensioner to write off her debts.
According to the junior partner of the Yakovlev & Partners legal group, Denis Krauyalis, the Supreme Court made “a decision with a human face and tried to balance the interests of the debtor and the creditor as much as possible.” Lawyer Arbitrazh.ru Anton Kravchenko generally supports the “Dolovnikov’s approach of the Supreme Court”, noting that the panel’s conclusions could have been influenced by the “specific texture of the case”. So, ProLegals lawyer Maxim Lukhmanov explains, a big role here was played by the fact that the debtor was a pensioner, spent money on her disabled son and did not harm the creditor, who bought an illiquid claim for 10 thousand rubles, receiving more than 1 million rubles.
For creditors, the position of the BC entails new risks. If the debtor’s misappropriation of funds does not yet mean his bad faith, then despite the limitations prescribed by law for a bankrupt, the position of the court “potentially allows the debtor to dispose of his property in the absence of a loyal manager without the risk of liability,” points out Mr. Lukhmanov. He also debates the argument that a reasonable buyer of an apartment should make sure that the seller has other housing: “Such a standard of buyer’s discretion can lead to incorrect decisions in disputes about the foreclosure of the only housing.”
No less important is the conclusion of the Supreme Court on accounting for the sale price of receivables. But the “cheapness of the rights of claim” is often due to the high costs of subsequent collection and actual receipt of money, and sometimes the costs can be comparable to the amount of collection or even exceed it, says Mr. Kravchenko. As a result, there are risks for buyers of claims, as the courts may consider it sufficient for a creditor in bankruptcy to receive an amount equal to that which was paid for the purchase of debt, sums up Mr. Krauyalis.