How a person can declare bankruptcy and when to do it

If an individual no longer fulfills his or her obligations and sees no possibility to resolve the situation amicably, this may be grounds for opening bankruptcy proceedings.

Pursuant to Art. 8(2) and (3) of the Bankruptcy Code of Ukraine (the "BKPU"), both the debtor and the creditor have the right to apply to the commercial court for the initiation of bankruptcy proceedings.

Article 1 of the Bankruptcy Code of Ukraine (the "BKPU") defines insolvency as the debtor's inability to fulfill its monetary obligations to creditors after the due date, except through the application of the procedures provided for by this Code.

According to Part 2 of Art. 115 of this Code, insolvency proceedings may be initiated against an individual if:

• the amount of the debtor's overdue obligations to the creditor(s) is at least 30 times the minimum wage, which is more than UAH 240,000
• the debtor has stopped repaying loans or making other scheduled payments in the amount of more than 50 percent of the monthly payments for each of the loan and other obligations for two months
• a decision has been made in the enforcement proceedings that the individual does not have any property that may be subject to foreclosure;
• there are other circumstances that confirm that the debtor will not be able to fulfill its monetary obligations or make regular current payments in the near future (threat of insolvency).

The purpose of an individual's bankruptcy procedure is to help repay debts, not to get rid of them.

The initiation of the procedure does not guarantee immediate relief from debts, and persons wishing to file an application for insolvency proceedings should be aware of the risks set out in the Bankruptcy Code of Ukraine, namely

• within the next 5 years, the person will not be able to use the bankruptcy procedure again;
• within the next 5 years, the person is obliged to notify in writing of the fact of his/her insolvency before entering into loan, surety, pledge, credit agreements;
• within the next 3 years, the person will not have an impeccable business reputation; the debtor cannot dispose of his/her property and enter into new loan agreements, etc.) and the rather severe legal consequences of being declared bankrupt.

How to declare bankruptcy

The first step is to consult with a lawyer about the feasibility and possibility of bankruptcy proceedings.

In certain cases, making a final decision will require additional information from government agencies and creditors. This stage of the bankruptcy procedure can last from 1 day to 2 months (taking into account the collection of all necessary information).

The second stage is the preparation and submission of an application to the commercial court to initiate insolvency proceedings.

In order to initiate bankruptcy proceedings against an individual, an application for the initiation of bankruptcy (insolvency) proceedings must be filed with the commercial court. Before submitting the application, you must advance three months' expenses for the insolvency officer. These funds are deposited into a deposit account.

In addition, the entire package of documents for bankruptcy must be carefully prepared before filing, and the application must legally set out the grounds for going to court.

The list of all these documents is prescribed in Article 116 of the CUZPB. But the main ones are:

• description of the property with property rights, location, value, shares, status (mortgage, encumbrances, etc.)
• a specific list of creditors and debtors with all the necessary information (amounts, terms, organizational data, etc.)
• declarations of property status (form approved by the state bankruptcy authority). The declarations contain information about the property status for the last 3 years, information about the property of the debtor's family members (in particular, the property of the spouse if no more than 3 years have passed since the divorce);
• a proposal for debt restructuring (a draft debt restructuring plan is a very important document);
• all copies of transactions regarding shares, participation in the authorized capital, purchase and sale of vehicles, etc;
• a list and information on all available accounts opened by banking and non-banking institutions (including accounts abroad, e-wallets, etc.).

If everything is done correctly and the application has no formal grounds, you will be invited to the first meeting - a preparatory hearing on the case - in 20 days.

The process of bankruptcy of an individual after the opening of the proceedings can be divided into 2 global stages:

Debt restructuring.

This stage is intended to restore the solvency of the individual debtor. At this stage, measures can be taken such as the sale of existing property, changes in the method and procedure for fulfilling obligations, deferral or installment of obligations, writing off debts or part of them, and others.

These measures are detailed in the debt restructuring plan, which is voted on by the debtor's creditors and approved by the court. It is the insolvency officer who takes these measures and performs other actions to implement the debt restructuring plan.

When the plan expires, the debtor is obliged to provide the court and creditors with a detailed report on the implementation of the debt restructuring plan.

After reviewing the debtor's report, the court may either decide to close the proceedings (if the debtor successfully complies with the plan) or the court may decide to proceed to the next stage of the procedure and declare the debtor bankrupt.

Declaring the debtor bankrupt and introducing a debt repayment procedure

At this stage of the procedure, an individual is officially declared bankrupt, such information is published on the official web portal of the judiciary, and the procedure for repayment of debts at the expense of the liquidation estate begins.

After that, the commercial court issues a ruling to close the proceedings and discharge the bankrupt from debts that are outstanding due to insufficient property.

How much does an individual bankruptcy procedure cost?

The bankruptcy procedure of an individual has certain costs that should be taken into account before filing an application with the court. The main costs include:

• For the debtor to file a petition with the court(court fee)- UAH 0.
• Advance remuneration to the insolvency practitioner (restructuring manager) for 3 months of performance of the powers - 15 minimum subsistence levels for able-bodied persons (5 for each month), as of 2025, this amounts to UAH 45,420.
• Attorney's fees - as agreed with the attorney depending on the complexity of the case.

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