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Bankruptcy procedures of joint and several debtors

Artem Kukin, Partner of the Law Firm "YUST", Advocate, Doctor at Law
Rodion Smirnov, Lawyer of the Law Firm "YUST"

Currently the creditor, who has claim rights towards joint and several debtors, faces a number of difficulties when exercising his rights within the framework of bankruptcy procedure. Such difficulties originate from the fact that bankruptcy legislation does not govern such situation specifically. The judicial authorities also apply a variety of approaches. Is the creditor entitled to initiate bankruptcy proceedings against all joint and several debtors or only against one of them? How do the rights of the creditor and of the surety regarding the debtor, who has partially settled the debt, correlate within the framework of bankruptcy proceedings?

Initiation of parallel cases

The Federal Law No. 127-FZ “On insolvency (bankruptcy)” dated 26.10.2002 (hereinafter – the Bankruptcy Law) contains no prohibition to the creditor to claim full payment of the debt by each joint and several debtor. Therefore, a number of federal district courts of arbitration (ruling No. A33-14019/03-C4-K9-Ф02-5654/04-C2 by the FCA of the East Siberian District dated 10.02.2005; ruling No. Ф08-5096/2005 by the FCA of the North Caucasus District dated 26.10.2005 on the case No. A53-6067/2005-C233, No. Ф08-5298/2006 on the case No. A53-2424/2006-C2-33; ruling by the FCA of the North-Western District dated 30.05.2006 on the case No. A26-7111/2005-183, dated 22.02.2011 on the case No. A21-3863/2010; ruling by the FCA of the Moscow District No. КГ-А41/2609-11 on the case No. A41-20052/10), following Article 323 of the CCRF, believe – reasonably, in our opinion, - that the creditor is entitled to file with the court, within the framework of the bankruptcy case, the claim to pay the entire debt amount towards all joint and several debtors, that is – to initiate the bankruptcy case of the main debtor and of the sureties.

However, there is also the opposite approach. The recommendations of the joint and several session on Scientific Consultancy Councils under the FCA of the Povolzhie District and under the FCA of the Volgo-Viatsky District on the issues of application of corporate law provisions and insolvency (bankruptcy) law provisions, which occurred on March 25, 2010, in Kazan, say the following: “The creditor may obtain the court decision to exact monetary funds from all joint and several debtors, but he only may initiate a bankruptcy case in regard of one of them. If the creditor presents the full claim to one person, he should be given the opportunity to completely settle the deal with that debtor. In regard of the not settled part of the claim, the creditor may present the claim to another joint and several debtor”.

Resolution of the FCA of the Povolzhie District dated 07.10.2011 on the case No. A55-3330/2011 was motivated by the point of view explained above.

Application of surety provisions

Within the context of the considered problem, the draft resolution of the Board of the SCA of Russia “On certain issues of the resolution of disputes related to sureties” (in development) (hereinafter – the Project) should be obligatorily mentioned. A large part of the draft is dedicated to the details of application of the surety provisions when considering bankruptcy cases. <…>

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