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The new law on bankruptcy of individuals: unanswered questions

The new law on bankruptcy of individuals: unanswered questions

According to the Central Bank of Russia, the amount of the funds loaned by banks to individuals as of April 1st of 2015 was 10 532 496 million roubles. The amount of the loans with delayed payments («90+») exceeded 972 520 million roubles, or 9,2 % of the total loaned amounts. The central media inform that approximately 40 million Russian citizens have loans, and over 5 million cannot cope with repaying the debts and need restructuring their credits.

Meanwhile, the causes for such inability of the citizens to perform under their credits may differ: starting from the deterioration of the financial position (19 %), loss of the job and, consequently, of planned income (15 %), simple forgetfulness (13 %), and up to the unwillingness to repay the debt (6 %) [1].

The debtors’ non-performance of their obligations to the banks leads to the increase of the amount of the bad debts, which makes the banks spend more on forming reserves to compensate for possible losses under late loans and increases the expenses of debt recovery.

Such expenses are clearly not profitable for the banks, and the banks will obviously strive to recover the bad debts promptly. The ways of debt collection from individuals tend to be quite aggressive and expensive. They include, in particular, resorting to courts, initiating executive proceedings, contracting collection agencies.

The life of the delaying debtors and their creditors will become more complicated on July 1st of 2015, when the procedure of bankruptcy of individuals is included into the legislation.

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