How to file for bankruptcy for individuals and legal entities.

Bankruptcy is a rather interesting process. Indeed, if it is correctly executed, one can even find advantages in this process. Therefore, it is essential to learn how to declare personal bankruptcy or how to declare oneself bankrupt as a legal entity. That is, there are many nuances about how to file for bankruptcy without going to court.

Moreover, when considering how to declare bankruptcy for an individual, it is crucial to understand how to exit this state. Additionally, for those with too much debt, it is necessary to understand how to file for bankruptcy through the court. This process can be carried out both through the court and without it, and everything can be done on legal grounds.

How to declare bankruptcy for a legal entity?

So, how to declare oneself bankrupt as an individual: let's start with what bankruptcy is—a relatively straightforward process available to both individuals and legal entities. This process means that this person can no longer manage their financial obligations. It primarily concerns credit obligations. That is, the individual cannot fulfill their old “functions.” Essentially, this legal mechanism is regulated by the legislation of Ukraine and can be an important step for those who find themselves in a difficult financial situation. A person cannot declare themselves bankrupt simply because they want to. In 2024, the bankruptcy filing process includes several key stages, as the war continues in Ukraine. This is an important factor that must be considered.

In general, bankruptcy is a legal procedure aimed at easing the debtor's life. The debtor can be either an individual or a legal entity. By declaring bankruptcy, this individual can discharge their debts. This means that they are not relieved of all obligations but are allowed to gradually deal with their debts. This can be useful in cases where the debt exceeds assets and there is no real possibility to pay all obligations.

Separately, we can consider who can start thinking about bankruptcy:

• the individual has debt obligations that they cannot pay off (debts have already accumulated);

• the individual lacks a source of income that would allow them to repay the loan immediately;

• due to lawsuits that have already imposed certain restrictions on debtors' incomes, the individual cannot conduct their business.

Each of these cases can serve as a reason to initiate the bankruptcy process.

How is the bankruptcy process initiated?

In Ukraine, the bankruptcy procedure for individuals is regulated by the Law of Ukraine "On Restoring the Solvency of a Debtor or Declaring Them Bankrupt." This law details the requirements, conditions, and stages of the bankruptcy process. Bankruptcy can be filed by an individual whose debt obligations exceed their financial capabilities. That is, each process occurs based on this law.

There are quite a few such stages, and all are sequential:

1. First, a petition must be submitted to the court. This petition initiates the entire process. The petition should describe the situation, specify the credit obligations, and outline all details.

2. Next, the exact amount of the debt needs to be determined. The court assesses the total amount of debts, including loans, utility bill debts, alimony, and other obligations.

3. To provide some guarantee, the debtor's property is also evaluated. At this stage, an inventory of the property belonging to the debtor, which can be used for partial debt repayment, is conducted. If there is no property, this must be indicated in the documents.

4. Then a court decision is made on how to restructure the debt. The court may propose debt restructuring—changing the terms of repayment. For example, the term may be extended, and the repayment amounts may be reduced.

5. At this stage, the individual is already recognized as bankrupt. If restructuring cannot be implemented or the debtor is unable to fulfill the new conditions, the court declares them bankrupt. After this, a significant portion of the debts is discharged.

To carry out all these stages, a package of documents will need to be submitted. For example, a passport and income statements.

How is the bankruptcy of a legal entity recognized?

Bankruptcy of legal entities in Ukraine is also regulated by the Law of Ukraine "On Restoring the Solvency of a Debtor or Declaring Them Bankrupt." Unlike individuals, the bankruptcy of companies involves more complex processes related to the assessment of assets, obligations to employees, and creditors.

The stages of this process are slightly different from that of an individual. What is involved:

1. Filing a petition in court. The petition is submitted to the commercial court at the company's registration location. It can be filed by either the debtor company itself or creditors if the debt has not been repaid for more than 3 months since the obligation arose.

2. Next, rehabilitation procedures are initiated. That is, the court appoints a manager who conducts business restructuring and negotiates new repayment terms with creditors.

3. Then the company's assets need to be assessed. This stage can follow if the rehabilitation does not succeed.

4. In the case of bankruptcy of a legal entity, all company assets are sold, and the proceeds are directed to repay debts to creditors. After this, the company is liquidated, and it ceases to exist as a legal entity.

Then the procedure comes to an end. After all settlements with creditors are completed, the court issues a decision to conclude the bankruptcy process. The company is legally liquidated.

In this case, a package of documents must also be prepared. For example, the company's founding documents.

In general, this process affects both legal entities and individuals. The bankruptcy process, although it is a rescue from debts, has consequences for future financial and business activities. Not everyone manages to exit this process quickly enough to avoid losses. However, this process sometimes remains the only necessity.