Many entrepreneurs have encountered the situation of a contractor being declared bankrupt. Moreover, in practice, situations arise where insolvent contractors have been subject to a final judgment, for example, for an offense specified in Article 300 et seq. Debtors seeking to be free from their obligations, including those resulting from a final judgment, decide to file for personal bankruptcy.
The regulations governing personal bankruptcy do not prohibit a person convicted of a crime from filing an effective petition for personal bankruptcy . As a result of the 2020 amendment to the Bankruptcy Law ( "Bankruptcy Law" ), bankruptcy courts no longer consider – at the stage of issuing a bankruptcy order – whether the debtor's insolvency was caused by their own fault or gross negligence (this is assessed at the stage of establishing a repayment plan).
However, the bankrupt should be aware that if a final judgment has been issued against him/her in which the court obliges the bankrupt to pay:
- court-imposed fines;
- a fine or pecuniary benefit ordered by the court as a punitive measure or a measure related to placing the perpetrator under probation;
- compensation for damage resulting from a crime or offence confirmed by a final judgment,
then, in accordance with Article 491(21) paragraph 2 of the Law on Taxes, they will not be subject to cancellation .
The above limitation is an exception to the general rule that applies in bankruptcy proceedings against natural persons, i.e. the rule that allows the bankrupt to write off obligations not satisfied in bankruptcy proceedings.
From the point of view of the bankrupt's creditors entitled to pursue claims under a final judgment of conviction, it is important that despite the declaration of the debtor's bankruptcy, their claim is not subject to write-off.
This article is for informational purposes only and does not constitute legal advice.
Legal status as of August 22, 2023
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