Rus­sia’s first per­sonal bank­ruptcy law comes into force

The China Post - - MARKETS -

Rus­sia’s first per­sonal bank­ruptcy law came into force on Thurs­day in a move ex­pected to usher in a flood of le­gal ac­tion by Rus­sians who are strug­gling to pay back loans.

Rus­sians with debts of more than 500,000 rubles (US$7,680) that are more than 90 days over­due will now be able to de­clare them­selves bank­rupt, ac­cord­ing to the new law, signed by Pres­i­dent Vladimir Putin late last year.

Rus­sia has pre­vi­ously al­lowed com­pa­nies to de­clare them­selves bank­rupt but not in­di­vid­u­als.

Rus­sian banks en­cour­aged peo­ple to take out loans and mort­gages dur­ing the boom years of high oil prices and many are now strug­gling to make the re­pay­ments, par­tic­u­larly those who took out loans de­nom­i­nated in for­eign cur­rency be­fore the ru­ble plum­meted last year on the back of low oil prices and Western sanc­tions over the Ukraine cri­sis.

“I re­ceive many such letters (on the is­sue) and be­hind each is a per­sonal tragedy,” said the deputy pres­i­dent of Rus­sia’s cen­tral bank, Vasily Pozdy­shev, in a state­ment.

“Ex­perts es­ti­mate that some 400,000-500,000 cit­i­zens could ap­ply for bank­ruptcy,” Pozdy­shev said.

Some ex­perts have ques­tioned how many will ac­tu­ally be able to do so, due to the rel­a­tively high cost of the pro­ce­dure.

Banks how­ever fear that a large num­ber of lenders will use the law to avoid pay­ing back loans, with the num­ber of de­layed pay­ments al­ready soar­ing over the last year.

“The law is en­ter­ing force at an in­con­ve­nient mo­ment,” wrote Ve­do­mosti busi­ness daily in an ed­i­to­rial.

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