Bankruptcy procedure for individuals registered as a Ukrainian sole proprietor business (SPD) requires legal regulation, first of all to protect the interest of creditors as banks can often block bankruptcy orders served on SPDs.

In their message Golub and Shinkarenko from the Agency of Strategic Decisions quoted Andrey Shvydkin, the judge of Kharkiv Commercial Court, stating that there is different interpretation of the law whether it is right or not to include consumer credit of SPD under bankruptcy procedure in general obligations to the creditors.

“Gaps in the legislation cause delays in bankruptcy procedures of SPDs as very often banks overrule bankruptcy orders as they disagree with the court decision”, noted A. Shvydkin.

Under the legislation the liquidation estate must include all property of an individual without a possibility for banks to settle the issue regarding troubled loans.

A. Shvydkin sees the problem in the current Law of Ukraine “On Restoring Solvency or Declaring Debtor Bankrupt” as personal debts and debts arising our of an SPDs business activity are not clearly separated. Another significant drawback of the law is lack of clear description of the bankruptcy procedure and bankruptcy elements for an SPD.

“I hope that all these problems will be settled as the Foundation for Effective Governance has created a working group, which is developing a new draft law “On Restoring Solvency or Declaring Debtor Bankrupt”. The new draft law will clearly describe all the procedures as well as explain whether creditors of consumer loans can participate in bankruptcy procedures, noted A. Shvydkin.

He believes that this will help to clearly define debtor’s obligations and protect businessmen and creditors as the result.

“From my experience, I see that during the recession the number of bankruptcy orders served on SPDs has increased several times. As the result we faced dozens of problematic issues, which the current legislation does not cover”, stated the judge.