Private business in Russia usually has a short lifespan, without reorganization and significant changes, the average duration for SMEs is 5 years. If over the past months/years of activity a lot of debts have accumulated, then the company and legal entity can be declared insolvent. In this article we will briefly talk about the features of the bankruptcy (insolvency) procedure of an individual entrepreneur (IP) with tax debts (to the tax office and clients) and loans - how to file, what stages need to be completed.
Who is a bankrupt businessman
This is a person engaged in entrepreneurial activity who can no longer fulfill his material obligations to creditors and organizations, including government ones, to which the debt is open. Recognition of insolvency allows you to begin legal proceedings for the sale of property, full or partial repayment of debt and cancellation of the balance. Moreover, this decision can only be recognized by arbitration courts in accordance with Federal Law No. 127.
The bankruptcy procedures for individual entrepreneurs and individuals have minor differences and are often performed together.
Consequences of bankruptcy of an individual entrepreneur
You should not think that bankruptcy is a simple procedure that will not affect the subsequent life of a businessman. This is a greasy stain on your business reputation and it will be very difficult to get rid of it.
The consequences of bankruptcy of an individual entrepreneur are as follows:
- is required to indicate this when taking out loans or any other loans for five years As a rule, this ends in a loan refusal.
- A former individual entrepreneur is prohibited from starting the bankruptcy process again for 5 years .
- For three years, the former entrepreneur is prohibited from holding any leadership positions or registering a new business .
So, we looked at the pros and cons of bankruptcy as an entrepreneur. The latter includes the fact that for insolvency in business you will have to pay both with your own good name and the inability to take out loans or hold significant positions in other organizations.
Which entrepreneurs are declared bankrupt: signs of insolvency
There are a number of conditions under which you can start the program:
Bankruptcy of individuals
from 5000 rub/month
Read more
Services of a credit lawyer
from 3000 rubles
Read more
Legal assistance to debtors
from 3000 rubles
more
Write-off of loan debts
from 5000 rub/month
More details
- Overdue payments – from 3 months or more (for each debt).
- The total debt exceeds 40% of the value of the company's entire property.
All material obligations can be divided into two categories:
- Loans or unfulfilled terms of the contract between the supplier of goods and the buyer.
- Taxes and utility bills, employee salaries.
Since October 1, 2015, the bankruptcy rules for individual entrepreneurs are the same as for individuals; the above list includes loans taken for personal needs (buying a car for the family, household appliances, mortgages), debts to suppliers and taxes.
What debts can bankruptcy help an individual entrepreneur get rid of?
The insolvency procedure allows you to completely legally get rid of debts to the tax and extra-budgetary funds, private investors, and commercial banks. The only type of debt that remains with a bankrupt entrepreneur are obligations that directly affect the creditors: wages, compensation for harm, and also alimony for individuals.
Tax debts
Arrears in the tax service are not an obstacle to declaring an individual entrepreneur bankrupt. Both the entrepreneur himself and the Federal Tax Service inspectors can initiate a debtor’s insolvency case.
Deregistration of entrepreneurs is carried out according to 129-FZ “On State Registration”. In accordance with the law, the Federal Tax Service may refuse to deregister an individual entrepreneur if there are compelling reasons to suspect a citizen of fraudulent activities or tax evasion.
But even after successful termination of state registration, tax debts and arrears remain and must be repaid in full. If this is not done, the tax service will send a statement of claim to the court for forced collection of the outstanding debt from an individual - a former entrepreneur.
In this case, the citizen will be liable for unpaid obligations related to commercial activities and personal property.
Bankruptcy of an individual entrepreneur is the only opportunity for entrepreneurs to get out of a financial hole, once and for all closing all issues with supervisory and regulatory authorities.
Debts to the Social Insurance Fund and Pension Fund
All mandatory insurance contributions are made to the Federal Tax Service in the form of a single tax, therefore, the obligation to pay contributions separately to the funds does not become an obstacle to terminating the registration of an entrepreneur.
After the successful completion of bankruptcy of an individual entrepreneur, information is transferred to the Pension Fund and the Social Insurance Fund, the status of an individual entrepreneur is liquidated and collection of payments stops automatically.
However, if there are open arrears in favor of funds, the citizen is obliged to pay it, even after cessation of business activity.
Loan debts
Bankruptcy of individual entrepreneurs, as well as insolvency of individuals, allows you to legally get rid of bank loans and other financial obligations.
At the final stage of bankruptcy, the debtor's property is sold at auction, and all funds that were obtained at the auction are used to pay off debt obligations to creditors. If the total amount of all the debtor's assets does not cover his debts, they are written off after the entrepreneur is officially declared bankrupt.
Debts of an individual in case of bankruptcy of an individual entrepreneur
The debts of an individual and an entrepreneur in bankruptcy are combined, so to write them off, only one arbitration procedure is carried out aimed at writing them off. For individuals, debt may arise from loans and borrowings, payments for utilities, tax payments, and traffic police fines.
An individual entrepreneur has debt for targeted loans, rent payments, fines from supervisory and regulatory authorities, taxes and fees, and employee salaries.
Step-by-step instruction
We recommend that you contact a specialized legal agency before starting the process. offers legal support and bankruptcy case management services for individuals and individual entrepreneurs. A specialist will help you submit an application, fill it out correctly, collect documents, and also protect you from calls and annoying creditors during the paperwork and after it is completed. Let's look at the main stages you have to go through.
Notice of intention to file for insolvency
You need to go to the Federal Resources website and place an advertisement that will present the facts about the upcoming procedure. This must be done in advance, at least 15 days before submitting the application. If this is not done, the court proceedings will not begin and the application will be left without progress. However, copies of this notice do not need to be sent to all creditors. An alternative option is to contact a notary; he usually charges about 3,000 rubles for this service.
Filing an application to the arbitration court
The applicant (the debtor himself, the bank, tax or other authority) is required to fill out standard documents in two copies. You can obtain a sample from the court clerk or electronically. When filling out, you should indicate your full initials, registration address, contacts, income level and place of employment, information about each creditor, and the total amount of debt.
At this stage, you must submit papers along with your application. Since filing for business insolvency and bankruptcy of an individual entrepreneur (individual entrepreneur) is not quick, citizens need to provide all the papers that identify them and confirm the specifics of their financial status. Namely:
- Passport.
- Extract from the Unified State Register of Entrepreneurs regarding the registration of the company.
- TIN.
- A list with the amounts of each debt and confirmation through contracts, written transactions that have legal force.
- Estimate of all property of an individual exceeding the cost of 10 thousand rubles, incl. real estate, cars, land, securities, jewelry.
- Copies of contracts for any financial procedures that exceed 300,000 rubles over the last 3 years. They will be checked. If fraud is discovered, the transaction may be cancelled.
- Extract from the registry office on marital status - marriage, divorce, presence of minor children.
- A receipt confirming that the state fee has been paid. The amount of state duty in case of bankruptcy of an individual entrepreneur on debt is 300 rubles.
- Payment for the work of the financial manager – 25,000 rubles. must be kept in a deposit account at the expense of the salary for one procedure.
The package of documents can be increased if necessary.
Consideration of the application by the court
This stage can last from 15 days to three months. There are three possible solutions:
- The beginning of office work is the sale of property or debt restructuring.
- Recognizing a claim as unfounded when one of the conditions is not met.
- Refusal to start a case, since an application has already been filed against this person and it has been accepted for proceedings.
If fraud is detected, the person falls under one of the articles of the Criminal Code - 196 or 197.
Appointment of a financial manager
The applicant chooses an SRO, that is, an accredited company that has the opportunity to nominate financial managers. Its presence is mandatory, services are paid separately. He participates at every stage of the paperwork, is an intermediary in many procedures and is authorized to involve other people, petition for an appeal or review of a decision, and much more.
Calling a meeting
All interested people and companies, incl. Representatives of banks must apply for inclusion in the register of creditors' claims, then they can participate in meetings and have the right to vote. Here the main decision is made - whether it is possible to restructure the debt or whether it is necessary to proceed to the sale of property. Also at this meeting (in person or in absentia) finances are distributed and to what extent they will be satisfied in the first place, that is, the order in which money is received.
How to make bankruptcy of an individual entrepreneur using restructuring
If interested parties, along with the financial manager, believe that it is possible not to resort to the sale of the real estate debtor, then together they propose a solution - a way out of the current situation. Thus, the total debt can be restructured - the payment period is extended, some fines and penalties are suspended or even written off, and the amount of the monthly contribution is reduced. Although the case can be considered for several months, when all payments are suspended, the debtor often manages to collect part of the money and repay at least a little.
Then a P/R (restructuring plan) is prescribed, according to which payments will be made - amounts and terms. The paperwork is considered completed, but it can be resumed if the obligations under the new P/R are not complied with by the borrower.
How to declare an individual entrepreneur bankrupt through the sale of property
Auction period is 4-6 months. The money received is credited as payment of debts, the remainder is written off. The financial manager is responsible for how real estate and other valuables go under the hammer. An entrepreneur may be subject to restrictions on traveling abroad, but this rarely happens. Everything is for sale, both registered to the company and personal, excluding:
- the only living space, provided that it is not under a mortgage or pledge;
- household and personal items, except antiques and luxury items;
- pets, incl. livestock and poultry that are not used for business;
- food and money in the amount of the minimum subsistence level for one family member;
- if there are disabled people - a car.
Law on Insolvency of Individual Entrepreneurs
The procedure for declaring an individual entrepreneur insolvent, as well as the insolvency of citizens without a similar status, is regulated by the provisions of Law No. 127-FZ.
Thus, from 2021, individual entrepreneurs have the right to initiate bankruptcy proceedings, whereas previously only creditors, supervisory and regulatory government agencies could apply to the arbitration court.
From September 2021, businessmen whose debt is in the range of 50–500 thousand rubles can file their insolvency through the MFC, bypassing all court procedures.
Judicial practice and issues
Russia is catching up with Europe in this area. Declaring bankruptcy is the only legal way to write it off without being left with nothing. Let's see what topics interest readers.
Are the debts of an individual entrepreneur paid off as an individual?
Creditors can be included in the general register and participate in the distribution of money received from the sale of things.
Bankruptcy of individuals
Read Financial manager in bankruptcy of individuals: rights, obligations, when and by whom is appointed
from 5000 rub/month
Read more
Services of a credit lawyer
from 3000 rubles
Read more
Legal assistance to debtors
from 3000 rubles
more
Write-off of loan debts
from 5000 rub/month
More details
Consequences if there is no property
The case will be closed and all obligations will be canceled.
Video
Will individual entrepreneurs with unpaid taxes be closed?
Yes, the company will be closed, but all liabilities will be transferred to the individual. That is, if there is property or money in the account, they will be written off. If the Pension Fund of the Russian Federation and the Social Insurance Fund and the Federal Tax Service did not submit their data to the register of creditors on time, then the statute of limitations for such obligations is 3 years.
