FOR WHAT REASONS CAN A COURT NOT RELEASE A DEBTOR CITIZEN FROM HIS OBLIGATIONS?

After completing settlements with bankruptcy creditors and consideration by the court of the report on the results of the sale of a citizen's property, the debtor is released from further fulfillment of creditors' claims, including those not declared during the bankruptcy procedure. At the same time, Federal Law No. 127-FZ dated 10/26/2002 "On Insolvency (Bankruptcy)" (hereinafter referred to as the Bankruptcy Law) establishes a number of cases in which such exemption is unacceptable.

The conditions of non-release of a citizen from obligations can be divided into two categories. Denis Plotnikov, lawyer, arbitration manager, member of the Association of Arbitration Managers of the self–regulatory organization "Central Agency of Arbitration Managers", dealt with the issue in detail.

The first category consists in the commission of illegal actions by a citizen, as a result of which the rule of non-release is applied. So, they will not be released from fulfilling obligations in the following cases:
• A citizen has been brought to criminal or administrative responsibility for illegal actions in bankruptcy, intentional or fictitious bankruptcy. Such illegal actions must be committed by the debtor in this bankruptcy case, and the judicial act on bringing to responsibility must enter into force.
• The citizen did not provide the necessary information or provided deliberately unreliable information to the financial manager or the arbitration court considering the bankruptcy case of the citizen, and this circumstance is established by the relevant judicial act adopted during the consideration of the bankruptcy case of the citizen.
• It is proved that when an obligation arose or was fulfilled, on which the bankruptcy creditor or the authorized body based its claim in the bankruptcy case of a citizen, the citizen acted illegally, including committed fraud, maliciously evaded repayment of accounts payable, evaded paying taxes and (or) fees from an individual, provided the creditor with knowingly false information on obtaining a loan, concealed or intentionally destroyed property.
It should be noted that the illegal actions of the debtor during the bankruptcy procedure (failure to receive correspondence from the financial manager, failure to provide access to residential premises for the purpose of conducting an inventory of property, concealment of property and income), which were not established by a judicial act, but are confirmed by the financial manager, will also be the basis for non-discharge from obligations. This is exactly the legal position expressed in the Decision of the Arbitration Court of Moscow dated December 13, 2021 in case No. A40-39236/2020 in relation to the debtor Alukhanyan L.K.

Thus, the resolution of the issue of the presence or absence of circumstances in which the debtor cannot be released from fulfilling obligations largely depends on the good faith of the debtor. (Resolution of the Ninth Arbitration Court of Appeal dated 11/19/2020 in case No. A40-91367/2017).

The second category of non-release conditions includes a number of obligations from which exemption is not provided. Such obligations include:
- current payments;
- compensation for damage caused to life or health;
- payment of wages and severance pay;
- compensation for moral damage;
- on the recovery of alimony;
- other claims inextricably linked to the identity of the creditor;
- on bringing a citizen as a controlling person to subsidiary responsibility;
- on compensation by a citizen for losses caused by him to a legal entity of which the citizen was a participant or a member of whose collegial bodies;
- compensation by a citizen for losses caused intentionally or by gross negligence as a result of non-fulfillment or improper fulfillment by him as an arbitration administrator of the duties assigned to him in the bankruptcy case;
- compensation for damage to property caused by a citizen intentionally or through gross negligence;
- on the application of the consequences of the invalidity of a transaction declared invalid on the basis of Article 61.2 or 61.3 of the Bankruptcy Law.


Photo from Denis Plotnikov's personal archive