SUPREME COURT OF RUSSIA: LOWERING OF PRIORITY OF CLAIM IS NOT APPLICABLE IN BANKRUPTCY OF INDIVIDUAL

The Economic Board of the Supreme Court considered the case on the complaint of one of the creditors of the bankrupt individual, whose claims were lowered due to affiliation with the debtor. The lower courts came to the conclusion about the relationship between the debtor and the creditor, concluding that the loan issued by the creditor is justified, but is subject to satisfaction in the order preceding the distribution of the liquidation quota. However, the Supreme Court pointed at the mistakes of colleagues and demanded a re-consideration of the case.

The creditor's claim was based on a loan previously issued to the debtor, which the latter did not return on time.

However, the courts were confused by the fact that the borrowed funds were partially taken from dividends received by the creditor from participation in the company, as well as from a third party who was a close relative.

The same third party was a participant in another company together with the debtor. Having lowered the creditor's claims, the courts referred to paragraph 5 of the Review of Judicial Practice of January 29, 2020.

When the dispute was considered by the economic board, it was pointed out that this position was erroneous, since the rule of law in question is not applicable in bankruptcy of individuals and only concerns the insolvency of companies.

The Supreme Court recalled that when considering bankruptcy cases of individuals, the courts may consider issues of including of imaginary, already fulfilled and other non-satisfactory obligations in the register of creditors’ claims (decision No. 305-ES21-4424 of July 26, 2021 in case № A40-301015/2019).