Supreme Court of Russia outlined who has the right to initiate simplified bankruptcy procedures

The highest court considered the case, in the framework of which the debtor citizen was tried to be declared insolvent.  The courts of lower instances considered that in the procedure used by the applicant it was illegal, however, the economic board recalled the peculiarities of legal relations.

We are talking about an assignment agreement, under which the previous creditor of a citizen (a bank) sold the debt to him to another company. This company, due to the citizen's default on the loan, turned to the latter with a demand to repay the debt. Due to the fact that this did not happen, the assignee applied to the court to declare the individual insolvent.

The courts of three instances consistently refused to accept the application, justifying their position by the absence of the creditor's outstanding debt.

However, the assignees turned out to be persistent and went further.

When the complaint got to the Supreme Court of the Russian Federation, the Economic Board noted that in the case of an assignment, the entire volume of rights that the seller of the debt possessed passes from the assignor to the assignee. Thus, if the assignor (bank) by law had the right to initiate a case on the insolvency of a citizen without additional prolongation of the debt, then the buyer of this debt (the assignee), had the same rights.

As a result, the decisions of the lower instances were canceled, and the dispute was sent for reconsideration to work on the errors (decision No. 306-ES21-19441 of March 18, 2022).