Supreme Court of Russia: what to do in the event of buying a car from a debtor

As part of the usual civil circulation, two individuals signed an agreement for the sale of car. After the transfer of money and the vehicle, the buyer discovered significant defects of the purchased item and terminated the agreement through the court. Thus, the parties faced the obligation to restitution.

Subsequently, the seller applied to the court with a bankruptcy bankruptcy petition, and the buyer was included in the register of claims, but the bankruptcy trustee filed an application to compel the creditor to transfer the vehicle to the bankruptcy estate.

He believed that by including a demand for the return of the amount paid for the goods in the register of creditors’ claims, the creditor exercised his right to restitution and was obliged to fulfill the conditions for the return. The courts of three instances supported this interpretation.

However, the Supreme Court of the Russian Federation considered the need for the unconditional transfer of the vehicle to the bankruptcy estate unreasonable. The Economic Board indicated that in such a situation the creditor had two ways: he may not transfer the car to the bankruptcy estate, then the amount of losses caused to him should have been adjusted for the cost of the car, or may transferred the car to the bankruptcy estate, after which the pledge rules will would be applied to the vehicle (decision No. 307- EC21-5824 of July 22, 2021).

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