THE SUPREME COURT OF RUSSIA HAS CLARIFIED THE PROCEDURE FOR SALE OF PLEDGED PROPERTY IN BANKRUPTCY

The trustee proposed to first use the funds to pay off the costs of the auction, then transfer most of the remaining amount to the pledge lender and pay off the legal costs with the rest of the money.

The tax inspectorate insisted that, first of all, after the sale of real estate, the property and land tax charged on it should be repaid.

The courts of three instances unanimously took the side of the trustee, designating the priority of the registered claim of the pledge creditor.

However, the highest court urged colleagues to strive for justice in the issue of the balance of rights of both pledge and ordinary creditors.

The three judges noted that since the law already provides for the preemptive right to satisfy the claims of the pledge creditor through the sale of the pledged property, it would be unfair to take funds to pay the tax on this property until the moment of its sale from the remaining bankruptcy estate, thereby depriving other creditors of their rights.

The economic board has also recalled that the fate of the pledged property is mostly in the hands of the pledge creditor, who may strive for its quick sale, including with the aim of not accumulating tax debts.

As a result, the court made a decision to send part of the funds received from the sale of the pledged property to pay taxes accrued on it (decision No. 305-ES20-20287 dated April 8, 2021).