Duties of a consumer after declaring consumer bankruptcy

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For an individual who does not engage in business activities and has initiated the process of declaring consumer bankruptcy to achieve debt relief, receiving a declaration of bankruptcy from the Bankruptcy Court is the first success and the initial step toward achieving the desired goal.

However, it is essential to be aware that from this point onwards, there are certain responsibilities that the consumer must fulfill for the successful progression of the procedure.

What Responsibilities Does a Consumer Have After Declaring Consumer Bankruptcy?

In the declaration of bankruptcy, a trustee is appointed, who serves as an extrajudicial body of the proceedings. Their primary duty is to oversee the bankruptcy estate (the consumer’s assets) and its liquidation. Proper execution of the trustee’s duties requires cooperation from the consumer, and it is essential to understand these obligations. They are outlined in the Bankruptcy Law and failure to comply with them may result in sanctions.

The obligations of a bankrupt consumer towards the trustee are regulated by Article 57(1) of the Bankruptcy Law. The provision states that the bankrupt consumer is obliged to identify and surrender their entire estate to the trustee, as well as hand over documents related to their activities, assets, and financial records, including accounting books, other records maintained for tax purposes, and correspondence. The consumer confirms the fulfillment of this obligation in writing, which is submitted to the supervising judge. While this provision originates from regulations concerning business bankruptcies, it is applicable to consumer bankruptcies as well.

The bankrupt consumer is also obligated to provide the trustee and the supervising judge with any necessary explanations regarding their estate.

What Are the Consequences of Failing to Fulfill Consumer Responsibilities During Bankruptcy Proceedings?

As mentioned above, to ensure that the consumer complies with their imposed obligations during the bankruptcy proceedings, the Bankruptcy Law provides various sanctions for breaches of specific obligations.

The most severe sanction appears to be the potential termination of the bankruptcy proceedings. This would signify the conclusion of the proceedings without a decision regarding the subject matter of the case, and thus, without achieving debt relief.

Article 49110 of the Bankruptcy Law stipulates that if the bankrupt consumer fails to identify or surrender their entire estate, necessary documents, or otherwise fails to fulfill their obligations, the court, ex officio or at the request of the trustee or creditor, after hearing the bankrupt consumer, the trustee, and if necessary, the creditors, may terminate the proceedings, unless the consumer’s failure to fulfill their obligations is deemed immaterial, or the continuation of the proceedings is justified by considerations of equity or humanitarian reasons.

Moreover, the court may also terminate the proceedings if it is revealed that the information provided by the debtor in the bankruptcy application is untrue or incomplete, unless the inaccuracy or incompleteness is deemed immaterial, or the continuation of the proceedings is justified by considerations of equity or humanitarian reasons.

If, however, the court believes that despite the identified shortcomings, it is justified to proceed with the bankruptcy proceedings, and the consumer “refuses to cooperate,” the presiding judge, who assumes the responsibilities of the commissioner, may impose coercive measures on the consumer under Article 58 of the Bankruptcy Law.

What Is the Criminal Liability for Consumer Bankruptcy Responsibilities Violations?

It should also be noted that the legislator has introduced provisions into bankruptcy law that provide for criminal liability for violations of imposed obligations.

According to Articles 522 and 523 of the Bankruptcy Law, a person who:

  • provides false information in the bankruptcy application,
  • provides the court with false information regarding the state of their estate in bankruptcy proceedings,
  • fails to surrender their entire estate entering the bankruptcy estate to the trustee, accounting books, or other documents related to their estate,
  • fails to provide information to the trustee or the supervising judge regarding the consumer’s estate or fails to provide the trustee with data or documents enabling the performance of obligations specified in the law,

may be sentenced to imprisonment for a period ranging from 3 months to 5 years.

In summary, the issue of fulfilling responsibilities by consumers in bankruptcy proceedings will be further explored in subsequent articles. However, it is already evident from the above discussion how crucial it is to diligently fulfill imposed obligations and cooperate with the trustee and the court during the bankruptcy process. This should come as no surprise, as the stakes involve freeing oneself from significant debt burdens, which can sometimes be quite substantial.