Bankruptcy is a rather complex and extensive process and has an important significance in the social and economic life of the country, therefore, appropriate preparation is necessary when applying for it.
Collecting all the documents necessary for the bankruptcy procedure and carrying out the actions is not an easy task, which is why it is preferable to apply for legal assistance.
You should seek professional help if you or a partner show the first signs of insolvency, since failure to master the legislative regulations and improper organization of the necessary steps can lead to serious economic and criminal consequences.
Although the processes in the case of individuals and legal entities that are subjects of bankruptcy have a number of peculiarities, and the goals of bankruptcy for each are different, in both cases it is necessary to clearly imagine the mechanisms and correctly calculate the steps in order to avoid undesirable consequences and not encounter new problems. All this can be achieved thanks to competent legal advice.
There are also certain differences between the two types of bankruptcy – voluntary and forced bankruptcy procedures, which is why it is important to master the nuances in order to get out of the situation with as few losses as possible. Correct legal guidance will help find ways out of the various problems that arise in this period.
The meaning of bankruptcy is generally to give people who are in a difficult financial and economic situation the opportunity to start a new financial life, which is commonly called a “Fresh start” in English.
When an individual has signs of insolvency and is no longer able to service his financial obligations, the law provides a certain opportunity for the person to either be released from his obligations or to form a new, more favorable situation for him in the form of a financial recovery program, so that the person can service his obligations and not face serious consequences.
As for the insolvency of organizations, the goal here is to remove from economic life those sick links that are no longer able to service their obligations without causing chain problems for partner organizations and without hindering their normal activities. Therefore, if there is an opportunity to rehabilitate the legal entity, a financial rehabilitation program is implemented, and if not, then that organization is liquidated and leaves the economic chain, whose place is presumably taken by another organization in the future.
It should be noted that bankruptcy has many special tools that are not typical of ordinary civil-legal relations. Thus, when there is a court decision to declare the debtor bankrupt, a “moratorium” (translated from Latin as “freezing”) is applied to the debtor, that is, the interest, penalties, and fines calculated on his obligations cease for the debtor, which is one of the main positive provisions of the bankruptcy institution. A similar tool is the termination of all court cases or enforcement proceedings regarding the seizure of property against the debtor from the moment of the bankruptcy decision, since, upon entering the bankruptcy regime, this issue is also transferred to the bankruptcy field.
Unlike ordinary civil-legal relations, where each creditor tries to get his money back from the debtor as a priority and as quickly as possible, bankruptcy is a collective proceeding, and its goal is to collectively find comprehensive solutions for the given subject, therefore, the distribution of the debtor’s funds among the creditors is carried out not according to the chronology of the claim for seizure of money or receipt of a writ of execution, but according to the sequence regulated by law.
In other words, when an entity finds itself in an unfavorable financial and economic situation, bankruptcy instruments are intended to take that entity under certain protection, to temporarily protect it from the actions of creditors, until it becomes clear whether it is possible to implement a financial recovery plan or not. The bankruptcy proceedings of an individual end by releasing the person from certain obligations (if, of course, the person’s actions are lawful, there are no criminal elements, intentional bankruptcy, etc.), although a number of obligations established by law continue to operate, and in the case of organizations, the case ends either with the implementation of a financial recovery plan, or with liquidation and withdrawal from economic circulation.
Bankruptcy instruments aim to balance the interests of creditors and debtors and protect the rights of all parties. That is why, be well versed in the legislative regulations and do not view bankruptcy as a means of unfairly getting rid of obligations, and if, nevertheless, insolvency has become inevitable, seek legal assistance to overcome the process as smoothly as possible.