Russian Federation prepares for wave of bankruptcy filings under new law

A law on personal bankruptcy, under which an individual can be declared bankrupt upon a creditor’s request if the total amount of debt exceeds 500,000 rubles ($7,600) took effect in Russian Federation on October 1, RIA Novosti/Prime reported on Thursday.

When the law, which was signed by President Vladimir Putin in December 2014, came into force Thursday, Russia’s national courts database showed filings across the country, including in remote regions of Siberia.

“The law gives these people the opportunity to once and for all solve the problem of being persecuted by creditors”, he said. The legislation also touches foreign currency loans.

“Experts estimate that a few 400,000-500,000 citizens could apply for bankruptcy”, Pozdyshev said.

Russian banks had encouraged people to take out loans and mortgages during prosperous years of high oil prices and before worldwide sanctions were imposed against Russia over its illegal annexation of Crimea and its role in Ukraine’s civil war.

According to Sberbank’s UCB, 40 million Russians have a few kind of consumer loan nearly a third of the population although the number of loans being issued is decreasing either due to bank’s becoming more picky about their customers or a reluctance on behalf of consumers to get into debt.