Over the last week, we have repeatedly head two opposing messages: 1) people will be thrown out into the streets because of the bankruptcy procedure; 2) rascals will take advantage of the bankruptcy procedure so not to pay debts and deceive the banks.
In order to understand that these two messages are mutually contradictory one should not even be a lawyer, one just needs a bit of common sense.
So what is the new code of bankruptcy procedure is really about and why are some circles opposing the introduction of the institution of financial insolvency of individuals so much?
- Individuals who due to various circumstances have fallen into a debt hole have no chance to get out of it today. Banks continue to charge interests every month, the enforcement service takes away whatever can be collected, but in many cases the debtor will not be able to pay off the debt till his/her death. What happens in normal countries in such cases? These people go to courts seeking protection from creditors (this is called a bankruptcy procedure) and, according to the results of such a process, they either get their debts restructured or written off (if a person already has nothing left).
What are the benefits for our citizens? Exemption from debts, the opportunity to get a job, start business. The society and the state will get a taxpayer back, and the creditors will be freed from a bad debt. So who loses in this situation?! Nobody. Everybody wins – the debtor, the creditor, the society, and the state!
- So who benefits from spreading horror stories about throwing people out into the streets? Well, who is the one shouting “stop thief” the loudest in the crowd? That’s right – the thief himself! Such horror stories are beneficial only to unscrupulous borrowers who benefit from the frozen mortgage loans, because these are bona fide borrowers, bank depositors, simply taxpayers who do not have any deposit-lending relationships with banks who are paying for their debts. This is how the most trivial law of money conservation operates: if someone has failed to bring the money, then it will be taken from another source, that is, the scammer is the winner here.
- Who benefits from the second horror story saying that unscrupulous debtors will begin to deceive banks massively? Of course, no one else than the creditors who mainly represent the wild sector of debt collection. In fact, the bill provides for a whole set of fuses against unscrupulous debtors who hide their property in order to avoid liability.
- The social aspect of the bill. Every law is good only when it ensures a healthy balance of interests in the society. In this case we are talking about the balance between creditors and debtors. Ukraine has gone through numerous financial shocks, while the consequences of the financial crises of 2008 and 2014 are still affecting people and business. There are many people who had taken out loans for housing before these crises and are now unable to service these loans. What can they do? Their debts will not disappear all of a sudden, they have their homes pledged and the live in constant fear that tomorrow they may find themselves on the street. The authors of the Code offer a special procedure for solving this problem. The Code will define the concept of social housing (its size is still being discussed), which the debtor cannot be deprived of under any circumstances. But if the debtor has taken out a loan to buy a penthouse somewhere in a luxurious neighborhood, then he/she will have to move to a more modest apartment somewhere else.
Thus, we see that honest and conscientious debtors, creditors and everybody else will only benefit from this law. Only scammers and manipulators will lose. The parliament should choose whether to create really civilized and honest conditions for its citizens or to continue keeping them in debt slavery.