The number of financially insolvent individuals in Russia has reached over one million since the implementation of the judicial bankruptcy procedure in 2015, according to official statistics reported by business outlet RBK. The data revealed that nearly 250,000 debtors have undergone this process since the beginning of 2023, showing a 28.8% year-on-year increase.
While the number of bankruptcy procedures is still on the rise, the report suggests that the growth rate has slowed down. In 2020, the number of financially insolvent Russians increased by 72.6%. This was followed by a growth rate of 62% in 2021 and 44.2% in 2022. However, experts predict that the number of individuals resorting to the judicial bankruptcy procedure will continue to increase due to new laws protecting debtors’ rights.
In August, Russian President Vladimir Putin signed a law that expanded the eligibility criteria for the simplified bankruptcy procedure, making it accessible to more people. Under the new provisions, individuals can be declared bankrupt if their debt ranges from 25,000 rubles ($250) to $10,000. This is a significant change from the previous range of $500 to $5,000.
Additionally, the out-of-court bankruptcy procedure has been extended to include pensioners and recipients of monthly parental benefits. The law also proposes reducing the waiting period for initiating extrajudicial bankruptcy from ten to five years.
The rising trend of bankruptcy procedures in Russia can be attributed to the evolving legal framework that aims to protect the rights of debtors. These laws provide a lifeline for individuals burdened with unsustainable debts, allowing them to seek relief through bankruptcy procedures.
The implications of this increase in bankruptcies go beyond the individual level. They also have significant consequences for the Russian economy and financial system. As more individuals declare bankruptcy, lenders and financial institutions face an increasing number of nonperforming loans, which can have a negative impact on their balance sheets. Furthermore, the overall stability of the financial system can be compromised if bankruptcies continue to rise unchecked.
However, there are positive aspects to these new laws as well. They provide an opportunity for individuals to start fresh and rebuild their financial lives. By erasing their debts through bankruptcy, debtors can regain control of their finances and work towards a more stable future.
Overall, the rise in the number of bankruptcies in Russia highlights the growing problem of financial insolvency in the country. While the introduction of new laws protecting debtors’ rights is undoubtedly beneficial for those struggling with debt, it also calls for a comprehensive approach to address the root causes of this issue. Efforts should be made to promote financial literacy, responsible borrowing, and sustainable lending practices to prevent individuals from falling into overwhelming debt in the first place.