Closure of Bankruptcy Proceedings: Where Procedure Ends

Bankruptcy is not merely a financial downfall — it is a legal process with a precise purpose and logic. A court cannot keep a debtor in limbo once the goal of the procedure — restoring solvency or ensuring fair distribution of assets — has been achieved. Article 90 of the Ukrainian Bankruptcy Procedure Code (KUzPB) clearly defines the moments when the court must close a case. Yet recent judicial practice shows that this “full stop” often becomes the start of new debates — about good faith, genuine debt repayment, and the moral boundaries of debtor behavior.

When debts are truly repaid — and when they are merely “postponed”

The most common ground for closure is full satisfaction of creditors’ claims or restoration of solvency (Clause 5, Part 1, Article 90 KUzPB). The Supreme Court has repeatedly emphasized: repayment means actual fulfillment of obligations, not formal restructuring. In its ruling of 18 May 2023 in case No. 923/954/20, the Court stated that installments or deferred payments are not equivalent to debt repayment and therefore cannot justify closing a bankruptcy case. In another ruling, dated 7 July 2022, in the same case, the Supreme Court overturned an appellate decision that had prematurely terminated proceedings without confirming actual payments.

The conclusion is clear: bankruptcy ends not when a restructuring plan is signed, but when all creditor claims have been factually satisfied or lawfully discharged.

Liquidation and the final report: the end of the road

In most insolvency cases, the procedure culminates in the approval of the liquidator’s report and balance sheet. After all assets are sold and proceeds distributed, the court issues an order closing the case. If the debtor’s property is insufficient for full settlement, the remaining creditor claims are deemed extinguished (Part 4, Article 90 KUzPB). That was the outcome in case No. 914/2468/20, where the Eastern Appellate Commercial Court, on 11 August 2021, approved the liquidator’s report and terminated the company. The Supreme Court, by its ruling of 28 October 2021, upheld this decision, confirming that a lack of assets is the natural conclusion of liquidation, not a reason to avoid it.

Settlement as a path to compromise

Until recently, the concept of a settlement in bankruptcy proceedings was a gray area. In its 1 June 2020 decision (case No. 910/13010/19), the Supreme Court held that a settlement agreement was not fully compatible with the collective nature of bankruptcy. However, in 2023, Law No. 2971-IX amended Article 90 of the KUzPB, adding settlement between debtor and creditors as a legitimate ground for case closure.

Since then, practice has shifted. On 15 November 2024, the Northern Appellate Commercial Court approved such a settlement, emphasizing that its terms respected all parties’ rights. The business avoided liquidation and continued operations while fulfilling the agreed repayment plan — a pragmatic balance between law and economy.

When a case simply loses its purpose

Sometimes a bankruptcy proceeding must end because there is no longer any subject matter to consider. If the court finds no signs of insolvency — debts have been paid or are insignificant — it may close the case (Clause 11, Part 1, Article 90 KUzPB). In case No. 922/3911/19, the only creditor withdrew its claims, and both the first instance and appellate courts concluded that bankruptcy was meaningless.

As the Supreme Court later confirmed, bankruptcy cannot serve as a “timeout” from debt obligations — it exists only for genuinely insolvent debtors.

Bad faith as a barrier to a new start

A special category under Part 7, Article 123 KUzPB concerns bad-faith debtors. If the debtor submits false asset declarations, conceals property, or abuses the procedure, the court must terminate the case. In case No. 917/2088/19 (Supreme Court ruling of 1 September 2021), an entrepreneur’s case was closed because he failed to disclose part of his assets. In case No. 920/1330/23 (Supreme Court ruling of 4 December 2024), the debtor’s plan proposed complete debt forgiveness with no repayments. The Court confirmed the closure, describing such behavior as an abuse of the insolvency process.

Under the law, such a debtor cannot re-apply for bankruptcy for one year — a clear message about accountability.

Conclusion

The closure of a bankruptcy proceeding is not a mere procedural formality — it is a test of integrity.

The Supreme Court consistently maintains that:

• a case concludes only when obligations are fulfilled or the process has lost its purpose,
• but it is terminated with consequences if the debtor manipulates bankruptcy to evade responsibility.