How Courts Terminate Personal Bankruptcy Proceedings

The institution of personal insolvency was introduced as a mechanism for the rehabilitation of a bona fide debtor and the restoration of solvency. However, recent Supreme Court practice demonstrates that this procedure is subject to strict judicial scrutiny and a significantly elevated evidentiary standard.

Between 2021 and 2025, the Supreme Court developed a consistent legal position: access to debt discharge is conditional upon good faith conduct and full procedural compliance.Good Faith as a Substantive Criterion

In its rulings of 31 January 2024 (case No. 911/2140/22), 15 February 2024 (No. 904/7413/21), 25 January 2024 (No. 916/1575/21) and 18 April 2024 (No. 920/1398/21), the Supreme Court emphasized that discharge from debts is available exclusively to a bona fide debtor.

The Court clarified that good faith implies full disclosure of assets, transparent cooperation with creditors and the insolvency trustee, submission of a reliable declaration, and the presentation of a realistic restructuring plan. The insolvency procedure cannot be used as a mechanism to legitimize asset withdrawal or to avoid lawful obligations.

Judicial Control at the Stage of Opening Proceedings

In the rulings of 16 November 2022 (No. 917/1604/21), 13 May 2024 (No. 922/5486/23) and again in No. 920/1398/21, the Commercial Cassation Court within the Supreme Court stressed that the debtor must substantiate insolvency with proper and sufficient evidence, including primary documentation.

A credit report alone does not prove either the origin or the exact amount of debt. Courts are required to verify when obligations arose, their legal nature, and whether they are due and enforceable.

This approach significantly raises the evidentiary threshold even before proceedings are formally opened.

Non-Appearance and Procedural Passivity

The Grand Chamber of the Supreme Court in its ruling of 12 January 2023 (No. 9901/278/21) and the Commercial Cassation Court in 13 August 2025 (No. 903/901/24) held that once a debtor initiates insolvency proceedings, they must actively participate in the process.

Failure to appear in court after attendance has been declared mandatory, or failure to provide requested explanations and documents, may result in the application being left without consideration. Insolvency is not an automatic administrative mechanism but a judicial process requiring procedural diligence.

Declaration of Assets and the Definition of Family Members

In the judgment of the Judicial Chamber of the Commercial Cassation Court dated 22 September 2021 (No. 910/6639/20), as well as in subsequent rulings of 21 September 2023 (No. 908/3839/21) and 3 August 2023 (No. 926/2987-б/20), the Supreme Court clarified the scope of the debtor’s declaration obligations.

The concept of “family member” within personal insolvency proceedings is defined by Article 116(5) of the Bankruptcy Procedures Code and does not follow the definition contained in family law.

Children (including adult children), parents, and persons under guardianship must be disclosed regardless of cohabitation. This interpretation is aimed at preventing concealment of assets through transfers to close relatives. An incomplete declaration may therefore indicate bad faith and justify negative procedural consequences.

Realistic Restructuring Plan

In its rulings of 14 March 2024 (No. 916/2411/21) and 7 October 2023 (No. 902/276/22), the Supreme Court underlined that the restructuring plan must be economically substantiated and realistic.

The debtor must explain the causes of insolvency, the use of borrowed funds, and demonstrate genuine prospects of restoring solvency. A merely formal or hypothetical plan does not meet the objectives of the procedure.

Role and Powers of the Insolvency Trustee

In No. 926/2987-Б/20 (3 August 2023), the Court emphasized that the restructuring trustee is obliged to conduct a thorough verification of the debtor’s financial condition and comply with court instructions regarding additional asset checks.

The Court also addressed the inadmissibility of contractual clauses with insolvency trustees that contradict mandatory provisions of the Bankruptcy Procedures Code, including excessive penalty provisions or improper allocation of obligations.

Conclusion

The Supreme Court’s jurisprudence clearly demonstrates that personal bankruptcy is not a simplified debt discharge instrument but a judicial mechanism subject to strict compliance with principles of good faith, transparency, and evidentiary sufficiency.

Non-appearance, incomplete documentation, and a formalistic restructuring plan are not technical defects — they constitute substantive grounds for termination of proceedings or refusal to grant relief.

Through these decisions, the Supreme Court is shaping a modern doctrine of personal insolvency grounded in procedural integrity and judicial control.