How to Prepare a Personal Insolvency Application: A Practical Guide for Debtors

In today’s reality, many individuals face the inability to service their loans. In such cases, debtors often look for a solution in the form of a “personal insolvency application.” It is important to understand that, in legal terms, the official recognition of an individual’s insolvency is possible only through a court, in accordance with the Code of Ukraine on Bankruptcy Procedures.

At the same time, the first step towards financial resolution may begin with dialogue with the bank. Submitting a request to the bank for a loan restructuring helps demonstrate an attempt to settle the debt voluntarily and can play a role in further court proceedings.

Application to the Bank: A Chance for Settlement

Before going to court, it is advisable to attempt negotiations with the bank. Typical requests in such applications may include:

• restructuring of the debt — reducing the monthly payment, extending the loan term;
• credit holidays — temporary postponement of payments;
• waiver of penalties and fines, if the debt arose for valid reasons.

Such applications should be submitted in writing to the head of the bank. It is highly recommended to attach documents confirming financial hardship: income statements, medical records, unemployment certificates, etc.

While the law does not oblige the bank to approve restructuring, in practice banks often agree, as bankruptcy proceedings are generally less favorable for them.

What Is Personal Insolvency?

According to the Code on Bankruptcy Procedures, insolvency is an individual’s objective inability to fulfill monetary obligations once they fall due.

Key point:

• An application to the bank is an out-of-court attempt at settlement.
• An application to the court is a formal process that initiates insolvency proceedings.

How to Write an Application to the Bank?

An application should clearly state:

1. Debtor’s details and credit agreement information.
2. Circumstances that led to financial difficulties.
3. Specific request (restructuring, deferral, waiver of penalties).
4. List of attached documents.

Suggested title: “Application on Insolvency and Request for Debt Restructuring.” Such a document does not replace a court application but may serve as evidence of good faith efforts in later proceedings.

Court Application: The Official Procedure

If negotiations with the bank fail, the next step is to apply to the commercial court. The application to open proceedings must include:

• a description of the debtor’s financial situation;
• a list of creditors and outstanding debts;
• a declaration of assets for the past three years;
• proof of advance payment for the insolvency trustee;
• a debt restructuring plan.

Applications can be submitted in person, by mail, or via the “Electronic Court” system. No court fee is charged in this category, but an advance payment for the insolvency trustee is mandatory.

Consequences of Filing for Insolvency

Opening insolvency proceedings has several important consequences for the debtor:

• accrual of penalties and fines is suspended;
• enforcement proceedings are halted;
• creditors’ claims can be filed only within the court case;
• in the event of successful restructuring, the debtor retains assets;
• if declared bankrupt, assets are sold and remaining debts discharged, except for those that cannot be written off (e.g., alimony).

Additionally, for five years after being declared bankrupt, the debtor must disclose this fact when entering into new loan agreements.

Legal Assistance

The procedure for declaring personal insolvency is complex and requires careful preparation of documents. Errors in wording or missing evidence may result in refusal to open proceedings or significant delays.

This is why professional legal support is a crucial factor for successfully resolving insolvency matters and achieving financial recovery.