Insolvency of IDPs and Military Personnel: How Court Practice Is Changing

The full-scale war has significantly transformed the application of the Ukrainian Bankruptcy Procedures Code in relation to individuals. While in 2021–2022 personal insolvency procedures were primarily perceived as a mechanism for resolving foreign currency loans or excessive consumer debt, in 2024–2025 commercial courts increasingly began dealing with cases involving internally displaced persons (IDPs), military personnel, individuals residing abroad, and citizens whose property was destroyed or remained in occupied territories.

Statistics from commercial courts demonstrate an almost exponential increase in such proceedings. In 2021, courts received 1,157 insolvency applications from individuals and sole proprietors; in 2024 the figure reached 1,835, and in 2025 it increased to 2,831 applications. The number of opened proceedings has also nearly tripled compared to the pre-war period.

The Court effectively acknowledges that the institution of personal insolvency is becoming one of the key mechanisms for the financial rehabilitation of citizens during wartime. Judicial practice directly identifies deteriorating financial conditions, excessive credit burdens, economic instability, and the consequences of martial law as the main drivers of this growth.

IDPs and Jurisdiction Issues: Which Court Should Hear the Case

One of the first systemic problems concerned territorial jurisdiction in cases involving internally displaced persons. In practice, after the beginning of the full-scale invasion, situations emerged where a person was formally registered in one region, actually residing in another, while their property could remain in occupied territory. This created substantial difficulties in determining which commercial court had jurisdiction over insolvency applications.

Judicial practice gradually developed an approach under which the decisive factor became the actual place of residence indicated in the IDP registration certificate. In case No. 913/362/24, the Commercial Court of the Luhansk Region explicitly stated that insolvency cases involving IDPs must be heard under the rules of exclusive jurisdiction based on the actual residence address specified in the IDP certificate. Similar approaches were applied when transferring cases between courts of Odesa, Chernivtsi and the city of Kyiv.

In effect, the judicial system has begun recognizing that during wartime the IDP certificate itself becomes the key procedural document for determining proper jurisdiction.

Debtors Abroad: A New Challenge for Bankruptcy Procedures

A separate category now consists of individuals who have left Ukraine.

The problem lies not only in the difficulty of ensuring their participation in court hearings. The Supreme Court effectively acknowledges a much deeper issue — the impossibility of fully controlling the debtor’s financial and property status.

Commercial court practice already highlights several practical difficulties:

• the insolvency trustee cannot conduct a full inventory of assets without the debtor’s participation;
• courts are effectively forced to rely on information about foreign income disclosed by the debtor himself;
• there is a significant risk of concealing foreign income or assets.

In case No. 924/819/24, the Commercial Court of the Khmelnytskyi Region specifically requested evidence of the debtor’s income earned while residing in Poland.

This category of cases demonstrates that the classic financial control mechanisms established by the Bankruptcy Procedures Code have proven insufficiently adapted to the realities of mass migration during wartime.

Military Personnel and the Right to Insolvency Protection

A separate branch of judicial practice concerns military personnel. Courts have effectively begun developing a special approach toward assessing the participation of mobilized individuals in insolvency proceedings. The reason is obvious — a debtor may physically be unable to participate in court hearings due to military service.

In case No. 911/2634/22, the Commercial Court of the Kyiv Region opened insolvency proceedings against a mobilized serviceman who explained to the court via video communication that he was stationed at a military unit and could not personally appear before the court. The court took into account his explanations, the participation of his legal representative, and his written submissions. This approach is particularly important because it demonstrates a departure from purely formal procedural standards.

At the same time, judicial practice remains inconsistent. In its ruling dated 13 August 2025 in case No. 903/901/24, the Commercial Cassation Court within the Supreme Court upheld the dismissal of an insolvency application due to the debtor’s repeated failure to appear before the court.

The debtor failed to provide sufficient explanations and evidence, while the representative could not answer key questions regarding income and liabilities. The Court directly emphasized that in certain categories of insolvency cases the debtor’s personal participation is critically important for verifying the reality of insolvency. Therefore, the mere existence of legal representation does not automatically guarantee that insolvency proceedings may continue without the debtor’s direct involvement.

Good Faith Has Become the Central Criterion

Virtually all modern Supreme Court practice concerning personal insolvency is built around the principle of the debtor’s good faith. In its decision of 26 May 2022 in case No. 903/806/20, the Supreme Court formulated one of the key legal conclusions governing personal bankruptcy proceedings: only a good-faith debtor who does not conceal assets, does not artificially create insolvency, and genuinely seeks debt restructuring may benefit from debt relief.

For this reason, courts are increasingly scrutinizing:

• asset declarations;
• income of family members;
• sources of funds;
• the authenticity of creditor claims;
• the debtor’s conduct throughout the proceedings.

This approach becomes especially significant in cases involving IDPs and military personnel, where courts must balance creditor protection against the practical impossibility of applying standard verification procedures during wartime.

Legislation Is Still Lagging Behind Wartime Reality

Current judicial practice effectively acknowledges that the Ukrainian Bankruptcy Procedures Code does not adequately address many wartime realities. Among the major unresolved issues are:

• the absence of special regulation for IDPs;
• procedural specifics concerning military personnel;
• property located in occupied territories;
• destroyed or damaged property;
• foreign assets;
• property requisitioned for military purposes.

In practice, courts are now forced to compensate for legislative gaps by developing temporary mechanisms for adapting insolvency procedures to wartime conditions. For this reason, the coming years are likely to become a period of formation of an entirely new model of personal bankruptcy in Ukraine — one that fully takes into account wartime factors, mass displacement, mobilization, and large-scale loss of property.