Personal Insolvency in Ukraine: Supreme Court Case Law

The Commercial Cassation Court within the Supreme Court of Ukraine has published a systematic review of case law addressing the abuse of rights in bankruptcy and insolvency proceedings. The review covers legal positions developed between 2018 and June 2026. Particular attention is given to personal insolvency proceedings, where the possibility of debt discharge directly depends on the debtor's good faith, full disclosure of their financial circumstances, and the authenticity of creditors' claims.

Debtor Good Faith Is Assessed Before Insolvency Proceedings Begin

An individual's application for insolvency does not automatically guarantee that proceedings will be opened. The commercial court must examine not only whether the application formally complies with the Bankruptcy Procedures Code of Ukraine but also whether the alleged debts are sufficiently substantiated and whether the debtor has acted in good faith.

This approach is reflected in the Supreme Court's judgment of 20 May 2026 in case No. 917/1999/25.

The debtor applied to the court, citing outstanding obligations to twenty creditors, a lack of assets available to repay the debts, and an inability to meet credit obligations. However, the courts found that the applicant had failed to provide sufficient evidence of the existence and amount of the debts, substantiate their income, or fully disclose information about family members' financial circumstances. In addition, some of the borrowed funds had been used for gambling.

The Supreme Court upheld the refusal to open insolvency proceedings, emphasizing that credit bureau reports and bank statements alone do not replace documents establishing the creation of obligations, the receipt of funds, and repayment terms. The Court also stressed the need for a realistic debt restructuring plan. Without evidence of actual or projected income, a court cannot properly assess the prospects of restoring the debtor's solvency.

Accordingly, personal insolvency proceedings are intended for individuals who genuinely require financial rehabilitation, rather than those seeking the benefits of the procedure without adequately substantiating their financial position.

The Supreme Court expressed a similar position in its judgment of 16 June 2026 in case No. 917/2334/25.

Concealing Assets May Result in Termination of Proceedings

An individual's good faith is relevant not only when insolvency proceedings are opened but throughout the entire process. A notable example is the Commercial Cassation Court's judgment of 3 December 2024 in case No. 916/197/23. In that case, the debtor failed to disclose all her assets in the required declarations, including vehicles and corporate interests in several companies. She also failed to provide adequate explanations regarding the source of funds used to pay her lawyers and the insolvency practitioner.

Even after submitting amended declarations, some information remained undisclosed. The Supreme Court confirmed that a debtor must cooperate with the restructuring administrator, creditors, and the court, providing complete and accurate information about assets and income. Importantly, merely correcting declarations does not necessarily remedy the consequences of earlier bad-faith conduct. In the circumstances of the case, the Commercial Cassation Court upheld the termination of proceedings under Article 123(7)(1) of the Bankruptcy Procedures Code of Ukraine.

Insolvency Proceedings Must Not Become a Mechanism for Avoiding Debt Repayment

One of the Supreme Court's central conclusions concerns the need to maintain a fair balance between the interests of debtors and creditors. In its judgment of 13 May 2025 in case No. 904/3275/23, the Commercial Cassation Court considered a situation in which a debtor proposed a restructuring plan that effectively provided for the discharge of most outstanding debts without genuine measures to repay them.

The debtor had failed to explain how the borrowed funds had been used, disclose movements of significant assets, or substantiate the sources of future income. The Court emphasized that a good-faith debtor must demonstrate a genuine willingness to reach a compromise with creditors and take reasonable steps, within their actual financial capacity, to satisfy creditor claims.

A restructuring plan must therefore contain economically justified mechanisms for meeting obligations rather than merely a formal proposal to write off debts. The Supreme Court also highlighted the active role of commercial courts in approving restructuring plans. Even where a plan has been agreed upon by the debtor and creditors, the court remains obliged to verify its compliance with statutory requirements.

Where any of the grounds specified in Article 126(8) of the Bankruptcy Procedures Code apply, the court cannot approve the plan solely because the participants have endorsed it. In the case under consideration, the Supreme Court upheld the termination of proceedings due to the debtor's established lack of good faith.

However, this approach does not prohibit debt discharge as a possible outcome of lawful insolvency proceedings. The decisive question is whether the procedure is being used for its intended purpose and whether the debtor has fulfilled their legal obligations.

A Promissory Receipt Does Not Always Establish a Genuine Creditor Claim

The principle of good faith applies not only to debtors but also to creditors submitting claims in insolvency proceedings.

In its judgment of 1 March 2023 in case No. 902/221/22, the Supreme Court addressed the evidentiary requirements for claims based on a loan agreement and a written acknowledgment of debt. The creditor submitted a monetary claim against the debtor, but the courts identified a substantial discrepancy between the amount allegedly lent and the creditor's declared income over an extended period.

The applicant failed to provide evidence of alternative sources of funds or sufficient financial capacity to make the loan.

The Commercial Cassation Court emphasized that, in insolvency proceedings, courts must examine not only the formal existence of a loan agreement and a receipt but also whether the underlying monetary obligation genuinely arose. This is particularly important because recognizing one creditor's claim directly affects the rights of other creditors and the course of the entire insolvency procedure.

Where there are well-founded doubts about the authenticity of a debt, the creditor may be required to provide additional evidence, including information about the origin of funds, income, and financial circumstances. Furthermore, the presumption of validity of legal transactions under Article 204 of the Civil Code of Ukraine does not relieve a creditor of the obligation to substantiate their claim. The Supreme Court upheld the refusal to recognize the creditor's claim. Similar approaches appear in the Commercial Cassation Court's judgments of 13 May, 1 July, and 14 August 2025.

The consolidated case law of the Commercial Cassation Court demonstrates increasingly rigorous judicial scrutiny of the conduct of participants in personal insolvency proceedings.