How Bankruptcy Law Works in Kazakhstan

Personal bankruptcy is the formally recognised inability to pay debts. After a person goes through the bankruptcy procedure, he/she can feel free to ignore creditors, debt collection agencies. Upon the expiry of a certain period of time, his/her credit history will clear up.

The bankruptcy law helps restore the solvency of people, namely those who literally have run into debt and cannot repay them. There may be various reasons of why a person becomes unable to repay credits – financial condition deteriorates due to the economic crisis, loss of a job, health issues when a person cannot work as much as he/she used to. Even low financial literacy can become the reason: if a person fails to estimate his/her financial strength when getting a loan with high interest rate. People in such situation usually accumulate even more debt in utilities and taxes. Delays in payments result in penalties, forfeit and fines. It compounds the situation by increasing the debt of a person who is already in debt. Therefore, the state has decided to help such people with the bankruptcy procedure.

The law provides for three types of procedures:

Recovery of solvency,

In-court bankruptcy,

Out-of-court bankruptcy.

The latter procedure is designed for individuals whose debt is relatively small, yet with no resources to repay the debt. It also prevents courts from excessive workload. Only the debtor may apply for either of the three procedures.

Individuals whose debt is under 1,600 minimum calculation indices (MCI) may apply for out-of-court bankruptcy. In 2023, it amounted to 5 million 520 thousand tenge, or 11,989 dollars. There is a set of conditions:

The individual does not have property (including joint property);

The debt has not been repaid for 12 months in a row, or for 6 months in a row if the debtor receives targeted subsistence allowance;

The debtor has applied to a bank or microcredit organisation (MCO) in an attempt to solve the problem. The settlement procedure needs to be held within 18 months maximum from the date of overdue debt occurrence;

The debtor has not undergone the in-court or out-of-court bankruptcy within the last seven years.

The debtor also may apply if the period of default on obligations is more than 5 years.

The debtor applies for out-of-court bankruptcy via the State Corporation “Government for citizens” and submits a pack of documents:

A list of creditors with amounts of debts and addresses of creditors;

A copy of a document that proves that the debtor had tried to reach a deal with the bank (MCO) on the settlement of the overdue debt.

The documents may be the bank’s (MCO’s) replies on refusal to amend the terms and conditions of the contract. If the bank (MCO) fails to provide a document proving that the debtor has held procedures to settle outstanding obligations, it should provide a copy of the debtor’s application to the bank (MCO) or confirmation of the e-application.

If the documents are in good order, information about the debtor shall appear on the e-government’s portal within 15 business days.

Once it happens, creditors specified in the application for bankruptcy may not demand the debt from the person, charge money from his/her accounts, charge a penalty, fine, and compensations from all types of the debt. Besides, any debt repayment judgements awarded by courts shall be suspended.

A bankrupt is banned from taking credits (except microcredits in pawnshops) for five years. He/she may not provide pledge, guarantee and bail as collateral for bank credits and microcredits for five years.

If debts exceed 1,600 MCIs (in 2023, it was more than 5 million 520 thousand tenge, or 11,989 dollars), one should file one of two applications to court – to recover solvency or to apply for the in-court bankruptcy.

In this case, the debtor:

Has not repaid debts for 12 months; Has tried to settle the problem with the bank or MCO within the period not exceeding 18 months from the date of overdue debt occurrence;

Has not gone through the in-court or out-of-court bankruptcy in the last seven years.

If the debtor’s debt does not exceed the cost of his/her property, he/she may apply to court to recover solvency.

The debtor applies to court at his/her place of residence either in writing or in electronic form for the procedure of solvency recovery or in-court bankruptcy. The application must be accompanied by the following documents:

A list of all creditors and debtors (specifying the amounts of debts and dates of debt occurrence, domicile or location, and e-mail and contact numbers, if any);

A list of debtor’s property including a valuation report (drawn up no later than six months before the application date);

A list of civil and/or other obligations, including the ones that are secured with the debtor’s property, in the last three years before the date of application for solvency recovery or in-court bankruptcy;

A copy of a document proving the fact of the debtor’s taking measures to settle the debt under the bank loan agreement and (or) microcredit agreement.

The court shall issue an order on initiation of proceedings within 10 business days after the date of application receipt. Then, a receiver shall be appointed for the debtor.  The debtor must allow the receiver to draw up a list of all of his/her property.

The maturity date indicated on the application shall be deemed expired on the day of initiation of proceedings by court. Creditors may not demand debt from the debtor, or impose penalty, fines and compensations, charge money from his/her bank accounts, seize property from the debtor, and all previously issued court decisions regarding the debtor’s property shall be suspended. Moreover, any decisions issued by state bodies, other bodies and organisations requiring the debtor to repay debts shall be suspended.

The person may not:

Take new credits (except for microcredits from pawnshops);

Leave Kazakhstan (except for reasons of treatment, accompaniment of an immediate relative for treatment, funeral of an immediate relative outside of Kazakhstan).

The receiver shall take stock of the debtor’s property in the presence of the debtor. Then, the receiver shall draw up a report that contains one of three options:

The debtor is insolvent and there are reasons for applying the procedure of solvency recovery;

The debtor is insolvent and there are reasons for applying the procedure of in-court bankruptcy;

The debtor is solvent and there are no reasons for applying the procedure of solvency recovery or in-court bankruptcy.

The report shall be submitted to court.

The receiver is paid out of the debtor’s money. The receiver’s monthly fee is one minimum wage rate (in 2023, it was 70 thousand tenge, or 152 dollars).

The receiver shall submit a plan on how to recover the debtor’s solvency. The plan may include, e.g., the sale of a part of the debtor’s property; lease of property, exchange of housing (vehicle) for housing (vehicle) of a lesser cost; the debtor’s employment. The draft plan shall be agreed with creditors, then the plan shall be approved by court.

After the plan is carried out, the debtor shall apply to court for completion of the procedure. The court shall take a decision within 10 business days that contains instructions on the completion of the procedure and stating that the debtor has recovered his/her solvency.

If the court finds that in-court bankruptcy procedure should be held, the receiver shall sell the debtor’s property and make settlements with the creditors. The procedure shall take six months (the term may be prolonged for another six months). The property should be sold at the cost not lower than 75 per cent of the assessed value.

After settlement with creditors, the receiver shall submit the final report to court. The court has one month to approve the report and make decision on completion of the in-court bankruptcy procedure.

The only housing will not be sold if it is not the security of obligations, i.e. it is not the collateral, earnest payment, etc.

The law does not specify where the person would live if the only housing is the security of obligations. The government probably would need to draft another document to settle this issue.

A bankrupt may not take credits (except for microcredits from pawnshops), give security and guarantee for five years.

No, the bankrupt will still have the following obligations:

Pay child maintenance; Compensate for harm to life or health of a person;

Obligations arising under the law “On the National Bank” (the law does not specify the obligations – Editor);

Indemnify against damage caused by a criminal offence, as well as make payments to the treasury levied by court order.