The first personal bankruptcy case in the country began and ended
Author: Zhou Qunfeng
Published in the 2023nd issue of China Newsweek magazine on July 7, 31
On June 6, Cao Qixuan, president of the Shenzhen Bankruptcy Court of the Shenzhen Intermediate People's Court, handed Liang a civil ruling.
"A civil ruling is served on you today to make a ruling in accordance with the provisions of the Shenzhen Special Economic Zone Personal Bankruptcy Regulations (hereinafter referred to as the "Regulations") to relieve you of your liability for the settlement of unliquidated debts of creditors within the scope of the debts specified in the reorganization plan." Cao Qixuan said.
This is the first personal bankruptcy case in China and the first personal bankruptcy reorganization case that has been completed. Cao Qixuan recalled that when he first interviewed Liang Wenjin in court in April 2021, Liang Wenjin "lowered his head, his face was sallow, and there was no smile", this time he was "a little fatter and very spirited".
Liang Wenjin, 37, is an engineer who was saddled with 2020,76 yuan in debt after failing to start a business in 2021 and was repeatedly called for debts. On March 3, 1, the "Regulations", known as the protection of "honest and unfortunate debtors", came into effect, and nine days later, he applied to the Shenzhen Intermediate People's Court to ease the economic pressure through "personal bankruptcy".
According to the personal bankruptcy reorganization plan reached between Liang Wenjin and his creditors, he only needs to repay the principal of the loan, which can be repaid in installments within 3 years, and the creditors can waive the remaining interest and late payment fees. In the end, he completed the plan 15 months ahead of schedule.
Li Shuguang, director of the Center for Bankruptcy Law and Enterprise Restructuring at China University of Political Science and Law, who has participated in the drafting of legislation such as the Enterprise Bankruptcy Law and the State-owned Assets Law, told China Newsweek that in China's traditional culture, there are still misunderstandings about bankruptcy, especially personal bankruptcy, and many people "talk about breaking colors" and even stigmatizing personal bankruptcy.
From being called for debts to "being the first to solve a case"
From starting a business to being riddled with debt, it was only a year and a half. In June 2018, Liang Wenjin, who had been working hard in Shenzhen for 6 years, did not want to live a lifelong life as a worker and planned to start a business. He studied industrial design and has previously worked in the consumer electronics category and holds two design-related patents.
In March 2019, he and his former colleagues established a Shenzhen technology co., LTD., hoping to develop Bluetooth headset products with innovative patents. Five months later, he went to Hong Kong with his products, but few customers. While perfecting the product, he increased the development of forehead temperature guns in 3, but the market response was still not satisfactory.
Liang Wenjin is a typical technical thinking, he thinks that the product design is enough, and does not pay much attention to the follow-up sales and promotion work. Coupled with the impact of the epidemic, the company is gradually struggling. In September 2020, the company that had been established only one and a half years ago collapsed, and Liang Wenjin was saddled with debt, which gradually snowballed.
Liang Wenjin told China Newsweek that in order to solve the company's operating capital problem, he has borrowed money from financial institutions, applied for eight credit cards, and borrowed money from relatives and friends. After the company collapsed, relatives and friends forgave him, but the pressure from financial institutions immediately came. Some people who claimed to represent a financial institution called him to collect debts, and "almost every day or two, I would receive a bill, which was very stressful."
In October 2020, Liang Wenjin found a new job, still in the consumer electronics industry, where he served as the company's product structure design engineer.
After work, debt collection calls continue to flow, sometimes seven or eight a day. He did not dare to answer in the office, but he was afraid that if he did not answer, these people would find the unit and be known by the leader, resulting in the loss of work.
Two months later, he had an opportunity. On March 2, 2021, the Regulations came into force. It stipulates that if a natural person who resides in the Shenzhen Special Economic Zone and has participated in Shenzhen social insurance for three consecutive years loses the ability to pay off debts due to production, operation or living consumption, or whose assets are insufficient to pay off all his debts, he may undergo bankruptcy liquidation, reorganization or reconciliation in accordance with these Regulations.
Nine days later, Liang Wenjin applied to the Shenzhen Intermediate Court to try to alleviate the crisis through "personal bankruptcy". Because personal bankruptcy is still a new thing, Liang Wenjin cannot distinguish the difference between bankruptcy liquidation, reorganization and reconciliation mentioned in the Regulations, and he applied for bankruptcy liquidation.
The bankruptcy court judge learned that Liang Wenjin's failure to start a business soon found a job, indicating that he was employable. The monthly salary is about 2,<> yuan, and the income is relatively stable. At the same time, he also has a strong willingness to repay debts. Therefore, the judge told him that he was actually more suitable for bankruptcy reorganization proceedings than bankruptcy liquidation.
Li Shuguang told China Newsweek that choosing to go bankrupt and liquidation means that after being ruled by the court, all of its debts may be "written off", which is often a move that debtors are forced to take when they are cornered and do not see a turnaround for a long time in the future. Bankruptcy liquidation has a great impact on personal credit, and many institutions and individuals may no longer be willing to cooperate with it.
The debtor of bankruptcy reorganization, although it also has heavy debt pressure, can see a turnaround in a relatively short period of time, and the debtor can repay part of the debt on a monthly basis according to the plan within a certain period of time after the court approves its reorganization plan. Li Shuguang said that in this case, if Liang Wenjin still chooses bankruptcy and liquidation on the premise of having a stable income, others may suspect that he is evading debts.
On April 2021, 4, Liang Wenjin submitted the Application for Change of Personal Bankruptcy Type to the court, changing the application for personal bankruptcy liquidation to an application for reorganization. The court found that as of the date of the bankruptcy application, his total debts were about 27,76 yuan, he only had 36120,4719 yuan in deposits, 9,<>.<> yuan in housing provident fund, no large property such as real estate and vehicles, and a fixed monthly income.
On May 5, the Shenzhen Intermediate People's Court ruled to accept Liang Wenjin's personal bankruptcy reorganization case and appointed Guangdong Jingtian Law Firm as Liang Wenjin's bankruptcy administrator. The administrator, that is, the intermediary institution responsible for handling bankruptcy affairs such as liquidating the debtor's claims and debts, taking over, investigating, disposing of, distributing the debtor's property, and supervising the implementation of the reorganization plan under the guidance and supervision of the court in bankruptcy cases.
Jingtian Law Firm is one of the institutional administrators on the list of bankruptcy case administrators of the Guangdong Provincial Higher People's Court, and Du Yanzhi, a partner and lawyer of the firm, is the person in charge of the administrator. Du Yanzhi told China Newsweek that personal bankruptcy is no less difficult than corporate bankruptcy. As an economic entity, an enterprise has a strict financial system and auditing procedures after industrial and commercial registration, and the basic situation can be seen and felt. The financial situation of natural persons is not so transparent, and the "error" in the declaration of personal assets is not easy to detect. Moreover, in addition to commercial law relationships, personal bankruptcy also involves many civil law relationships that need to be dealt with, such as family division, divorce and marriage, inheritance, etc., which increases the difficulty of property investigation and handling.
In May 2021, after taking over the case, she and her colleagues visited Liang Wenjin's home to verify the relevant financial situation. At that time, the Liang family was "very depressed": "That day, when we went to his house, Liang Wenjin's mother and wife did not say a word from beginning to end, and their faces were full of sadness. Liang Wenjin was also in a very low mood. His children who are in elementary school are very sensible and offered to come downstairs to pick us up."
Liu Shengjun, the lead lawyer of the case, was one of the individual administrators in Shenzhen in the "Guangdong Province Bankruptcy Case Administrator List" and participated in the whole process of handling the case. He recalled to China Newsweek that at that time, Liang Wenjin's family of five rented a 35-square-meter house in Longhua District. He leaves early and returns late every day, commuting by bus for an hour.
The administrator visited the door several times to verify the bank statements of Liang Wenjin and his wife, the housing lease contract, and the tuition and miscellaneous bills of the two children. After a thorough investigation, they found that the results of the investigation were consistent with Liang's description when he filed for personal bankruptcy.
According to the Regulations, interest accrual will cease on the date when the court rules to accept the bankruptcy application, but the Decision on Limiting Consumption Behavior must also be made to the debtor.
According to the regulations, except for the needs of life and work and with the consent of the court, Liang Wenjin shall not engage in the following consumption behaviors, including choosing the first class or first class of the aircraft, the soft sleeper of the train, the second class or above of the ship, the first class or above of the high-speed rail and other EMU trains when taking transportation; Consumption in nightclubs, golf courses, and three-star hotels, hotels and other places; For children to attend high-fee private schools, etc.
Liang Wenjin's situation was clear, and the administrator shifted his focus to creditors.
In a bankruptcy case, the administrator assists the debtor in preparing a debt repayment plan, i.e. a draft reorganization plan, which needs to be submitted to the creditors' meeting for voting.
On June 2021, 6, the Shenzhen Intermediate Court organized the first creditors' meeting for Liang Wenjin to solve the case. At the meeting, the administrator interpreted Liang Wenjin's draft reorganization plan and analyzed his debt repayment plan and solvency. If Liang Wenjin chooses the bankruptcy liquidation procedure, the creditors' compensation rate is about 22%, and if the bankruptcy reorganization procedure is chosen, the creditor's compensation rate is about 31%. Obviously, the reorganization procedure is more beneficial to creditors and is a direct manifestation of the debtor's good faith.
In addition, according to the "Regulations", he can ask to pay off his debts within five years, but Liang Wenjin is determined to pay off the arrears and get rid of it as soon as possible, and he proposes to pay off all the principal of the loan within three years.
Cao Qixuan told China Newsweek that in the first month of the implementation of the regulations, the Shenzhen Intermediate Court received 263 applications for solving cases, most of the applicants submitted incomplete materials, and there were many omissions in the declared information. "I interviewed and counseled all 12 applicants, and Liang Wenjin was one of them. After interviews, the court accepted five bankruptcy petitions. Of these five cases, only the Leung Wenjin case is progressing smoothly. He and his family actively cooperated with the Court and the administrator's investigation, in particular his proposed restructuring plan to pay off the principal within three years. ”
According to the restructuring plan, Liang Wenjin will repay the principal of the loan (about 67,5 yuan) within three years, and all interest (about 8,5 yuan) will be waived. If the reorganization plan cannot be implemented, the creditor is legally entitled to recover from it all the outstanding principal and interest of the loan, and the interest after the bankruptcy application is filed will continue to be calculated.
According to the Regulations, the draft personal bankruptcy reorganization plan must be voted on by a meeting of creditors, and a majority of the creditors present at the meeting agree to the draft reorganization plan, and the amount of claims represented by them accounts for more than two-thirds of the total claims of the group, that is, the draft reorganization plan is approved. The draft reorganization plan adopted by the creditors' meeting must also be submitted to the court for examination and approval before it can take effect.
Liu Shengjun said that when the first creditors' meeting was held, the claims of 10 creditors had been examined and confirmed, and 9 creditors attended the meeting, of which 8 creditors voted in favor of the draft reorganization plan, representing more than 90% of the creditors' rights. "Because the draft reorganization plan was approved by a single vote, only one creditors' meeting was held in the case."
He told China Newsweek that after the meeting, the creditor who did not vote in favor also volunteered. In fact, it can also be understood as the unanimous adoption of the draft reorganization plan. Subsequently, a total of five creditors filed additional claims with the administrator. It is understood that the 5 creditors in the case are all financial institutions.
Liu Shengjun said that Shenzhen's personal bankruptcy regulations are the first in China, and as the first personal bankruptcy case in China, creditors still need to understand the digestion process. At the beginning, some creditors were hesitant to forgive the debt, but through the analysis of the debtor's solvency, after many exchanges and exchanges, the creditors were able to gradually understand that the debt repayment plan listed in the draft reorganization plan was the most favorable option for creditors.
Du Yanzhi said that among the creditors in the case, in addition to local banks in Shenzhen, banks in other provinces such as Sichuan, Shandong and Chongqing were also involved. When she contacted a bank in a province, a person in charge of the bank said that the city where the bank is located did not have personal bankruptcy regulations and was not subject to Shenzhen's "regulations", "They didn't understand, so I called many times to communicate, and slowly their attitude changed, and later they felt that this plan could better protect the rights and interests of creditors, and began to cooperate."
However, Li Shuguang said that in a bankruptcy case, if the administrator presents all the information to prove that the debtor meets the conditions for bankruptcy, the creditor still does not agree to the debtor entering the bankruptcy procedure, which will in turn affect the creditor's creditworthiness. In this case, the court may compel the ruling.
On July 2021, 7, the Shenzhen Intermediate People's Court issued an announcement approving Liang Wenjin's personal bankruptcy reorganization plan. According to the reorganization plan, in the next three years, Liang Wenjin and his wife will use other income to repay debts in addition to retaining basic living expenses.
Liang Wenjin's family of five, mother, wife and two children, need to spend 1900,2500 yuan per month on rent and utilities, 700,1300 yuan in family living expenses, <> yuan in children's living expenses, and <>,<> yuan in personal living expenses. In addition, Liang Wenjin is not in good health and needs to spend a large amount of medical expenses.
According to the Ordinance, if Leung does not implement the reorganization plan, creditors also have the right to apply to the court for bankruptcy liquidation. Cao Qixuan said, "The purpose of breaking the system is to rescue honest and unfortunate debtors, and will not allow debtors to deliberately fail to implement the reorganization plan approved by the court and let him maliciously delay the repayment of debts." In the event of non-implementation or inability to execute the reorganization plan, if the reorganization plan cannot be enforced, the court will rule to terminate the enforcement. ”
However, the Regulations also take into account the special circumstances in which the debtor may not be able to repay the money on time due to objective reasons. If Liang Wenjin is unable to repay the debt in time because the company pays three months' salary late, the court will also allow him to postpone the debt for three months, but he must compensate the creditor for the corresponding losses.
After Liang Wenjin's restructuring plan was passed, his spending restrictions were also lifted. Cao Qixuan said, "The Regulations stipulate that after the court approves the reorganization plan in accordance with the law, it should lift the restrictions on his consumption behavior, which is to facilitate the debtor's work, smoothly implement the reorganization plan, and achieve economic regeneration as soon as possible. ”
Bi Yang, the authorized agent of the Shenzhen branch of China Guangfa Bank Co., Ltd., attended the creditors' meeting in the Liang Wenjin case. Bi Yang told China Newsweek that through the court's investigation into Liang's bankruptcy conditions, China Guangfa Bank also considered Liang Wenjin to be an "honest and unfortunate" debtor. Based on this, banks are willing to give them a chance to (economic rebirth).
She also said that in cases involving overdue credit cards, even if the bank sues for enforcement in accordance with the court's procedures, the probability of final settlement is very small. From the perspective of bad credit card litigation cases, many credit card holders will be in a state of loss after overdue, which makes banks more passive. Therefore, bankruptcy reorganization is a win-win for both creditors and debtors.
Get out of the quagmire 15 months early
From July 2021, when the case entered the implementation stage of the reorganization plan, Liang Wenjin lived a life of repayment on time. Every month, he must fill in the income, expenses, debt repayment, etc. on the "iShenzhen" App, and the Shenzhen Municipal Bankruptcy Administration will guide and supervise, and the administrator will verify it every month.
Liang Wenjin said that after entering the repayment plan, his psychological pressure suddenly became much smaller, and the debt collection calls were no longer bombarded in turn, and his days finally came to an end again.
Due to the significant increase in the unit's salary, on April 2023, 4, he paid off all the principal of the debt, a full 14 months ahead of the original plan. At that time, he had less than 15 yuan left in his account, but because he was no longer under the pressure of debt, he had an indescribable feeling.
On June 6, the Shenzhen Intermediate Court ruled to waive his remaining outstanding interest and late payment fees in accordance with the law. At this point, the "first personal bankruptcy case in the country" came to an end. From all angles, the case is a win-win situation.
According to the Ordinance, interest accrues on claims after the court accepts the debtor's bankruptcy application. Previously, Liang Wenjin had incurred about 8,5 yuan in interest and late payment fees due to liabilities, and after the implementation of the reorganization plan, the court ruled to exempt this part of the arrears from the liability to settle the debt. Liu Shengjun calculated an account for him, and if he did not stop accruing interest, Liang Wenjin would now generate more than 30,<> yuan in interest and late fees. If there is no broken system, his debts will become heavier and heavier, which will not only make it difficult for individuals to turn over, but also drag down the entire family.
Liang Wenjin also lamented that without the "Regulations", I am afraid it would be difficult for him to get out of the quagmire of debt. "In the future, if I have the opportunity, I will start a business. After all, after these encounters, I have become more mature and have accumulated more work experience. Even if it fails again, it will not leave the family in trouble. ”
From the perspective of creditors, Zhang Rui, a judge at the Shenzhen Bankruptcy Court, told China Newsweek that Liang Wenjin's case also gave creditors confidence, after all, they achieved such a high debt recovery rate in such a short period of time. In the future, creditors should give greater support to personal bankruptcy reorganization cases.
Cao Qixuan said that in a reorganization case, if the debtor is willing to repay all the principal of the loan, the draft reorganization plan can be voted on by the creditors' meeting relatively quickly. At present, the Shenzhen Intermediate Court has ruled to approve the reorganization plan, and the debtor's draft reorganization plan is to pay off 100% of the loan principal and repay the debt in installments.
In June 2023, the Shenzhen Bankruptcy Court promulgated the Work Guidelines on the Trial of Individual Bankruptcy Reorganization Cases. It mentioned that in a personal bankruptcy reorganization case, if the debtor has settled its debts in accordance with the reorganization plan and the court allows the release of its unliquidated debts, upon the application of the debtor, the court may issue a certificate of good faith performance to the credit investigation management department to promote the debtor's credit repair.
This means that Liang's personal credit can be repaired. However, Cao Qixuan said that during the pilot period in Shenzhen, the provisions of the credit investigation management department on personal bankruptcy credit repair were still blank. After the implementation of the reorganization plan and the ruling of exemption, the court still needs to promote this work, "requiring the support of credit bureaus and creditors."
In addition, judging from Liang Wenjin and more applications received by the court, bankruptcy risk monitoring and front-end debt relief work are still missing. Liang Wenjin has successively applied for eight credit cards, "borrowing new to pay off the old" to increase the debt hole. In fact, he was in financial distress for some time before reaching the statutory bankruptcy conditions. The court can only provide relief measures after it files for bankruptcy, and it is difficult to actively influence it in advance.
Cao Qixuan introduced that many countries have established bankruptcy risk monitoring mechanisms led by bankruptcy administrative agencies, and carried out debt relief work in advance. For example, France has established an independent transitional debt committee, which is responsible for screening debtors in distress, recording their debt settlement applications, and conducting out-of-court debt consultation mechanisms before bankruptcy proceedings to promote a win-win situation for creditors, debtors and other parties.
At present, the Shenzhen Bankruptcy Administration is still in the pilot exploration stage, and has not yet carried out bankruptcy risk monitoring and front-end debt relief work. "This work makes even more sense when the personal bankruptcy system is rolled out at the national level. It is recommended that relevant departments fully investigate and actively promote reform exploration. Cao Qixuan said.
However, the completion of the implementation of the case is still of great significance. Liu Shengjun said that personal bankruptcy legislation transmits the concept of good faith of natural persons, and a "honest and unfortunate" debtor needs a system to give them a respite after falling into trouble. The broken system opened up such a path for them and set up a railing, and the debtor must be careful not to climb over the railing, actively complete this road, and finally complete the transformation and rebirth.
Liu Shengjun said that every natural person is a cell of society, and if they are in debt due to certain encounters, the society needs to give them a way to solve it, otherwise it will put these people in a vicious circle for a long time, but increase the cost of social governance.
He believes that when these "honest and unfortunate" debtors return to normal life, social individuals are saved and activated, which greatly reduces the governance costs of the entire society in the long run. This is the embodiment of the tolerance of the government, the judiciary, creditors, etc. towards their entrepreneurial failures, to some extent, it improves the business environment and provides them with the guarantee of "after-sales service" in the system.
Cao Qixuan also said that Shenzhen's private economy is developed, there are many small and micro enterprises and self-employed, and there are successes and failures in entrepreneurship. Liang Wenjin's case can make all sectors of society fully understand this system. The court ruled that the release of part of the debtor's liabilities was not unconditional and was based on the debtor's "good faith" and whether the creditor's understanding had been obtained through efforts to pay off the debt.
"It is hoped that this system can be continuously improved, so that debtors in need can deal with debt problems in a timely manner through this system, free themselves from difficulties, and let the system play its maximum value." Cao Qixuan said.
China Newsweek, Issue 2023, 29
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