Bankruptcy Is No Longer a Stigma: Why Personal Bankruptcies in Russia Are Growing at Record Rates

— Why do you think the number of personal bankruptcies in Russia is growing at such a pace?

— Growth in personal bankruptcies in 2025 has been driven by a confluence of several factors. First, there's an echo of the credit boom: borrowers who took out loans during the period of relatively low rates and frenzied demand in 2023–2024—before the Central Bank sharply raised rates—are now entering the bankruptcy process. The Bank of Russia's tight monetary policy and rising inflation have made servicing these debts impossible for hundreds of thousands of households.

Second, there's been increased accessibility of information about personal bankruptcy options and the relative simplicity of the process. Word of mouth works quite effectively here: people learn about successfully completed cases from acquaintances, and when you add aggressive advertising to the mix, it has normalized personal bankruptcy and removed the psychological barrier and fear of receiving 'bankrupt status.'

And finally, the assembly-line approach of lawyers specializing in this area has reduced the cost of the procedure for clients, making it accessible to the average debtor. Personal bankruptcy procedures are largely standardized, which makes it easy to calculate labor costs and renders the entire process predictable.

— What types of debts do people most often bring to the bankruptcy process, and how has the structure of these debts changed in recent years?

— In my view, the profile of debtors has changed. If previously it was mortgage holders and entrepreneurs filing for bankruptcy, now the bulk consists of unsecured consumer loans and microloans.

In 2025, the share of 'bad' debts in banks' portfolios being transferred to collection agencies reached 40%, which is a historic high. Traditionally, a significant portion consists of utility and tax debts, which get written off as a 'rider' to the main loans.

— Why is debt restructuring used less often than debt discharge?

— Debt restructuring is applied in less than 1% of cases. It's essentially a 'dead letter' provision of the law for two reasons. The first is economic: to have a plan approved, the debtor must have a high 'official' income that would allow them to pay off debts over 3–5 years. The typical bankrupt doesn't have such income.

The second is the position of creditors: it's more profitable for banks to write off debt through asset liquidation (or sell it to collection agencies) than to wait years for payments according to a minimal schedule that the debtor will most likely default on anyway.

At the same time, there's currently a shift in judicial practice: courts are beginning to apply the 'cram down' mechanism, where they can override creditors' decision to initiate asset liquidation instead of approving a restructuring plan, or conversely, approve a plan proposed by creditors without the debtor's consent. On one hand, this gives the debtor an opportunity to preserve assets, and on the other, it ensures protection of creditors' rights when they're unwilling to write off debts and want to receive at least something according to the proposed plan. I consider this trend positive and consistent with the principle of balancing the rights of both debtors and creditors.