Bankruptcy of Natural Persons
Bankruptcy is the insolvency procedure where the Court declares the debtor bankrupt, following the filing of a bankruptcy petition, either by the debtor or a creditor. Once the Court issues the bankruptcy order, the property of the bankrupt is passed on to the trustee and is distributed between the creditors.
Information related to Bankruptcies
Research in Bankruptcy Register
There is a bankruptcies and liquidations register uploaded on the website of the Insolvency Department, where research can be conducted by providing the name or the identity number of a bankrupt person. The registry contains information, such as bankruptcy date, name of trustee and the bankruptcy order’s publication date.
Filing a bankruptcy application
A bankruptcy petition can be submitted to the Court by a creditor or the debtor if the total amount of unsecured debts exceeds the amount of €15,000.
The applicant must provide a certificate that there are no ongoing debt restructuring procedures based on the Insolvency of Natural Persons (Personal Repayment Plans and Debt Relief Order) Law of 2015, which is issued by the Insolvency Department.
A fee of €500 is paid to the Insolvency Department and proof of payment is attached to the application.
If the application is made by the debtor, must be accompanied by an affidavit that he has made reasonable efforts to compromise with his creditors by submitting to them a Personal Repayment Plan, under the relevant law, to the extent that the debtor’s circumstances allow him to do such an arrangement. Moreover, the application must be served to all creditors.
Results of Bankruptcy
With the issuance of the Bankruptcy Order, the property of the bankrupt is passed on to the trustee and is distributed among creditors who submitted a debt verification form.
The Bankrupt is disqualified from being elected, or being:
(a) a member of the Legislative Council, (b) a mayor or a member of the Municipal Council,
(c) a member of a District Council, (d) a community leader, unless he secures his discharge with a certificate issued by the court, showing that his bankruptcy was not caused due to his own misconduct.
Moreover, a bankrupt cannot be a director in a company without a court permission, cannot sell or transfer his property or create more debts without informing his creditors about the bankruptcy order.
Lawsuits against bankrupt persons
No creditor shall file a lawsuit or other legal proceeding regarding a verifiable debt, except when there is a court’s permission. If a lawsuit or other legal proceeding was filed against the bankrupt before the issuance of the bankruptcy order, it continues without requiring a Court permission or amendment of the title of the lawsuit or other legal proceeding.
Encumbrance on bankrupt’s estate
After the issuance of the bankruptcy order, nobody will be entitled to register any encumbrances on the property of the bankrupt.
Obligations of the Bankrupt
The bankruptcy Order is published in the official gazette of the Republic of Cyprus and on the website of the Department of Insolvency and is additionally uploaded in the register of bankruptcies and liquidations.
It is also notified to the Tax Department, the Director of the Land Registry Department, the Social Insurance Services and, if the bankrupt is an employee, to his employer.
Notification of Bankruptcy Order
The bankruptcy Order is published in the official gazette of the Republic of Cyprus and on the website of the Department of Insolvency and is additionally uploaded in the register of bankruptcies and liquidations.
It is also notified to the Tax Department, the Director of the Land Registry Department, the Social Insurance Services and, if the bankrupt is an employee, to his employer.
Proof of Debt
Any creditor who wants to recover a debt from the bankrupt’s estate, must submit a proof of debt form to the trustee within 35 days of the date of publication of the bankruptcy order in the Official Gazette, with the right to apply for time extension.
The proof of debt form is filled in with the amount of debt as at the date of the Bankruptcy Order. Along must me attached any evidence of the debt and if there are guarantors, the form with their data.
Examination of the proof of debt form
The trustee examines every proof of debt and within 10 days accepts or rejects it in writing. If the proof of debt form is rejected the creditor is informed about the reasons of the rejection. The guarantor is informed by the creditor regarding the acceptance or rejection of the proof of debt form. The creditor as well as the guarantor in case they are not satisfied with the decision, can appeal to the Court within 21 days, from the day they became aware of the decision. In case anyone appeals to the court, the court can validate, annul or vary the decision of the trustee.
Valuation of property subject to encumbrances
The secured creditor, within 10 days from the publication of the bankruptcy order in the official gazette, must submit to the trustee and to guarantors if any, a valuation of the property on which there is a security, along with the form ΔΕΠΠ.
Within 10 days from the submission of the valuation, the trustee and the guarantor where applicable: a) either agree among themselves and with the creditor as to the market value of the property, and in such a case the valuation is binding for all parts,
- b) either appoint an independent valuator or
- c) ask the Insolvency Department to appoint an independent valuator.
The appointed independent valuator determines, within ten days from his appointment, the value of the property subject to security, and the valuation is binding for all parts.
Bankrupt’s property not distributed to creditors
The bankrupt has the right to own the following property:
Books, tools and other objects or equipment necessary for his business, of total value up to €6,000.
A vehicle worth up to €3,000. If the bankrupt or a dependent person is a person with a disability, the value of their vehicle may be higher.
Household appliances necessary to maintain a satisfactory standard of living for the bankrupt and his dependents.
When the bankrupt or his dependents are attending primary, secondary or higher education courses, the books, materials and other equipment that are reasonably necessary.
Payment of dividend to creditors
The bankrupt’s property is distributed to the creditors after the deduction of actual costs, the fees of the Insolvency Department and the expenses made by the applicant creditor. Privileged debts are paid firstly and then if there is sufficient amount, follows the payment of unsecured debts in the same proportion.
Automatic discharge from bankruptcy
A bankrupt person can automatically be discharged from bankruptcy after 3 years from the bankruptcy order, if he has submitted the statement of affairs and the preliminary report to to the trustee at least a year before the discharge date. In case of a discharge, the undistributed part of the bankruptcy estate remains with the trustee for the benefit of his creditors.
The automatic discharge results to full discharge of the bankrupt’s verifiable debts (with the exception of the debts referred in Article 27A (8) of the Bankruptcy Law Chapter 5), provided that the person acts in good faith and cooperates fully, either with the trustee, for the disposal and distribution of the bankruptcy estate.
A discharge confirmation may be requested from the Insolvency Department.
Property acquired after automatic discharge
Property acquired after the bankrupt’s discharge is not considered a bankruptcy property and is not distributed to creditors. But if any property arose during the bankruptcy regardless of whether it was registered to the bankrupt’s name after his discharge, it is part of the bankruptcy estate and should therefore go to the trustee for the benefit of the creditors.
Annulment of bankruptcy order
To annul a Bankruptcy Order, an application must be made to the Court by any interested party. An annulment order is issued if in the opinion of the Court, the debtor should not have been declared bankrupt, or if it is proved that the bankrupt’s debts have been paid in full, or the creditors have consented to the annulment of the bankruptcy order.