Which debts cannot be written off during restructuring
Debt restructuring is one of the legal mechanisms that allows an individual to settle their financial obligations by changing the terms of their fulfillment. Its purpose is to help the debtor restore solvency and the creditors to receive repayment in an agreed manner. To start the procedure, the person or their authorized representative submits an appropriate application and develops a restructuring plan that defines the order of debt repayment. This was reminded by the Sumy Interregional Department of the Ministry of Justice of Ukraine.
The restructuring plan may include:
- the sale of certain debtor's property, including pledged property, with determination of the terms, sequence of sale, and the approximate amount of funds expected to be received;
- changing the terms of debt obligations, including revising deadlines, payment schedules, methods of repayment, or the amount of debt;
- applying deferral, installment plans, or writing off part or all of the debt in cases provided by law;
- involving other persons in fulfilling the debtor's obligations, including through suretyship, guarantees, or other civil law mechanisms;
- implementing measures aimed at improving the debtor's financial condition, including employment, changing profession, upgrading qualifications, or other actions that will contribute to restoring solvency.
At the same time, the law establishes a list of obligations that cannot be restructured or written off. These include debts related to:
- fulfillment of the duty to pay alimony;
- compensation for damage caused by a criminal offense, injury, other health damage, or death of a person;
- payment of the single contribution to the compulsory state social insurance;
- payment of other mandatory contributions in the compulsory state social insurance system.
Meanwhile, the legislation provides a separate rule regarding tax debt. If the tax debt arose within three years before the opening of insolvency proceedings for an individual, it is recognized as hopeless and may be written off within the restructuring procedure.
Thus, although restructuring is an effective way to resolve financial difficulties, it does not apply to certain categories of socially significant obligations, the fulfillment of which remains mandatory regardless of the debtor's financial condition.
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