On October 9, 2019 (September 11, 2019 in the lunar calendar), the first "personal bankruptcy" in China. On October 9, 2019, a piece of news from WeChat WeChat official account "Wenzhou Court" really aroused a wave of public concern. On the morning of the same day, Wenzhou Intermediate People's Court and Pingyang County People's Court held a press briefing, informing Pingyang Court of the case of centralized debt clearance of Cai, a shareholder of a bankrupt enterprise in Wenzhou, which also became the first personal debt clearance case in China. It is reported that the debtor Cai is a shareholder of a bankrupt enterprise in Wenzhou. After the enterprise went bankrupt, Cai was judged to bear the joint and several liability for the repayment of corporate debts of more than 2.14 million yuan. However, after investigation, it was found that Cai actually had no solvency, and the court finally accepted his plan of paying off the debt of 1.5%, that is, more than 32,000 yuan, within 18 months. The outside world believes that this means that the personal bankruptcy system has begun to break the ice on a pilot basis, but at the same time, some people worry that once the license exemption is abused, it may induce malicious evasion of debts, induce moral hazard and damage the fair compensation of bankruptcy procedures. So, what is the specific situation? Let's take a look together. 01. Case Review In this case, Cai, as a shareholder of the bankrupt enterprise, should have been jointly and severally liable for paying off the debt of more than 2.14 million yuan of the bankrupt enterprise according to the effective judgment document. However, after investigation, the court found that the property under Cai's name only held 1% equity (the actual capital contribution capacity was 5,800 yuan) in a machinery company in Ruian City where he currently works, and there was another scrapped motorcycle and sporadic deposits. In addition, Cai has suffered from hypertension and kidney disease for a long time, the medical expenses are huge, the children are in college, and the family can't make ends meet for a long time. The husband and wife's total monthly income of less than 8,000 yuan is really unable to repay this huge debt. On September 24th, in the first creditors' meeting of Cai's personal debt centralized liquidation hosted by Pingyang Court, four creditors expressed their understanding and sympathy for Cai's actual living difficulties, agreed to reserve the necessary living expenses and medical expenses for the debtor, voluntarily gave up the right to recover his remaining debts, and agreed that the debtor could restore his personal credit three years after the completion of the liquidation plan. At the same time, Cai also promised that there was no other property except the property identified by the administrator by reading out the Commitment Letter of No Dishonest Behavior; If there is dishonest behavior, it is willing to bear the legal consequences, and if it causes losses to creditors, it is liable for compensation according to law. In the end, the creditor agreed to the repayment plan proposed by Cai, which was paid off in one lump sum within 18 months according to the 1.5% clearing ratio of more than 32,000 yuan. At the same time, Cai promised that within six years from the date of completion of the plan, if his family's annual income exceeds 120,000 yuan, 50% of the excess will be used to pay off the unpaid debts of all creditors. In addition, the meeting also made it clear that within six years from the date when the centralized debt liquidation plan is fully fulfilled, if it is found that Cai has failed to declare major property, or has committed fraud, malicious reduction of the debtor's property or other acts of evading debts, the creditor may request to restore the original debt amount. Pay off the debt amount. On September 27th, Pingyang Court issued a restraining order against Cai's behavior, and ended the execution of Cai's case involved in this liquidation. Finally, the case was settled. 02. Bankruptcy does not mean evasion of debts. You still have to try your best to repay the arrears. Obviously, the focus of this case is whether you still need to repay the money owed after personal bankruptcy? And will it cause the risk of debt evasion? Xu Yangguang, a professor at Renmin University of China Law School, has made it clear before that you should not think that you can be exempted from liability as long as you file for bankruptcy, let alone equate personal bankruptcy with "evading" personal debts. He said that for debts that can be exempted, some countries clearly stipulate that the repayment of part of the debt is the condition of exemption, while others restrict the debtor's economic life within a period of time (usually lasting 3-5 years) after the termination of bankruptcy proceedings, and adjust it through a pre-determined debt adjustment plan or repayment plan. Taking Hong Kong as an example, the bankruptcy period of a bankrupt is 4/5 years. In terms of housing, the bankrupt can live in all his properties for up to 12 months. After the expiration, the bankrupt must vacate it and deliver it to the trustee, who will realize it to repay the debt. In daily life, except for the necessary daily living expenses, all other income of the bankrupt shall be delivered to the trustee for debt repayment; The bankrupt shall not have any high consumption behavior; When the credit consumption exceeds 100 Hong Kong dollars, the identity of the bankrupt shall be informed to the other party in advance. When the Hong Kong property market bubble burst, famous acting stars Dicky Cheung and Zhong Zhentao all filed for personal bankruptcy because they bought too many houses and finally couldn't bear their debts. During the period of personal bankruptcy, these people couldn't own any property, that is to say, they didn't have a house or a car, and all their income was used to pay off their debts, and their lives could only maintain the minimum standard. Until the bankruptcy period expired, they were released from their debts and the money they earned was owned by themselves. In October, 2006, after the court approved Zhong Zhentao's bankruptcy, Zhong Zhentao said slightly sadly in an interview: "In the past four years, my house in Hong Kong has been rented. When filming, the production unit didn't drive me to pick me up, so I took the subway. When visiting department stores, you can only see but not buy, because I am a bankrupt person." In addition, many foreign bankruptcy laws only take economic situation as a condition for filing for bankruptcy. As Ye Jianping, director of the Office of the Legal Affairs Committee of Wenzhou Municipal People's Congress, said, "We can't absolutely put an end to all evasion of debts, just as we can't eliminate illegal crimes by enacting laws. No country in the world can do it yet, but system construction is always trying to prevent and reduce illegal crimes as much as possible". Therefore, those "Lao Lai" who try to evade their debts had better not have too many expectations for filing for bankruptcy, and we don't have to worry too much that the personal bankruptcy system will be exploited by these people. 03. Why should we implement a personal bankruptcy system? Next, let's return to a fundamental question, that is, why do we want to implement the personal bankruptcy system? Let's start with the personal bankruptcy system itself. As we all know, an enterprise can file for bankruptcy when it is faced with insolvency. After filing for bankruptcy, the enterprise will enter the liquidation procedure, that is, the remaining assets will be repaid, and the creditors can only admit losses for the part that cannot be repaid, and can't continue to pursue it. Among them, the business owner does not need to bear joint and several liability with personal property, which means that after the enterprise files for bankruptcy, the debt will end here. In terms of process, the personal bankruptcy system is actually not fundamentally different from enterprise bankruptcy. It is also a process in which the debtor is unable to pay back the money and cannot reconcile with the creditor, and the court liquidates all its property and uses it to pay off the debt. As for why this system should be implemented now, it is because with the rapid development of the market economy, personal assets are constantly growing, individuals and families participate in stock speculation and real estate speculation, and the proportion of credit cards and loans for consumption is getting higher and higher. Personal insolvency often occurs due to loan stock speculation, real estate speculation and large overdraft of credit cards. As the younger generation's awareness of advanced consumption is getting stronger and stronger, their spending power is getting stronger and stronger, and there are more and more loans for housing, automobiles, tourism and consumer goods. The personal bankruptcy system can effectively help those who spend ahead of time but fail to repay their loans. People get through the life difficulties caused by the credit crisis. Furthermore, the personal bankruptcy system can help those who are unable to pay their debts because of force majeure. For example, the Wenchuan earthquake in Sichuan in 2008 caused a large number of houses to be damaged, among which a large number of commercial houses had outstanding bank mortgage loans. As the country does not have a personal bankruptcy legal system, it is impossible to exempt those individuals or families who are really unable to repay their housing loans from debts according to law, and banks cannot write off relevant loans according to law. In practice, it can only be solved temporarily by issuing an emergency notice from the China Banking Regulatory Commission. This temporary policy arrangement needs to be replaced by a standardized and rigorous legal system. The establishment of personal bankruptcy system, for individuals in serious financial difficulties, can exempt certain debts according to law through personal bankruptcy procedures, so that they can re-realize normal production and life through efforts. In this sense, personal bankruptcy system can actually play a considerable protective role for individuals or families in serious financial difficulties. That is to say, if the debtor is insolvent, he can also apply for bankruptcy protection according to law. Under the condition that his life is greatly restricted and his personal reputation is damaged, his debt can be exempted to a certain extent, and he can get a chance to start a new leaf, so as to prevent the phenomenon of evading debts and even other extreme behaviors after carrying heavy debts. In short, it is to give those who are honest a chance to turn over. 04. Conclusion Although the personal bankruptcy system essentially takes into account the interests of both creditors and debtors, it protects bona fide and honest debtors, not malicious debtors. However, after all, the personal bankruptcy system will take certain disciplinary measures against the bankrupt, which will have a serious adverse impact on the individual's reputation, work, life, social interaction, marriage and other aspects. Therefore, unless it is a last resort, we'd better not apply for personal bankruptcy easily. However, as far as this system itself is concerned, as long as it can be successfully implemented and improved with the development of time, it must be a kind of progress for the whole society. Reference materials: "The first personal bankruptcy pilot in China! The man's debt is 2.14 million, and the court agreed that he only needs to pay back 32,000 in the end!" Daily Economic News "The personal bankruptcy system will be piloted! What is personal bankruptcy? Don't you have to pay off debts in bankruptcy?"