How can a creditor recover money from a bankrupt? Part I. Challenging transactions and actions

General bankruptcy procedure

Insolvency is enforced through the courts. At the moment, the procedure is applicable to both citizens and legal entities. The essence in each case will be the same - the person’s debts are written off, but his property is also sold, and the proceeds from the sale are used to pay off the debts.

Another option is debt restructuring. The person receives the obligation to repay the debt with reduced interest, without taking into account penalties over a three-year period. However, such a procedure is possible if the potential bankrupt’s capabilities allow him to pay the required amount.

Bankruptcy is carried out in several stages:

analysis of the situation and preparation of documentation . You should immediately determine whether the procedure is possible, how to minimize costs, and what actions will have to be taken. In some cases, it is better to refuse bankruptcy, since it is unfounded;
preparation and submission of an application to the arbitration court . You will need to collect a significant package of papers, as well as correctly prepare an application. The final result largely depends on this;
participation in the trial . Creditors and a financial manager who participates in the management of the debtor’s property and is engaged in its subsequent analysis and distribution will also be called;
direct bankruptcy , that is, the sale of property and write-off of existing debts to creditors.

The average duration of the procedure is six months. If a legal entity goes bankrupt, the work may last longer.

During the procedure, the possibility of a person making large transactions will be significantly limited. In addition, some contracts that were drawn up in the last 3 years may also be challenged. This is necessary to protect the interests of creditors. However, not everything is as simple as it seems at first glance.

Read: Consideration of bankruptcy cases in arbitration court

When transactions can be challenged

The presence of the possibility of challenging a transaction does not mean that this will necessarily happen. In fact, the law only provides for the possibility of such an action, but does not speak of a one hundred percent guarantee that supposedly all transactions will be cancelled.

In fact, canceling a deal is not that easy. The court will need to find a balance between the interests of the parties to the contract, as well as the creditors. Therefore, in practice, cancellation is a last resort option.

In situations where the subject of the transaction was transferred several times to the new owner, there is a conflict of interests of many persons at once. Cancellation will lead to the emergence of mutual claims from a whole chain of citizens and organizations. Judicial practice in such cases most often indicates the impossibility of terminating contractual obligations.

It turns out that the theoretical opportunity to challenge a transaction appears only if there are some signs indicating its invalidity or sham. Otherwise, the relationship between the parties can be considered absolutely legal.

Terms of the agreement on transfer of funds

The conclusion of this agreement indicates that one participant in the transaction transferred money to the other party for a certain period. In practice, there are cases when the latter party does not fulfill its obligations in full.

And in order to prove to the authorized body the fact that the funds were actually given as a loan, you will need to provide a supporting document. However, it must strictly comply with the requirements of the law so that no questions arise during the proceedings.

What information should this agreement contain:

The total amount of funds transferred.
If there is interest, its amount must be indicated.
Procedure for transferring funds. Accounts must be listed. If the money was transferred in cash, then the corresponding receipts must be attached.
Purpose of funds received. If necessary.
Cash disbursement schedule.
Refund schedule.
Penalties for violations of the terms of this agreement.
Passport details.
Addresses where the parties reside.
Time, day, date and year of the transaction.
Place of the transaction.
Personal signatures of the participating parties.

All information entered into the document must be strictly reliable. When registering, we recommend that you check your passport details yourself to ensure their accuracy.

Legal regulation

Indeed, the possibility of challenging transactions in bankruptcy is provided for by current legislation. The circumstances are specified in Article 61.2 of Federal Law-127:

if the agreement was concluded one year before the bankruptcy petition was accepted, then it may be declared invalid by the court if the value of the transferred objects was unequal. In other words, the court will take into account how well the contract complies with market conditions. For example, a car is usually sold at a price of 500 thousand rubles, while there is a deal for 100 thousand rubles. In this case, there are indeed grounds for cancellation;
if the transaction was made with the aim of causing financial damage to creditors, then it is contested within three years. For example, if it was committed specifically, in order not to pay obligations. Or it was gratuitous at a time when the person already met the criteria of insolvency.

The invalidation process must be carried out in accordance with the rules established by the Arbitration Procedural Code of the Russian Federation. The issue is considered as part of the bankruptcy case, and not separately.

Link to document: Federal Law No. 127-FZ of October 26, 2002 “On Insolvency (Bankruptcy)”

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There are several special statutes of limitations for filing an application to challenge a transaction.

— within one year before or after the court accepts a bankruptcy petition, a transaction made by the debtor may be declared invalid if it entailed unequal counter-fulfillment of obligations by the other party to the transaction.

- within three years before the acceptance of an application for declaring the debtor bankrupt or after the acceptance of the said application, a transaction made by the debtor for the purpose of causing harm to the property rights of creditors may be declared invalid by an arbitration court, and as a result of its commission, damage to the property rights of creditors was caused and if the other party transaction knew about the specified purpose of the debtor at the time of the transaction (suspicious transaction).

What transactions can be challenged?

Not every contract can be challenged as part of a bankruptcy procedure. This requires the presence of a number of signs:

the purpose of such a transaction is to avoid fulfilling an obligation to the creditor, to preserve property (even through other persons) or to obtain benefits that cannot be used to pay off obligations;
the transaction is clearly of a sham nature, that is, it was made to hide some other relationship. For example, a gift agreement was concluded when in fact there were purchase and sale relations;
the value of the property is not equivalent to its real value. This may be necessary in order to hide the real benefit from the creditor.

In this case, it is not necessary to have all the signs at once; only one or a few are enough.

Even if the existence of a reason to challenge is obvious, it is not a fact that the court will side with the creditor. It is necessary to prove that another way to resolve the situation is impossible, that the rights of other persons are not violated, or are violated to a lesser extent than the rights of the creditor.

The important point is whether the other party even knew that the transaction was being made for the purpose of non-fulfillment of obligations. That is, is she a bona fide purchaser?

Another type of transactions that can be classified as voidable are those in which preference is given to a specific creditor (or several). For example, an object is transferred to pay off a debt when it was not collateral, while other creditors received nothing.

Read: Procedure for selling collateral property

Challenging transactions on “bankruptcy” grounds

A.Yu. ASTAFUROV

Astafurov Andrey Yurievich, head of the bankruptcy practice of the Moscow Bar Association "Arbat".

As the French writer Tristan Bernard aptly put it, bankruptcy is a legal procedure in which you put money in your trouser pocket and give your jacket to creditors, and the English writer Arnold Bennett noted that sometimes bankruptcy is good business. In modern Russian legal reality, negligent debtors use the bankruptcy procedure as a legal way not to pay their debts, so the problem of challenging the debtor’s transactions to withdraw their assets does not lose relevance. In order to counteract such dishonest behavior of the debtor, the Bankruptcy Law, Federal Law No. 73-FZ of April 28, 2009, included Chapter III.1, which regulates the grounds and procedure for challenging the debtor’s transactions on special “bankruptcy” grounds. In development of these provisions, Resolution of the Plenum of the Supreme Arbitration Court of the Russian Federation of December 23, 2010 N 63 “On some issues related to the application of Chapter III.1 of the Federal Law “On Insolvency (Bankruptcy)” was adopted, which underwent a significant revision in 2013. Based on the analysis of these documents, as well as current judicial practice, the author of the presented article is A.Yu. Astafurov - answers the questions: what exactly can be challenged using this mechanism; who, when and how can challenge the transaction of an insolvent debtor.

Key words: arbitration manager, bankruptcy, withdrawal of assets, bankruptcy creditors, non-market transactions, challenging transactions, period of suspicion, preferential transactions.

The concept of a transaction in the context of a challenge on “bankruptcy” grounds

The concept of a transaction that can be challenged on “bankruptcy” grounds is much broader than the civil law concept of a transaction given in Article 153 of the Civil Code of the Russian Federation. First of all, on “bankruptcy” grounds, it is possible to challenge actions aimed at fulfilling civil obligations, such as cash or non-cash payment by the debtor of a monetary debt to the creditor, the transfer by the debtor of other property into the ownership of the creditor, an application for set-off, an agreement on novation, the provision of compensation and etc.

In addition, the mechanism for challenging transactions in bankruptcy also allows you to challenge actions aimed at fulfilling obligations and duties arising in accordance with labor, family legislation, legislation on taxes and fees, customs legislation, procedural legislation and other branches of legislation of the Russian Federation. These include, in particular, payment of wages, a marriage contract, an agreement on the division of common property of spouses, payment of taxes, fees and customs duties both by the payer himself and by writing off funds from the payer’s account on behalf of the relevant government body, transfer to the claimant in enforcement proceedings of funds received from the sale of the debtor's property, a settlement agreement concluded by the debtor in another case.

Example from practice.

Fact of the case: As part of the bankruptcy case, the bankruptcy trustee filed an application to invalidate bank transactions involving the debiting of funds from the debtor's current accounts to repay the debt to the Federal Tax Service of Russia and to apply the consequences of their invalidity in the form of the return of funds to the bankruptcy estate.

Position of the court: The claim was satisfied, since as a result of the payments made, the tax authority was given greater preference in relation to the satisfaction of its claims that existed before the completion of the disputed transactions than would have been provided in the case of settlements with creditors in the order of priority in accordance with bankruptcy legislation.

Details of the case: Resolution of the Arbitration Court of the East Siberian District dated August 11, 2021 in case No. A10-3741/2014.

“Bankruptcy” grounds for invalidating transactions

The debtor's transactions, which can be challenged on the basis of the provisions of the Bankruptcy Law, are divided into suspicious transactions and transactions with preference (preferential transactions).

Suspicious transactions, in turn, are divided into non-market transactions (clause 1, article 61.2 of the Bankruptcy Law) and transactions made to the detriment of creditors (clause 2, article 61.2 of the Bankruptcy Law). These transactions can be challenged during the period of suspicion .

Let’s take a closer look at each type of indicated transaction:

A) Non-market transactions. Non-market transactions can be challenged if they were made within one year before the acceptance of the application for bankruptcy or after the acceptance of the said application. The subject of proof in this category of cases includes the discrepancy between the price of this transaction and (or) its other conditions at the time of its conclusion to the price and (or) other conditions under which similar transactions are made in comparable circumstances. When comparing the terms of a transaction with similar transactions, one should take into account both the conditions of similar transactions made by the debtor, and the conditions under which similar transactions were made by other participants in the turnover. In this case, establishing other circumstances, such as bad faith of the debtor's counterparty, is not required.

Example from practice.

Fact of the case: As part of the bankruptcy case, the bankruptcy trustee filed an application to invalidate the compensation agreement and to apply the consequences of the invalidity of the transaction in the form of the defendant’s obligation to return the store building and the land plot for servicing this building to the debtor’s bankruptcy estate.

The court's position: The bankruptcy trustee's requirements were satisfied. The terms of the contract differ significantly from the conditions under which similar transactions are made in comparable circumstances. Establishing the bad faith of the counterparty to the transaction is not included in the subject of proof in this case.

Details of the case: Resolution of the Arbitration Court of the Volga-Vyatka District dated April 17, 2015 in case No. A29-10596/2012.

B) A transaction aimed at causing harm to the property rights of creditors. A transaction aimed at causing harm to the property rights of creditors may be declared invalid if such a transaction was completed within three years before the adoption of an application for declaring the debtor bankrupt or after the acceptance of the said application. The subject of proof for this category of cases is determined by paragraph 5 of Resolution of the Plenum of the Supreme Arbitration Court of the Russian Federation dated December 23, 2010 No. 63 “On some issues related to the application of Chapter III.1 of the Federal Law “On Insolvency (Bankruptcy)” (hereinafter referred to as Resolution No. 63): the will of the debtor must be aimed at causing property damage to the rights of creditors; this harm as a result of this transaction must take place; the other party to the transaction must be in bad faith.

In this case, property damage to the rights of creditors should be understood as a decrease in the value or size of the debtor’s property and (or) an increase in the size of property claims against the debtor, as well as other consequences of transactions or legally significant actions performed by the debtor, which have led or may lead to a complete or partial loss of creditors’ opportunities obtain satisfaction of one's claims for the debtor's obligations at the expense of his property.

Confirmation of other circumstances included in the subject of proof in this category of cases presents certain difficulties for the person challenging the transaction, due to which certain presumptions have been introduced in paragraph 2 of Article 61.2 of the Bankruptcy Law, in the presence of which it is considered that the debtor’s goal in making this transaction was causing property damage to creditors, or that the other party to the transaction knew or should have known about the specified purpose of the debtor at the time of the transaction.

The purpose of causing harm to the property rights of creditors is assumed if the following two conditions are simultaneously present: at the time of the transaction, the debtor met the criteria of insolvency or insufficiency of property and there is at least one of the other circumstances provided for in paragraphs two to five of paragraph 2 of Article 61.2 of the Bankruptcy Law. Such circumstances, in particular, include the fact that the transaction was completed free of charge or in relation to an interested party, as well as the fact that the value of the property transferred as a result of the transaction or several interrelated transactions is twenty or more percent of the book value of the debtor’s assets, etc.

Example from practice.

Fact of the case: As part of the bankruptcy case, the bankruptcy trustee filed an application to invalidate transactions involving the debiting of funds from the company's current account and to apply the consequences of invalidity of transactions.

The court's position: The claim was satisfied, since during the period of the contested transactions the debtor met the criteria of insolvency, and the total amount of written-off funds was more than 20 percent of the book value of the debtor's assets, the purpose of causing harm to the property rights of creditors when making the contested transactions was proven.

Details of the case: Resolution of the Arbitration Court of the Moscow District dated April 21, 2015 N A40-167146/13.

Regarding the good faith of the other party to the transaction: it is assumed that the other party knew that the transaction was aimed at harming creditors if it is recognized as an interested party (an exhaustive list of them is given in Article 19 of the Bankruptcy Law) or if it knew or should have known about the infringement interests of the debtor's creditors or about signs of insolvency or insufficiency of the debtor's property.

When assessing the good faith of the other party to the transaction, it should also be remembered that information on the introduction of supervision, financial recovery, external management, on declaring the debtor bankrupt and on the opening of bankruptcy proceedings is subject to mandatory publication. In this regard, in the presence of such publications, in the event of a challenge on the basis of paragraph 2 of Article 61.2 of the Bankruptcy Law of transactions completed after these publications, the following must be assumed: unless otherwise proven, any person should have known that the corresponding bankruptcy procedure had been introduced , which means that the debtor has signs of insolvency.

Example from practice.

Fact of the case: As part of the bankruptcy case, the bankruptcy trustee filed an application to invalidate the contracts for the sale and purchase of vehicles that were concluded between the debtor and the other party to the transaction.

Position of the court: The application to invalidate transactions for the sale of the debtor's property and to apply the consequences of invalidity of the transactions was granted, since the case materials proved that the transactions were made with the aim of causing harm to the property rights of creditors; as a result of the transaction, damage was caused to the property rights of creditors. The fact that the debtor is under surveillance in itself confirms his insolvency. Due to the explanations given in paragraph. 4 clause 7 of Resolution No. 63, the other party to the transaction could not have been unaware that the debtor was in bankruptcy proceedings.

Details of the case: Resolution of the Ninth Arbitration Court of Appeal dated March 31, 2021 in case No. A40-31173/14.

B) Preferential transactions. From the point of view of bankruptcy law, the depravity of preferential transactions lies in the fact that such a transaction entails giving preference to one of the creditors over other creditors. From the point of view of bankruptcy law, these transactions are invalid due to the fact that they violate its fundamental principles - the priority and proportionality of satisfying the claims of creditors. The burden of proving that the transaction entails or may entail the exercise of a preference lies with the person challenging it.

At the same time, the legislator, depending on the period that has passed since the conclusion of the disputed transaction, as well as on the nature of the transaction itself, divides the grounds for declaring preferential transactions invalid.

If a transaction is made after the arbitration court accepted an application for declaring the debtor bankrupt or within one month before the arbitration court accepted the application for declaring the debtor bankrupt, then to declare it invalid it is not necessary to establish the bad faith of the debtor's counterparty, as well as the purpose of the debtor himself to cause damage to property rights of creditors.

If the transaction was completed no earlier than six months and no later than one month before the court accepted the application to declare the debtor bankrupt, then to declare it invalid it is necessary to establish the bad faith of the debtor's counterparty in the transaction, namely, what he knew or should have known about a sign of insolvency or insufficiency of property or about circumstances that allow us to draw a conclusion about a sign of insolvency or insufficiency of property. The mere placement in the file of arbitration cases of information about the initiation of bankruptcy proceedings against the debtor does not mean that all creditors should have known about it.

Example from practice.

Fact of the case: As part of the bankruptcy case, the bankruptcy trustee filed an application to invalidate a transaction to offset similar counterclaims between the debtor and his counterparty.

The court's position: The application was rejected, since the bankruptcy trustee of the debtor did not prove the presence of the totality of circumstances necessary to recognize the disputed transaction as invalid.

The courts proceeded from the absence of evidence of awareness of the debtor's counterparty about the debtor's signs of insolvency or insufficient property.

Rejecting the arguments of the bankruptcy trustee of the debtor that information about the debtor’s existing debts was placed in the file of arbitration cases, the courts substantiated their position by referring to the explanations set out in paragraph 7 of paragraph 12 of Resolution No. 63. The mere placement in the file of arbitration cases of information on the initiation the bankruptcy case of the debtor does not mean that all creditors knew or should have known about the sign of insolvency or insufficiency of property.

Details of the case: Resolution of the Arbitration Court of the Moscow District dated August 15, 2021 in case No. A41-51994/2014.

If, during the designated period of time, a transaction was made aimed at ensuring the fulfillment of an obligation of the debtor or a third party to an individual creditor that arose before the completion of the disputed transaction, as well as a transaction that led or could lead to a change in the order of satisfaction of the creditor’s claims for obligations that arose before the completion of the disputed transaction, then establishing the bad faith of the other party to the transaction is also not required. An example of such transactions is the conclusion of a pledge agreement to secure previously incurred obligations.

Example from practice.

Fact of the case: As part of the bankruptcy case, the bankruptcy trustee applied to the arbitration court with an application to invalidate the real estate mortgage agreements.

The court's position: The claim is satisfied. According to the court, from the content of paragraphs 2 and 3 of Article 61.3 of the Bankruptcy Law, it follows that regardless of whether the transaction was completed within six or one month before the initiation of bankruptcy proceedings, as well as after the initiation of this case, subject to the conditions provided for in paragraphs 2 and 3 of paragraph 1 of this article, the bad faith of the counterparty to the transaction is not subject to proof (paragraphs 1 and 2 of paragraph 12 of Resolution No. 63). Consequently, if the appropriate conditions are present, the invalidity of a transaction with a preference is essentially of a formal nature.

Details of the case: Ruling of the Supreme Court of the Russian Federation dated October 17, 2021 in case No. A56-71819/2012.

Temporary criteria for challenging transactions on “bankruptcy” grounds. Transactions made by the debtor can be challenged in external administration and bankruptcy proceedings. In the case of filing applications to challenge transactions on “bankruptcy” grounds in the supervision or financial management procedure, these applications are subject to leaving without consideration in relation to paragraph 7 of part 1 of Article 148 of the Arbitration Procedure Code of the Russian Federation.

At the same time, arguments about the presence of signs of grounds for invalidity in a transaction, provided for in Articles 61.2 or 61.3 of the Bankruptcy Law, may be taken into account by the court when considering a request for interim measures aimed at ensuring the property interests of creditors related to the future challenge of the relevant transaction according to the rules of Chapter III .1 Bankruptcy Law. Thus, the court has the right to seize property alienated by the debtor under this transaction to its other party.

Example from practice.

Fact of the case: As part of the bankruptcy case, the bankruptcy creditor applied for interim measures in the case of declaring the debtor insolvent (bankrupt) in the form of seizure of real estate objects and a prohibition on the Rosreestr management to carry out registration actions in relation to this property.

Position of the court: Taking interim measures in the absence of a filed vindication claim for the recovery of the debtor’s property alienated in a transaction contested in a bankruptcy case is possible in monitoring and financial recovery procedures on the basis of paragraph 3 of paragraph 30 of Resolution No. 63, subject to the submission by the applicant of evidence confirming the possibility of future obstacles to reclaiming the debtor's property.

Details of the case: Resolution of the Arbitration Court of the North-Western District dated February 20, 2021 in case No. A56-40284/2015.

It should also be noted: due to the fact that the transactions considered under this article are contestable, they are subject to the one-year statute of limitations established by paragraph 2 of Article 181 of the Civil Code of the Russian Federation.

In this case, this limitation period is calculated according to the arbitration manager. As a general rule, the limitation period for an application to challenge a debtor’s transaction is calculated from the moment when the initially approved external or bankruptcy trustee learned or should have learned about the existence of grounds for challenging the transaction provided for in Articles 61.2 or 61.3 of the Bankruptcy Law. If the person approved by the external or bankruptcy manager learned about the existence of grounds for challenging the transaction before its approval when introducing the relevant procedure (for example, because he learned about them due to the exercise of the powers of the temporary manager in the monitoring procedure), then the limitation period begins to run from the date of its approval . If the basis for the invalidity of a transaction is related to a violation of the Bankruptcy Law by the arbitration manager who completed it on behalf of the debtor, the limitation period for an application to challenge it is calculated from the moment when the next arbitration manager learned or should have known about the existence of grounds for challenging it.

Example from practice.

Fact of the case: As part of the bankruptcy case, the bankruptcy creditor filed an application to invalidate the real estate purchase and sale agreement and apply the consequences of invalidity of the transaction.

The court's position: The claim was denied because the bankruptcy trustee missed the statute of limitations. K** was appointed as a bankruptcy trustee on 07/01/2014, and the bankruptcy trustee K** submitted this application only on 03/03/2016, which cannot indicate a reasonable approach of the bankruptcy trustee to his duties.

Details of the case: Resolution of the Arbitration Court of the Moscow District dated August 4, 2021 in case No. A41-41210/2013.

Subjects of challenging transactions. First of all, the temporary and bankruptcy trustee has the right to challenge the debtor’s transactions, however, the current bankruptcy legislation is moving towards strengthening the role of bankruptcy creditors in challenging the debtor’s transactions. Because of this, at present, a bankruptcy creditor has the right to challenge the debtor’s transactions on the grounds discussed in this article if the amount of accounts payable to him included in the register of creditors’ claims is more than ten percent of the total amount of accounts payable included in the register of creditors’ claims, not counting the amount claims of the creditor in respect of whom the transaction is disputed and its affiliates.

Bankruptcy creditors who do not have this threshold amount of claims can consolidate their claims when filing an application to challenge the transaction and collect the required ten percent together.

Example from practice.

Fact of the case: Three bankruptcy creditors filed a statement challenging the debtor's transaction. The total amount of claims of these legal entities amounts to 13.93% of the total amount of accounts payable included in the register of claims of the debtor's creditors. The courts of three instances left this application without consideration based on the fact that the amount of accounts payable of each creditor individually does not exceed 10% of the total amount of accounts payable, and therefore came to the conclusion that the named persons did not have the right to challenge the transactions made by the debtor.

Position of the court: Judicial acts were cancelled. The case was sent to the court of first instance for consideration on the merits.

The provisions of the Bankruptcy Law, which provide for the right to challenge the debtor’s transactions by bankruptcy creditors who have a relatively small amount of claims against the debtor, are aimed at the latter’s independent protection of their legitimate interests, including in the case of dishonest behavior of the bankruptcy trustee who evades such actions.

At the same time, the ten percent threshold established by the Law serves only as a limitation for excessive and uncoordinated challenges to transactions at the request of minority creditors, which can upset the balance of interests of the persons participating in the bankruptcy case, lead to a delay in the bankruptcy procedure and an increase in current costs.

The possibility of combining the claims of several creditors to achieve common goals (recognizing the debtor’s illegal transaction as invalid, replenishing the bankruptcy estate, maximum proportional repayment of the claims of all creditors) meets the goals of bankruptcy proceedings and contributes to the effective restoration of their violated rights.

A different approach in such a situation contradicts the legislative regulation of the relevant legal relations and limits the rights of bona fide participants in a bankruptcy case to judicial protection.

Details of the case: Ruling of the Supreme Court of the Russian Federation dated May 10, 2021 in case No. A27-2836/2013.

In addition to uniting minority creditors in order to challenge the debtor’s transactions, Resolution No. 63 provides for another mechanism for them to protect their rights.

An individual creditor also has the right to contact the bankruptcy manager with a proposal to have the manager challenge the transaction on the basis of Articles 61.2 or 61.3 of the Bankruptcy Law. A creditor approaching an arbitration manager with a proposal to challenge a transaction must justify the presence of a set of circumstances that constitute the grounds for invalidity provided for by law in relation to the transaction specified by him. If the insolvency administrator evades challenging the transaction, the bankruptcy creditor has the right to file a complaint against the inaction of the insolvency administrator.

If the complaint about the inaction (refusal) of the arbitration manager to challenge the transaction is recognized as justified, the court also has the right to indicate in the judicial act that the person who filed the complaint has the right to file an application to challenge it. If the corresponding creditor, simultaneously with a complaint about the manager’s failure to challenge the transaction, filed an application to challenge this transaction (for example, for the purpose of not expiring the statute of limitations), then the consideration of such an application is suspended by the court until the said complaint is considered.

The procedure for challenging transactions in bankruptcy

The transaction is contested by the manager or by the decision of the meeting of creditors (if the bankrupt is an individual, then an individual creditor or financial manager may take the initiative).

In the event of bankruptcy of an organization, an individual creditor also has the right to file an application to challenge the transaction in court if his claim amounts to at least 10% of the total debt of the potential bankrupt.

The application must be filed with the court that is conducting the bankruptcy process. The manager, the debtor, as well as persons who are parties to the contract that is being disputed are invited to the meeting.

The court must listen to the positions of each side. Thus, the second party to the transaction will obviously try to prove the fact of the bona fide acquisition of the object, while the creditor will try to challenge this point.

Challenging the debtor's transactions in bankruptcy proceedings, general grounds

There are exactly three basic points that are spelled out in the Civil Code of the Russian Federation. But it is worth understanding that they are all somewhat amorphous in nature, without any detail. So, watch out for the following signs:

Imaginary. That is, to some extent, this is deception, falsification, a way to get rid of financial savings or property, in order to limit the formation of the bankruptcy estate.
Invalid. Accordingly, incorrectly drawn up, contrary to the rules, norms of the law, and so on.
Lack of consent from competent authorities. Challenging transactions within the framework of bankruptcy often rests on the fact that the manager or other supervisory authority did not give its permission in those moments when it was necessary. For example, a bankrupt does not have the right to conduct financial transactions in excess of 50 thousand rubles without special verification of the appropriateness of his actions.

Consequences of declaring a transaction invalid

Federal Law No. 127 in Article 61.6 defines the consequences of recognizing the invalidity of a transaction. They are as follows:

return of property to the debtor. The property that could potentially become the bankruptcy estate is transferred, including cash and valuables. In a situation where a refund is not possible, the buyer may receive an obligation to pay compensation, which may include additional damages;
persons who return property have the right to apply to the court to include them in the register of creditors. However, they have the right to expect payment of compensation only after other obligations have been fulfilled.

There are situations when the buyer knows that the transaction is being made for the purpose of evading obligations. In this case, the court may deprive the person of the right to be included in the register of creditors.

The debtor, as a rule, finds himself in an extremely disadvantageous position. But even greater losses arise for the acquirer of property under a transaction that was ultimately contested. Such persons not only lose the object they received, but also have the right to expect to receive compensation only after other persons receive it.

Types of transactions that may be challenged

Not every contract can be terminated, but only one that violates the rights of interested parties. In this case, transactions can be of a completely different nature:

dealings with preference . In this case, we are talking about the fact that the rights of one creditor were placed above the rights of another. For example, if, first of all, a debt to one person was closed by transferring certain property into his ownership;
suspicious transaction . It is characterized by the fact that it does not meet the conditions of ordinary market relations. For example, if the object was gifted to a dependent person (for example, a subordinate at work) or a relative, then avoidance of fulfillment of obligations is quite likely;
sham deal . This is the name given to contracts that hide other relationships. For example, a gift is concluded when it comes to buying and selling. This can be proven, for example, if the seller received a large transfer from the buyer during the period when the agreement was drawn up.

Depending on the type of contract, the parties have to take various actions to protect their own interests.

Read: What are the consequences of deliberate and fictitious bankruptcy of an individual

What should the other party to the transaction do?

In some cases, the second party to the contract that is being disputed is not aware of the intentions of the potential bankrupt. Such a person may be recognized as a bona fide purchaser.

It is quite difficult to prove this point. The court should pay attention to the following factors:

the buyer did not know and could not know that the transaction was illegal. This is possible when bankruptcy proceedings have not yet been initiated against the debtor. In addition, if transport or other movable objects were purchased, it is recommended to check them through the notarial registry of pledges;
the buyer did everything possible to verify the transaction, for example, contacted the register of pledges, checked information about the debtor and property in other ways;
the contract specifies the seller’s guarantee that the property is not encumbered by the claims of third parties;
the value of the object corresponds to the market value at the time of the transaction. Evidence must be provided to the court that the price was not underestimated and was not suspicious.

The purchaser must indicate that he in no way knew or could have known that the objects could become the subject of claims of third parties, and that the seller had any obligations.