Jia Yueting saved? Personal bankruptcy approved by over 80% of voting creditors!
Compiled from: China National Radio website, Contemporary Legal Studies, Sina Finance, Oriental Corporate Culture, Technology and Wealth Guide
Jia Yueting's personal bankruptcy reorganization was officially filed in October 2019, and now only the final hearing on May 21 at the Central District Bankruptcy Court in California, USA, is remaining.
According to the bankruptcy plan, Jia Yueting is willing to assume 40% of the guarantee responsibility. After creditors receive 40% of the total debt, Jia Yueting's debt liability must be relieved. More than 80% of the voters voted in favor of Jia Yueting's personal bankruptcy reorganization plan. The next step is that the court will hold a hearing on the plan on May 21. If the court approves the plan, Jia Yueting will resolve his personal guarantee debt issue.
Taking this opportunity, I will discuss with everyone the related issues of 'personal bankruptcy' in our country.
[3] What is "personal bankruptcy"?
The current Article 2 of China's Bankruptcy Law defines 'bankruptcy' only as 'corporate bankruptcy' and does not include 'personal bankruptcy.' Personal bankruptcy refers to the state in which, when an individual cannot repay debts with all of their property, the court declares bankruptcy for the individual according to legal provisions and the individual assumes the corresponding legal consequences. It includes three implications: first, the objective fact that the individual debtor cannot repay due debts; second, the application for bankruptcy by the individual according to personal bankruptcy legal procedures or the court's declaration of personal bankruptcy ex officio; third, the individual enjoys living rights after personal bankruptcy.
Simply put, when a debtor really cannot repay their debts, they can apply to the court for personal bankruptcy. Once approved, the debt will have a time limit, during which, apart from the debtor's basic living expenses, all other money must be used to repay the debt. After this period, regardless of whether the debt has been fully repaid, there is no need to pay anymore. China's personal bankruptcy system is still in the exploratory stage and has not yet taken shape, but it has long been implemented in countries such as the United States and Japan.
According to media reports, Shenzhen will be the first in the country to establish a personal bankruptcy system. On the eve of May Day, the 'Shenzhen Special Economic Zone Personal Bankruptcy Regulations (Draft)' was submitted for the first time to the Standing Committee of the Shenzhen Municipal People's Congress for review, initiating a 'breakthrough' move.
Why is Shenzhen so eager to push forward the breakthrough of the personal bankruptcy system?
As of the end of January this year, there were 1.236 million registered individual industrial and commercial households in Shenzhen, accounting for 37.5% of the total number of business entities in Shenzhen. In addition to the astonishing number of entrepreneurs starting businesses in their personal capacity, many owners of small and micro enterprises often bind personal assets with company assets. While a business can go bankrupt, an individual cannot, and many creditors require business owners to pledge personal assets as collateral. This not only increases financial risks but also creates opportunities for illegal financing, such as usury and underground banks. Lin Hui, a member of the Standing Committee of the Shenzhen Municipal People's Congress and Executive President of the Shenzhen Commercial Federation, said, 'Because about seventy to eighty percent of our enterprises pledge personal assets when taking out business loans, it can be said that they are putting their entire personal wealth at risk. We hope this law can protect these entrepreneurs who are willing to take risks, invest, and take responsibility for Shenzhen's development and construction, giving them a chance to have a buffer.'
The necessity of establishing a personal bankruptcy system
1. The personal bankruptcy system meets the needs of the development of the modern commodity economy
First of all, personal bankruptcy is an inevitable product of the development of a market economy. As long as there is a market economy, there will be competition, and competition leads to the survival of the fittest. Therefore, in countries where the market economy is relatively developed, such as the United States, the United Kingdom, France, and Japan, relatively complete personal bankruptcy systems have been established. It is precisely because of personal bankruptcy that the emergence of a mature Western market economy was promoted. Personal bankruptcy came first, then corporate bankruptcy followed; corporate bankruptcy is merely an amplification and extension of personal bankruptcy. With the establishment and improvement of China’s socialist market economic system, it is necessary to promptly establish a personal bankruptcy legal system that meets the requirements of the development of a modern market economy. Establishing and implementing personal bankruptcy law is conducive to protecting the legitimate rights and interests of creditors in a credit-based economy. This is because, when a debtor fails to repay debts or deliberately evades them, creditors can legally apply to have the debtor declared bankrupt and use bankruptcy procedures to protect their claims to the greatest extent. At present, China is in a period of economic system transition, and dishonest behaviors are widespread, with personal debt evasion and default increasingly emerging, posing serious threats to the rights of creditors and the safety of financial assets. If we establish a complete personal bankruptcy legal system, such dishonest behaviors can be effectively curbed.
2. Establishing a personal bankruptcy system can ensure that creditors receive fair repayment and is also beneficial for protecting the interests of debtors.
In the current judicial practice in our country, due to the absence of a personal bankruptcy system, issues related to individual debts can only be addressed under the provisions of compulsory enforcement in the Civil Procedure Law. As is well known, there are many difficulties in court enforcement nowadays, and the person subject to enforcement may evade it in various ways, preventing the creditor from realizing their rights. However, if a personal bankruptcy system were implemented, the debtor's assets could be fully frozen and distributed according to principles of fairness and reasonableness, thereby ensuring the interests of creditors. In addition to protecting creditors' fair compensation, granting the capacity for personal bankruptcy can also allow debtors to be relieved from litigation or reduce their debt burden, giving honest but unfortunate debtors an opportunity to restart their careers and participate in market competition.
[1] Image source from the internet; if infringement occurs, please delete!
