Russians go bankrupt on massive scale

In January-June 2018, 19053 citizens were declared bankrupt by Russian courts. This is 45% more than the same period in 2017, according to the reports of arbitration managers published on the Federal Reserve (the Federal Register on Bankruptcy Information).

The applicants in such cases, as a rule, are Russian citizens themselves. In the first half of this year, they initiated 84.5% of the procedures. Lenders initiated more than 14% of cases, while the Federal Tax Service - 1.3%.

The growth in the number of personal bankruptcies is caused by two main factors. The first is a difficult economic situation, the second is knowledge about an opportunity for a "restart".

There are 47 bankruptcies per 100,000 people in Russia. Most of them in the Vologda, Ryazan regions and Kalmykia (157, 95 and 91 people per 100 thousand people respectively).

Over three years, this procedure was initiated by 69.3 thousand people. According to the estimates of the Russian United Credit Bureau, this is 9.7% of the total number of potential bankrupts.

The vice-rector of the Academy of Labour and Social Relations Alexander Safonov, speaking to a correspondent of Vestnik Kavkaza, noted that there are several reasons for the increase in the number of personal bankruptcies among Russians. "First of all, our citizens have only started to learn about this procedure. And it was in 2016-2017 when we had the most severe consequences associated with the subsidence of citizens' incomes, but the bankruptcy procedure was still little known. Now this mechanism is becoming a more popular as a method of protection," he said.

"On the other hand, this is a continuation of the past years problems, when citizens took out long-term loans. We do not yet see any significant changes in our economy, it provokes the completion of citizens' personal programs for the unsuccessful borrowing of finances in past years, hence the increase in the number of bankrupts," Alexander Safonov drew attention.

The effect of both factors is explained by such a high percentage of procedures initiated by the future bankrupt. "Such a procedure enables the citizen, first, to improve his finances, and second, to save a minimum property. It is also a way to close a negative credit history," the vice-rector of the Academy of Labour and Social Relations explained.

The head of the department of stock markets and financial engineering of the Faculty of Finance and the Banking Business of RANEPA, Konstantin Korischenko, agreed with Safonov. "The first reason for such an increase in the number of personal bankruptcies is the novelty of this procedure," he said.

"The second reason is the population's increased household debt load," Konstantin Korishchenko said, adding that in the future a rising trend of personal bankruptcies will continue, as the situation has not yet reached its peak.