Russian court takes bankrupt man’s only home to pay off debt for first time in history; he is given small flat as replacement

For the first time in the history of Russia, a court has ruled that a citizen who declared bankruptcy should have his only housing seized and auctioned in order to pay back a debt. The unprecedented decision was upheld on appeal.

As compensation, he was given a small one-bedroom apartment. According to lawyers interviewed by Moscow daily Kommersant, this is the first known bankruptcy case in which a home was forcefully sold and replaced by more modest housing.

The case surrounds Ekaterinburg resident Arkady Potorochin, who was declared bankrupt in 2018, and owed his creditors 21.4 million rubles ($290,000). Potorochin lived in a five-room apartment, which was removed from his bankruptcy filing because it was his only dwelling, and he would therefore be left homeless. Russia’s civil code allows debtors to retain ownership of their only housing.

However, a year later, his creditors took him to court for a second time, and offered to replace his five-room 150m² apartment with a smaller 32m² one-bedroom flat. The court ruled in the claimant’s favor, deeming it fair because the man is single and has no children.

His apartment was sold for 8.25 million rubles ($112,000) last month.

According to some, the decision may become a precedent for similar cases in the future, especially in cases where a bankrupt individual owns a luxury home.

Earlier this year, Russia’s parliament passed a law that forbade pets from being taken away from their owners by bailiffs as repayment for debt. The new legislation will not protect working animals used in entrepreneurial activity, but will stop the likes of dogs and cats from being removed to pay off outstanding arrears.

Last month, the State Duma also passed a law that could see someone imprisoned for up to seven years for premeditated bankruptcy.

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