Restoration of Solvency and Bankruptcy of a Citizen of the Republic of Kazakhstan

🔷 I. GENERAL CHARACTERISTICS

Article 20-1 of the Civil Code of the Republic of Kazakhstan reflects a systemic innovation in Kazakh civil law—the introduction of the institution of personal (individual) bankruptcy, which previously did not exist in Kazakhstan.

This article refers to a special law — 📚 the Law of the Republic of Kazakhstan dated December 30, 2022 No. 166-VII “On Restoration of Solvency and Bankruptcy of Citizens of the Republic of Kazakhstan” (entered into force on March 3, 2023).

🔹 II. CONTENT AND LEGAL MEANING OF THE ARTICLE

Clause 1. In case of inability to satisfy creditors’ claims, three mechanisms are applied:

· restoration of solvency (rehabilitation);· out-of-court bankruptcy;· judicial bankruptcy.

Clause 2. Individual entrepreneurs (IE) are excluded— a different legal regime applies to them under the Entrepreneurial Code and the Law “On Rehabilitation and Bankruptcy.”

🔷 III. PROCEDURES PROVIDED BY THE SPECIAL LAW

✅ 1. Restoration of Solvency (Chapter 2 of Law No. 166-VII)

Purpose: to help a citizen repay debts without being declared bankrupt.

Conditions:

· the debtor has income (e.g., salary);· is willing to repay according to a schedule;· overdue payments do not exceed 5 years;· no status of an individual entrepreneur.

📌 Result: a debt repayment schedule is approved via eGov or by a court; the debtor continues to fulfill obligations under supervision.

✅ 2. Out-of-Court Bankruptcy (Chapter 3 of the Law)

Purpose: to release a citizen from debts through an administrative procedure (via eGov, Public Service Centers, State Corporation “Government for Citizens”).

Conditions:

· total debt exceeds 1,600 MCI (as of 2025 — more than 5.8 million tenge);· debt has not been repaid for more than 12 months;· no property/assets;· no income to restore solvency.

📌 Authority: the authorized body on bankruptcy — State Corporation “Government for Citizens.”📌 Consequences: debts are written off (except mandatory obligations such as alimony, compensation for harm, etc.); restrictions on obtaining loans and entering into transactions for 5 years.

✅ 3. Judicial Bankruptcy (Chapter 4 of the Law)

Purpose: to write off debts through court proceedings.

Grounds:

· debt exceeds 1,600 MCI;· the debtor has property, but it is insufficient to satisfy creditors’ claims;· overdue obligations for more than 12 months.

📌 Competent court: district (city) court at the place of residence of the citizen.📌 Result: property is sold, the remaining debt is written off, and legal consequences arise (e.g., prohibition on engaging in entrepreneurial activity, restrictions on leaving the country, etc.).

🔷 IV. LIMITATION: NOT APPLICABLE TO INDIVIDUAL ENTREPRENEURS (Clause 2)

Individual entrepreneurs are excluded from the scope of Article 20-1 and Law No. 166-VII.They are governed by the Law “On Rehabilitation and Bankruptcy” (2014).

📌 Reason: individual entrepreneurs conduct business activities and are equated to business entities—their bankruptcy is associated with entrepreneurial risks.

🔷 V. RELATED LEGAL PROVISIONS AND ACTS

Document — Application

Civil Code of the RK, Articles 20, 21 — Property liability of citizensLaw No. 166-VII — Bankruptcy and solvency restoration proceduresCivil Procedure Code of the RK — Judicial bankruptcy procedures (Chapter 26)Tax Code of the RK — Accounting of tax debts in bankruptcyLaw “On Enforcement Proceedings” — Termination of enforcement proceedings in bankruptcyConstitution of the RK, Articles 26, 29 — Protection of property rights and borrowers’ rights

🔷 VI. JUDICIAL AND ADMINISTRATIVE PRACTICE

🔹 Example 1: A citizen applied for out-of-court bankruptcy via eGov. Debt exceeding 12 months and lack of income were confirmed. The procedure ended with debt write-off.

🔹 Example 2: The court refused judicial bankruptcy after establishing that the debtor had evaded alimony payments—such debts are not subject to discharge.

🔷 VII. INTERNATIONAL STANDARDS

Norm — Content

UNCITRAL Legislative Guide on Insolvency Law (2005) — Protection of creditors’ rights and provision of a “second chance” to the debtorInternational Covenant on Civil and Political Rights — Access to justice and prohibition of imprisonment for debt (Article 11)UNCITRAL Model Law on Cross-Border Insolvency — Used for comparing insolvency procedures across jurisdictions

🔷 VIII. CONCLUSION

Article 20-1 of the Civil Code of the RK establishes the foundation for a humane and structured mechanism for relieving citizens from excessive debt. It:

· differentiates situations into three procedures (rehabilitation, out-of-court and judicial bankruptcy);· excludes individual entrepreneurs;· balances the interests of debtor and creditor;· is integrated with other codes and Law No. 166-VII. 

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