SHENZHEN’S personal bankruptcy regulations, the first of its kind in China, will come into effect March 1, 2021.

The regulations will provide a way out for honest but unfortunate individuals saddled with debt they cannot pay back, a report by Shenzhen Economic Daily said yesterday.

The regulations, recently released by the city’s legislature, will play an important role in constructing a complete and modern bankruptcy system and market exit mechanism. Through the personal bankruptcy rules, which drew lessons from international conventions and practices, law-abiding debtors in Shenzhen can expect to start a new life again.

The rules were set to better protect the legal rights of debtors. Those in debt can have up to 200,000 yuan (US$29,280) in total assets exemption that can be used for daily life, education and medical needs of debtors and their dependants.

Residents who have made social insurance payments for at least three consecutive years will be able to seek personal bankruptcy protection under the new rules, if they meet the relevant clauses.

Debtors can opt for liquidations, reorganizations or resettlements if they don’t have the ability to pay off debts or become insolvent due to production or operating losses or other reasons like increased living and consumption costs, according to the rules.

Meanwhile, the eligible personal bankruptcy applicants, who are exempted from all or part of their debts if declared bankrupt by court, will be subject to strict supervision in personal expenditures, income distribution and career qualifications.

During the three-year supervision period, the bankrupt debtors cannot use VIP or business seats when taking flights, soft sleepers of trains or Grade I seats of high-speed trains. They are not allowed to check in to three-star or above hotels, nightclubs or golf clubs. They are also restricted from purchasing properties or vehicles, renting offices at expensive office buildings, hotels or apartments, or expanding or decorating houses. Additionally, their children are not allowed to study at high-cost private schools.

In career qualifications, they are not allowed to serve as executives of publicly listed companies, non-listed companies or financial institutions.

The regulations protect those honest debtors who unfortunately run into financial trouble. Those who intend to take advantage of the loopholes to dodge their debt liabilities will find that their intentions will not be realized. Instead, they will receive severe punishments.

To prevent debt evasion, a registration system will be established to reflect and disclose personal bankruptcy situation promptly and accurately. If the applicants had been found to evade debts intentionally or make false statements, the court should reject the applications. If the debtors are found to have hidden, destroyed or forged financial documents, the court can reprimand, fine or detain the applicants, or even arrested the applicants if the offenses constitute a crime. 

(Han Ximin)