Appellate Court Cites Debtor’s Vacation in Turkey as Evidence of Bad Faith

PRObankrotstvo reports that the court emphasized that instead of repaying debts, the debtor spent borrowed funds on a vacation abroad and living in Kazakhstan. Case No. A60-5753/2023.

Vladislav Korneychuk, Head of Practice at FBK Legal, commented on the case:

When the case materials confirm that, instead of directing funds toward settlements with creditors, an individual spends them on trips to Turkey and living abroad, courts rightly perceive this as evidence of abuse of rights. The situation is compounded by the fact that, when taking out new loans, the debtor concealed from creditors information about his actual debt burden and existing unfulfilled obligations, deliberately misleading the banks in order to obtain money that was subsequently spent on consumer needs and travel.

For legal practice, this serves as an important reminder of the strict application of the provisions of Article 213.28 of the Bankruptcy Law. Under this norm, a citizen may not be discharged from obligations if bad-faith conduct is established, including concealment of information or provision of knowingly false information when obligations arose, as well as the commission of other unlawful actions. Courts consistently proceed from the premise that the institution of bankruptcy is intended to discharge debts only for honest participants in commerce, and the combination of deliberately concealed debt with subsequent unreasonable spending of borrowed funds precludes the possibility of applying the debt forgiveness mechanism. Creditors gain an additional argument for refusing to discharge a citizen from obligations by proving systematic disregard of standards of good-faith conduct.