The Supreme Court of Russia is determining whether a bankrupt citizen can keep compensation for moral damage
June, 30 2021

The Supreme Court (SC) of the Russian Federation will decide whether a bankrupt citizen can receive payments in compensation for moral damage, or this money should go to the bankruptcy estate, the court's filing cabinet testifies.

The Judicial Collegium for Economic Disputes (JCED) the Supreme Court of the Russian Federation will consider this issue on the example of the bankruptcy case of Zhanna Korepanova. At the beginning of 2020, she initiated a case on her own insolvency due to debts totaling 6.4 million rubles to collectors and Uralsib Bank.

In March 2020, the court declared her bankrupt and introduced a procedure for the sale of her property. After that, her financial manager Olesya Ogorodnikova asked the court to exclude Korepanova's right to claim compensation for moral damage from the bankruptcy estate. In 2016, the court recovered this compensation in the amount of 1 million rubles from the murderer of Korepanova's daughter. Monthly payments from the convict are 2.5-2.7 thousand rubles, the debt is about 850 thousand rubles.

The financial manager substantiated her application by the fact that compensation for moral damage is inextricably linked with the personality of the debtor, and Article 131 of the Insolvency Law allows the property to be excluded from the bankruptcy estate on this basis. She also referred to the Article 383 of the Civil Code (CC) of the Russian Federation, which prohibits the transfer of rights to claim compensation for harm to another person, as would happen if compensation payments were made not to Korepanova, but to her creditors.

However, the courts of three instances rejected this request. In their opinion, in the case of Korepanova's bankruptcy, it is not a claim for compensation for moral damage that will be surrendered, but the right to receive money recovered by a court decision. And if take into account the situation from this point of view, then the money should go to the bankruptcy estate, since the assignment of a monetary obligation is not prohibited.

"After the claimant applies to the court with a claim for compensation for moral damage, the court resolves this claim on the merits, the recovery of monetary compensation and the entry into force of the court decision, it is considered that the claimant has personally exercised her right," the Arbitration Court of the Udmurt Republic explained its decision.

But the financial manager did not agree with the refusal of the courts and appealed to the Supreme Court of the Russian Federation. In her complaint, she refers to the right of the courts to additionally exclude the property of a citizen from the bankruptcy estate, while observing the balance of interests of the debtor, and their dependents, and creditors.

The judge of the Supreme Court of the Russian Federation, Ekaterina Kornelyuk, considered this argument sufficient to transfer the complaint to the JCED of the SC for consideration. The meeting is scheduled for July 1.

Rizvan Fazdalov
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