The reasons include excessive consumption, borrowing money to speculate in stocks, and poor management. Shenzhen has received 1635 personal bankruptcy applications, sir | related | personal
On June 20th, the debtor of the first personal bankruptcy case in China, Liang, received a civil ruling that the case had been fully executed and his outstanding debts had been relieved in accordance with the law, giving him an economic "rebirth" as a result.
The first personal bankruptcy regulation in China, the Shenzhen Special Economic Zone Personal Bankruptcy Regulations, has been in effect for over two years since March 2021. As of now, the Shenzhen Intermediate People's Court has received 1635 personal bankruptcy applications, reviewed 411 cases, and ruled to accept 117 bankruptcy applications.
A staff member of the Shenzhen Intermediate People's Court told Red Star Capital Bureau that, based on the situation over the past two years, there are more people choosing bankruptcy reorganization procedures. To go through this procedure, the debtor needs to develop a reorganization plan and explain their future repayment plan.
Red Star Capital Bureau has reviewed dozens of personal bankruptcy application announcements on the Shenzhen Personal Bankruptcy Case Information Network and summarized the five major reasons why these individuals may go bankrupt.
Some people are burdened with huge debts due to excessive consumption; Some people entered the stock market around 2015 to borrow money and speculate in stocks, but later entered the futures market to invest without making any profit; Some people have poor business management
Screenshot from Shenzhen Personal Bankruptcy Case Information Network
① Advanced consumption
Consumption exceeding annual income is 200000 yuan
The Shenzhen Special Economic Zone Personal Bankruptcy Regulations provide three procedural options for bankruptcy liquidation, reorganization, and settlement.
Taking Mr. Bai, who applied for personal bankruptcy reorganization procedures, as an example, according to his personal bankruptcy application announcement, he joined Shenzhen Mobile in 2004 with good company benefits and bought his first home at the end of 2007. In 2010, his daughter was born and her life has always been quite comfortable.
However, shortly after his daughter's birth, the funds originally intended for a house exchange were gradually depleted due to investment failures, and Mr. Bai could only rely on his work income to make a living. "Life has also begun to decline," he said
Mr. Bai stated that he has been in debt since 2013. Due to the young age of his daughter, his wife resigned to take care of the children at home. As a result, rent, child education, and living expenses gradually increased, and he did not control his own expenses, leading to a phenomenon of not being able to make ends meet.
By 2014, due to the reduction of welfare benefits and a sharp decline in income, the phenomenon of living beyond one's means had become more severe. Mr. Bai began to use credit cards to make up for the consumption gap, and interest rates continued to increase.
In 2015 and 2016, three banks granted Mr. Bai a credit of up to 890000 yuan. "My inner self was inflated, coupled with blind confidence, and I believed that the company's welfare and income would improve. I did not control my own consumption and used the money from these credits to maintain various expenses for myself and my family."
Mr. Bai claimed that he maintains his expenses and livelihood through credit cards, consumer loans, and online loans, as well as using cards to support his credit and loans to support his loans. Every year, he spends 200000 yuan more than his income, and the annual interest rate ranges from tens of thousands to hundreds of thousands of yuan.
As of the time of application, Mr. Bai's monthly income was 11200 yuan and his total liabilities were approximately 1.8 million yuan. Mr. Bai applied to adjust his debt interest and penalty, and repay the principal portion of the debt in installments.
At present, the Red Star Capital Bureau has not found any information on the acceptance of Mr. Bai's bankruptcy case on relevant websites, and his personal bankruptcy application has not yet been accepted.
② Investment failure
The stock market and futures market suffered a total loss of 3.2 million yuan
Red Star Capital Bureau has noticed that whether it is bankruptcy liquidation or bankruptcy reorganization, it requires a vote at the creditors' meeting.
The staff of Shenzhen Intermediate People's Court told Red Star Capital Bureau that based on current handling experience, the significance of bankruptcy liquidation is not significant because it is equivalent to exempting all debts, and the opinions of institutions such as banks will be more significant.
At the same time, even if the applicant chooses to go through bankruptcy reorganization procedures, it is recommended to cover the principal of the debt in their repayment plan. "This is not a mandatory requirement, but if the repayment amount is lower than the principal, it will cause significant opposition from creditors, especially the bank, which must be approved by creditors' vote."
However, Red Star Capital Bureau has reviewed the public announcement of personal bankruptcy applications by the court and found that there are more people who choose bankruptcy reorganization, but there are also people who choose bankruptcy liquidation, such as Mr. Pang, who filed for review in October 2022.
According to Mr. Pang's self description, from July 2014 to March 2015, the stock market was booming, and he also began investing in stocks at this time, investing all 300000 yuan in cash in the stock market.
The Shanghai Composite Index from 2014 to 2017, screenshot from Dongfang Wealth
After continuously falling below the limit at full positions, Mr. Pang wanted to take a bottom and turn the balance, so he continued to invest with a bank loan and invested a total of 1.9 million yuan before and after; As of December 2017, the cumulative loss was 1.82 million yuan, with the remaining 80000 yuan used for repayment.
However, Mr. Pang did not slow down from the cliff.
On the recommendation of netizens, Mr. Pang entered the commodity futures market for investment in September 2017, with a total investment of 1.4 million yuan. However, he still failed to make a profit, resulting in a cumulative loss of 1.38 million yuan. The remaining 20000 yuan was used for repayment.
That is to say, Mr. Pang lost a total of 3.2 million yuan in the stock and futures markets before and after.
Due to Mr. Pang's choice of bankruptcy liquidation, once accepted, he can only retain limited property necessary for his basic life and career, such as an appropriate amount of cash, clothing, necessary household appliances, stationery, and books. The remaining property, such as houses and cars, will be taken over by the administrator.
According to Mr. Pang's declaration, his current average monthly salary is 6613 yuan. He has no car or house under his name, and his cash and bank deposits are both 0 yuan. He has 17.87 yuan in third-party payment platforms and 17500 yuan in housing provident fund.
Like Mr. Bai, the Red Star Capital Bureau was unable to find information on the acceptance of Mr. Pang's bankruptcy case on relevant websites, and his personal bankruptcy application may not have been accepted yet.
The staff of Shenzhen Intermediate People's Court told Red Star Capital Bureau that when the debtor applies, they will comprehensively sort out the reasons for their debt, and if there are more extreme situations, such as excessive spending and speculative behavior that is significantly higher than their personal ability, "this is not encouraged."
③ Poor management
Entrepreneurial failure and unstable work, burdened with approximately 1.15 million yuan in debt
Red Star Capital Bureau has found that some applicants have also been burdened with huge debts due to poor business operations.
For example, Mr. Chen, who came to Shenzhen for development in 2007. In 2009, Mr. Chen opened a company and rented an 80 square meter office with 5 employees. His main business was selling barcode printers, data collectors, and related consumables.
According to Mr. Chen's self description, since June 2010, due to the impact of e-commerce platforms, his sales revenue has significantly decreased, and the company's monthly expenses were about 60000 yuan, which was maintained until April 2011. Unable to persist, he laid off his employees and closed the business.
After completing this entrepreneurship, Mr. Chen lost over 1 million yuan of his own principal and also carried about 500000 yuan of debt. In the following years, he was heavily urged by third parties to collect payments, and each piece of work was not done for long.
Meanwhile, Mr. Chen got married in 2010, and his spouse did not have a stable job. His two children were born in Shenzhen in 2010 and 2014, respectively. The cost of living was huge, and he was unable to pay off his debts.
At present, Mr. Chen has two jobs. He works at a security service company during the day with a monthly income of 5300 yuan, and at a certain environmental service company at night with a monthly income of 4600 yuan. The total monthly income is 9900 yuan.
According to Mr. Chen's declaration, he has cash of 500 yuan, bank deposit of 98 yuan, third-party payment platform account of 4 yuan, housing provident fund of 2773 yuan, and no house or car under his name.
In the draft restructuring plan, Mr. Chen proposed that his current total liabilities are about 1.15 million yuan. He plans to repay 5000 yuan per month and can repay 300000 yuan within 5 years, hoping to reduce some of the principal and debt interest.
Shortly after Mr. Chen's application, in September 2022, the Shenzhen Intermediate People's Court accepted his personal bankruptcy reorganization case. As of October 20, 2022, a total of 15 creditors have filed 17 claims with Mr. Chen's bankruptcy administrator, with a total declared amount of 1.3339 million yuan.
On November 4, 2022, Mr. Chen's creditors' meeting was held, and 14 creditors disagreed with Mr. Chen's proposed restructuring plan draft. However, Mr. Chen stated that he was unable to propose a better plan due to his personal situation and therefore could not make any modifications.
Finally, the bankruptcy administrator applied to terminate Mr. Chen's personal bankruptcy reorganization proceedings, and the court allowed it in accordance with the law.
Screenshot from Shenzhen Personal Bankruptcy Case Information Network
④ Sudden misfortune
Both parents of the couple are suffering from cancer and cannot make ends meet
Red Star Capital Bureau has noticed that in addition to excessive consumption, investment failures, and poor management, there are also people who have taken the path of applying for bankruptcy reorganization due to sudden changes in their families.
According to Mr. Shen and Ms. Jia, both of their parents have been diagnosed with cancer, and they have been traveling back and forth between their hometown and Shenzhen city.
At the same time, they are earning less and less money in their business, with high expenses and unable to make ends meet. They use credit cards and online loans to circulate with each other, owing more and more debts, and the interest continues to circulate.
"Faced with overdue payments and continuous debt reminders from banks, unable to repay, I am applying for personal bankruptcy reorganization and hope to work hard to repay my debts." The couple stated in their self narration that their total debt is 1.03 million yuan.
According to Mr. Shen and Ms. Jia's declaration, they have a small car under their name. Mr. Shen usually uses this car to transport goods, and his daily income is about 400-500 yuan. He also has some part-time jobs, with a monthly income of about 15000 yuan. In addition, Ms. Jia works as a front desk salesperson in a certain company with a monthly income of approximately 2500 yuan.
In the draft restructuring plan proposed by the two, they deducted 9000 yuan from their monthly living expenses and repaid 6000 yuan per month. Within five years, a total of 360000 yuan was repaid.
However, Red Star Capital Bureau was unable to find information on the acceptance of bankruptcy cases for Mr. Shen and Ms. Jia on relevant websites, and their bankruptcy applications may not have been accepted yet.
⑤ Other types
After resignation, the legal representative still owes 570000 yuan in debt
In the aforementioned four situations, the debtor's borrowing was an active act, but Red Star Capital Bureau found that some debtors may be "scapegoats".
According to Ms. Wang's self description, from 2011 to 2015, her actual position at Company A was business manager, but she served as the legal representative. The actual operator of the company was Xie Mouming.
In 2015, Ms. Wang left Company A and worked for Company B for a year before joining Company C and continuing to work there until now.
However, in 2016, Company A was taken over by Xie Yanlu, the son of Xie Mouming. Xie Yanlu continued to use Ms. Wang's multiple credit cards and small loans to solve Company A's cash flow problems. Due to timely repayment, Ms. Wang did not intervene.
In November 2018, Xie Mouyan used a small tax loan of 345000 yuan from Company A. In July 2019, she found herself unable to repay the loan. Ms. Wang and Xie Mouming went to the bank to explain the situation, but the bank did not respond.
In August 2019, Company A announced bankruptcy, and after the machinery and equipment were sold, employees were paid their salaries. The rent deposit was used to offset unpaid rent and utility bills.
Ms. Wang claimed that she lost contact with Xie Mouyan after February 2021, and Xie Mouyan has not paid any fees for loans, social security taxes, etc. since August 2019, and these debts have been repaid by herself.
Meanwhile, Ms. Wang claimed that before Company A was determined to go bankrupt, she still owed some supplier payments. She ultimately signed a repayment agreement and stamped it with the company seal.
According to Ms. Wang's application, she is currently working as a procurement manager at Company C, with an average monthly salary of around 9800 yuan, as well as over 2000 yuan in savings and over 18000 yuan in provident fund. At present, the total debt is 570000 yuan.
Company A has been deregistered, and the legal representative before the deregistration was Ms. Wang. Screenshots from Tianyancha
She chose a bankruptcy settlement procedure, paying off 6000 yuan per month for a total of 216000 yuan over three years.
Red Star Capital Bureau has noticed that unlike bankruptcy liquidation and reorganization, bankruptcy settlement is negotiated by the debtor and creditors themselves, and the court only reviews the standardization of the settlement process and the legality of the settlement agreement.
However, Red Star Capital Bureau was unable to find information on Ms. Wang's bankruptcy case acceptance on relevant websites, or has not yet been ruled for acceptance.
