Bankrupt in China? New Shenzhen Law Allows Individuals to Officially Go Bust Starting Next March
What’s news: China’s first personal bankruptcy legislation will take effect in South China metropolis Shenzhen on March 1 next year, according to an official statement on Thursday, providing a way out for those “honest but unlucky” individuals saddled with debts they cannot pay off.
According to the new legislation, residents who have lived in Shenzhen and participated in the city’s social insurance program for three consecutive years can apply for bankruptcy restructuring or liquidation, or conciliation.
According to the draft regulation released earlier this year for public feedback, after a court declares an individual bankrupt, debtors will be subject to consumption and work restrictions for three years, and, after that period, they can apply for exemptions from their remaining debts.
What’s the background: The policy comes after years of debate on whether and how China should set up a personal bankruptcy law system. Many observers argue the country needs to allow personal bankruptcy, as more and more individuals fall into debt amid easy access to consumer credit and sluggish economic growth.
China enacted an Enterprise Bankruptcy Law in 1986, but did not include a personal bankruptcy ordinance. The central government backed the establishment of a personal bankruptcy system in a document issued last year.
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