China: First Ruling on Personal Bankruptcy Liquidation by Shenzhen Court

published on 2 December 2021 | reading time approx. 1 minute

The Regulations of Shenzhen Special Economic Zone on Personal Bankruptcy came into force on 1 March 2021. Since then, there have been several cases where debtors and creditors reached an agreement through conciliation as well as rulings on personal bankruptcy reorganization. However, on 8 November 2021 the Shenzhen Intermediate People’s Court for the first time approved a personal bankruptcy liquidation.

The case of a woman was accepted on 2 September 2021. Her total assets were valued at around RMB 300,000, whereas her total amount of claims was determined at just over RMB 900,000, as declared by seven creditors. Her monthly income was stated at RMB 5,000 and she was not in a permanent employment relationship. She was declared insolvent, which means that she has to follow certain restrictions on luxury spending and that any new assets earned above a certain threshold for living expenses will be distributed to her creditors. After three years, her unpaid debts can be discharged.

In China there is currently no nationwide legal framework for personal bankruptcy. Shenzhen is therefore something like a pilot project, providing individuals an opportunity to reorganize their debts. It remains to be seen whether this local regulation will later be transferred into national Chinese law.