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Writing off bad debts (procedure)

Saturday, 29 November 2014 12:31
Writing off bad debts (procedure)

Regulation and criteria for writing off debts

The mentioned procedure can be started towards the outstanding complied with the next criteria:

  1. loan debt, the statute of limitations of which has expired;
  2. debt not repaid in the result of insufficient property of private individual – private entrepreneur or legal entity which are declared bankrupts, in order established by the law or during their liquidation (remove registration of private entrepreneur);
  3. debt non repaid in the result of insufficient funds received from sale on auctions (public tenders) of the Customer’s property provided as a collateral of the mentioned debt, if other legal actions of the Bank regarding enforceable collection of other property of the borrower didn’t result in covering the debt in full amount;
  4. debt the collection of which was not possible due to force-majeure, disaster, proved in order stipulated by the current legislation.

Virtues for writing off debts

Virtues for writing off debt of the Customer under the Contract are:

  1. statute of limitations (general term is 3 (three) years under an appropriate Contract concluded with the Customer) has expired before the Law of Ukraine “On Enterprise Income Tax” became valid;

Debt, concerning which the Bank doesn’t apply to the court for its enforceable collection before expiring of the statute of limitations, is not included into its gross expenses and can not be compensated at the expense of its insured provisions.  

Principle amount which can not be collected from the Customer in the result of amicable settlement within the framework of the procedure on paying capacity restoration of the debtor or recognition him as a bankrupt, defined by the law, is not included to the gross expenses of the Bank, but can be compensated at the expense of its insured provisions.

  1. Debt under the Contracts which stipulate bills in favor of the Bank as the Customer’s obligations to be collateralized is compensated at the expense of insured provision of the Bank if protested bill remains unpaid within 30 calendar days after protesting and if a bill receiver initiated bankruptcy case against the bill provider in the court;
  2. Debt of the Customer, recognized as a bankrupt, in order established by the legislation, is compensated at the expense of insured provision of the Bank after receiving the court decision on recognition of the Customer as a bankrupt. 

Funds received by the Bank after termination of liquidation procedure and selling of the borrower’s property are included into gross expenses of the Bank during the tax period of their transferring.

When the Bank can’t apply to the court with an application on initiation of the bankruptcy case, because its demands towards the Customer make a total amount which is less that 300 minimum salaries, thus this amount is included in gross expenses of the Bank.

The bank has a right to compensate at the expense of insured provision a part of debt which is remained unpaid in the result of insufficient funds received from sale of collateralized property of the Customer/Collateral provider/Mortgage provider, and if other legal actions of the Bank relating to enforceable collection of another property of the Customer didn’t cover the debt in full amount.

Collateralized or mortgaged property is sold only on auctions (public sale).

In case of alienation of collateralized property, the Bank covers losses at the expense of income remained after taxation.

 

Debt of the enterprises, entities and establishments, the property of which can not be repossessed (or those which can not be privatized) according to the legislation of Ukraine, is compensated at the expense of insured provision of the Bank if, within 30 days after past due has occurred, it was not compensated by funds from the State budget.

Hereby, the Bank within the terms stipulated by the legislation is to apply to the court with a claim on losses compensation, received in the result of loan granting.

  1. Debt under the Contracts, admitted by the court completely or partially invalid at the Customer’s fault, is compensated at the expense of insured provision of the Bank,  if the Customer doesn’t repay a debt within 30 (thirty) calendar days after making decision by the court on recognition of them partially or completely invalid.
  2. Debt under the Contracts or their parts, admitted by the court invalid at the Bank’s fault or at the fault of both parties, is compensated at the expense of the Customer who returns accounts payable under the Contract, and if the debt is not repaid within 30 calendar days – at the expense of profit remained in the ownership of the Bank after taxation. 

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