BANKRUPTCY IN UKRAINE 2025: HOW CREDITORS CAN RECOVER THEIR MONEY
The number of bankruptcy cases in Ukraine is increasing as a result of economic fluctuations, wartime risks, and the deterioration of financial stability in businesses. At the same time, satisfying creditors’ claims is becoming more complicated: competition for limited assets, new restructuring procedures, and frequent legislative changes create risks for parties holding claims against a debtor.
This article outlines the key mechanisms for debt recovery within bankruptcy proceedings in Ukraine, the practical issues related to the status of interested parties and procedural stages, and provides practical recommendations for creditors.
1. Concept and stages of bankruptcy proceedings
1.1. General overview of bankruptcy proceedings
Bankruptcy procedures are governed by the Code of Ukraine on Bankruptcy Procedures (CUBP). Recent legislative changes have introduced mechanisms of preventive restructuring and partial implementation of EU directives these reforms affect creditors’ rights and the procedure for asserting claims.
Objectives of the procedure. The primary goals are either to restore the debtor’s solvency (rehabilitation, restructuring) or, if recovery is impossible, to declare insolvency, liquidate assets, and distribute proceeds proportionally among creditors.
Parties to the proceedings. Key participants include the debtor, creditors (including secured and partially secured creditors), the insolvency practitioner (arbitration manager), and the commercial court. Creditors form the register of claims and participate in creditors’ meetings; the insolvency practitioner manages the insolvency estate; the court supervises the progress of the case.
1.2. Stages of bankruptcy proceedings
– Initiation of bankruptcy proceedings. The court opens proceedings upon application of a creditor or the debtor where grounds provided by the CUBP exist.
– Asset management (property administration). Temporary restrictions on asset disposal are imposed; the insolvency practitioner assumes control over the bankruptcy estate; creditors’ claims are reviewed; and the creditors’ register is approved.
– Rehabilitation / restructuring. Prior to liquidation, preventive (pre-trial) restructuring or court-approved rehabilitation can be applied to preserve the business, restructure obligations, and increase the recovery rate. The preventive restructuring regime introduces special rules and a moratorium on enforcement.
– Liquidation. If rehabilitation is not feasible, the debtor’s assets are sold and proceeds distributed among creditors pursuant to statutory priority.
– Closing of proceedings. After the distribution of assets or other statutory grounds, the proceedings are closed; claims not filed in time generally become unenforceable.
1.3. Creditor’s interested-party status
An interested party is a person whose relationship with the debtor (corporate control, affiliation, prior transactions) raises reasonable doubt about impartiality.
Criteria for determining interest include:
– control or affiliated relationships;
– acquisition of claims from another interested party;
– contractual relationships and mutual transactions shortly before bankruptcy;
– involvement in payment chains.
Consequences of identifying interest:
– restriction or exclusion of voting rights at creditors’ meetings;
– exposure to challenges of claims by other creditors.
Proving the absence of affiliation may be difficult, as courts analyze documentation, transaction chains, and corporate links.
2. Mechanisms for debt recovery within bankruptcy
Submission of claims and the creditor register. After proceedings are opened, creditors must file their claims for inclusion in the register. Judicial recognition of the claim is essential, as it determines priority and distribution.
Priority and categories of claims.
– Current expenses are paid first;
– Secured claims have priority against collateral;
– Unsecured (competitive) creditors participate in proportional distribution.
Secured creditors may choose to remain secured or participate in the bankruptcy estate in whole or in part.
Role of the insolvency practitioner.
The practitioner reviews claims, forms the liquidation estate, challenges suspicious transactions, organizes asset sales, and distributes proceeds. The effectiveness and integrity of this party largely determines the recovery rate.
3. Specific features at certain stages of the procedure
– Commencement and moratorium. A moratorium on enforcement applies during proceedings and during preventive restructuring, limiting individual actions by creditors and creating a “window” for collective restructuring.
– Asset tracing and clawback. The law provides mechanisms to invalidate transactions aimed at asset stripping — a key tool for restoring the insolvency estate.
– Challenging actions of related parties. If the debtor or affiliates engaged in transactions detrimental to creditors, the insolvency practitioner and dissenting creditors may initiate challenges.
– Distribution of the liquidation estate. Actual proceeds are often insufficient to satisfy all claims; priority and collateral determine the amount recovered.
4. Case law and common issues
Common abuses include asset transfers prior to commencement of bankruptcy, sham transactions, and internal settlements among affiliated entities. Courts actively address such conduct and allow clawback of assets into the insolvency estate.
Problems with claim recognition include formal defects, missed deadlines, or incorrect qualification of claims — frequent grounds for denial. Case law highlights the importance of procedural compliance and adequate evidence.
Insufficiency of assets is common even properly filed claims may be satisfied only partially or not at all.
5. Alternative or parallel recovery tools
– Enforcement proceedings prior to bankruptcy. If a creditor already holds an enforceable judgment, they should maximize enforcement before bankruptcy is initiated.
– Personal (subsidiary) liability of management or founders. If management actions caused insolvency or harmed creditors, managers or beneficial owners may be held subsidiarily liable sometimes allowing creditors to recover additional funds.
6. Conclusions and recommendations
Main challenges: insufficient assets, procedural mistakes in filing claims, complications due to interested-party status, moratorium during restructuring, and the need to identify and challenge suspect transactions quickly.
Recommendations for creditors:
i. Act immediately: collect documents and file claims within statutory deadlines.
ii. Verify interested-party status: avoid acquiring claims from interested parties without proper due diligence.
iii. Engage professionals: legal counsel and financial/audit experts increase chances of recovery.
iv. Consider preventive restructuring: when debtor cooperation is possible, restructuring may lead to a higher recovery rate than liquidation.
v. Assess economic feasibility: for small claims, bankruptcy may be more costly than the expected return — consider alternative recovery mechanisms.
23.10.2025
