(ECNS) -- China plans to establish a personal bankruptcy system to address the problem of joint debt liability faced by natural persons in the case of enterprise bankruptcy, according to a document from the National Development and Reform Commission, China’s top economic planner.
Currently when a court fails to make a person pay his or her debt, the debtor will appear on the court's black list, which will incur restrictions such as being unable to travel by plane or high-speed train, or apply for loans. However, many on the list in civil and commercial cases are not intentionally repudiating their debts but simply have no money to repay.
The new document says efforts will be made to gradually allow private citizens to become exempt from those restrictions on consumption. Citizens will also be exempt from paying business debts secured with their guarantee. This will finally lead to the establishment of a personal bankruptcy system.
In addition, efforts will be made to improve legislation and regulations guiding the procedures for failing financial institutes to exit the market, either by themselves or in different ways. Other schemes such as a deposit insurance system are expected to play a greater role in supporting such exits.
In addition, no parties shall prevent state-owned enterprises that meet bankruptcy conditions from market exit，according to the document. When a state-owned company goes bankrupt, creditors such as financial institutions may not require the government to assume liability for debt settlement beyond the amount of their capital contribution to the company.