Russia’s bankruptcy law draws a sharp line between your home and everything else. The good news: your sole dwelling is shielded by statute. The bad news: there are exceptions that matter enormously.

What the Law Protects From Creditors

Article 446 of the Civil Procedure Code lists property that cannot be seized even in bankruptcy:

the sole residential premises and the land beneath it, provided it is the only home of the debtor and their family;
basic household furnishings (excluding luxury items);
clothing, footwear, and food;
tools and equipment necessary for the debtor’s professional activity.

If you own one flat and live in it — it will not be sold at auction.

The Critical Exception: a Mortgaged Flat

A mortgaged flat — even your only home — is not protected. The bank holds a pledge over it, and in bankruptcy the mortgaged property enters the bankruptcy estate and is sold, even if children are registered there.

What happens to a mortgaged flat in bankruptcy:

The flat is sold at auction.
The bank (as pledgee) receives 80% of the sale proceeds.
The remaining 20% is distributed among other creditors.
You exit bankruptcy without the flat — and without the debt.

A debt restructuring plan within the bankruptcy proceedings may allow you to keep the mortgaged flat, if you can agree on a new payment schedule with the bank.

”Excessive” Housing: the Supreme Court’s Position

Even a sole dwelling can be replaced with a smaller one in limited circumstances. The Supreme Court’s Plenary Ruling No. 48 permits creditors to apply for a “substitution” — selling the large flat and buying a smaller one for the debtor — if the property manifestly exceeds the debtor’s and their family’s reasonable needs.

In practice this is rare and requires a court order, but the risk is real for high-value, large-area properties.

Jointly Owned Marital Property

A flat purchased during the marriage is deemed joint marital property even if titled in one spouse’s name only. When one spouse files for bankruptcy:

The debtor-spouse’s share of joint property is included in the bankruptcy estate.
The flat may be sold in full, with the non-debtor spouse receiving their share in cash.
The non-debtor spouse may buy out the debtor’s share to keep the flat.

What Creditors Will Take

Everything else enters the bankruptcy estate:

a second flat, a dacha, land plots;
a car (except one essential for a disabled person);
securities, LLC shares;
expensive jewellery, antiques.

Can You Protect Property in Advance?

Some debtors transfer property to relatives before filing. This is dangerous: the financial trustee can challenge transactions made within 3 years before the bankruptcy petition if they prejudiced creditors (Article 61.2 of the Bankruptcy Law).

Lawful asset-protection strategies need to be discussed with a lawyer before debts accumulate — not when bankruptcy is already inevitable.

Frequently Asked Questions

Will my only flat be taken in bankruptcy? No, unless it is mortgaged. A sole dwelling is protected by Article 446 of the Civil Procedure Code and is excluded from the bankruptcy estate.

What happens to my mortgaged flat in bankruptcy? A mortgaged flat — even if it is your only home — can be sold at auction. The pledgee bank receives 80% of the proceeds. A debt restructuring plan agreed within the bankruptcy may allow you to avoid this outcome.

Can creditors take my spouse’s flat in bankruptcy? A flat titled solely in the spouse’s name cannot be seized directly. However, if it was purchased during the marriage, the debtor’s share in that jointly owned asset is included in the bankruptcy estate.

Bankruptcy and Your Home: What You Keep, What You Lose