Exclusion of property seized in a criminal case from the bankruptcy estate

In bankruptcy cases, there are often situations, when the debtor’s property is previously seized in a criminal caseto ensure compensation for damage caused by a crime, which is why such property was excluded from the bankruptcy estate and other creditors were deprived of the opportunity to sell it in bankruptcy proceedings.

Judicial practice on this issue has developed ambiguously, and there are cases where courts excluded property seized in a criminal case in favor of victims, thereby depriving other creditors of the opportunity to claim the distribution of funds received from its sale.

In one of the cases thatreached the Supreme Court, the issue of excludinga convicted debtor from the bankruptcy estate of the only housing that was seized in a criminal case was considered.

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Deciding on the fate of the disputed apartment, the courts proceeded from the fact that in the framework of criminal proceedings, the court of general jurisdiction seized this property to ensure the execution of the sentence in terms of a civil claim. At the same time, since the decision that any property cannot be foreclosed on was not taken, by virtue of the principle of general obligation of judicial acts, the sentence is subject to execution, and the adoption by arbitration courts of a different decision in respect of disputed property is unacceptable.

Regarding therefusalяя to satisfy claims for exclusion from the bankruptcy estate of the debtor of an apartment, which is the only habitable dwelling for the debtor, the Judicial Board of the Supreme Court indicated thatin order to ensure compensation for damage caused by a crime, the court may take measures, including seizing the property of the suspect, accused, defendant, convicted person (Article 115, part 210 of Article 230 of the Code of Criminal Procedure of the Russian Federation). At the same time, property that cannot be foreclosed on in accordance with the Civil Procedure Code of the Russian Federation (Part 4 of Article 115 of the Code of Criminal Procedure of the Russian Federation) is not subject to seizure, and the seizure imposed on such property is subject to cancellation upon the application of an interested person (Part 8 of Article 115 of the Code of Criminal Procedure of the Russian Federation).

In the event of bankruptcy of a convicted debtor who was a civil defendant, the creditor’s claims for compensation for damage caused by a crime are subject to satisfaction in the bankruptcy case of this debtor. In this regard, creditors under such an obligation from a tort (crime) are the same creditors as any other. Their requirements are subject to satisfaction as part of the third stage of the register.

Interim measures (measures to secure a claim), including the seizure of property, are essentially an accelerated means of protecting the property interests of a person who has suffered property damage (losses) in one form or another (Chapter 13 of the Civil Procedure Code of the Russian Federation, Chapter 8 of the Agribusiness Code of the Russian Federation). These measures are in the nature of temporary restrictions established for the preservation of disputed property until the validity of the creditor’s claims is confirmed, and in this case the property will not fall under the jurisdiction of the authority controlling the enforcement of a judicial act in accordance with the procedure established by law. The civil claim satisfied by the court verdict confirms the legitimacy of the creditor’s claims. Control over the distribution of the property of a convicted bankrupt debtor falls under the jurisdiction of the arbitration court.

Despite the earlier seizure, the debtor’s property, by virtue of the direct instructions of Articles 126 and 213.25 of the Bankruptcy Law, is included in its bankruptcy estate, is subject to free sale only in bankruptcy proceedings, and the proceeds are distributed among all creditors, including creditors from the tort.

Thus, the enforcement of judicial acts on property claims against an insolvent debtor, including claims for compensation for property damage caused by a crime, confirmed by a court verdict, is carried out in the bankruptcy case.