China's first ruling on personal bankruptcy cases took effect on Monday, about four months after the country's first local regulation on personal bankruptcy went into effect in March.

 

The case falls under the category of reorganization cases. The applicant, Liang Wenjin, a 35-year-old Shenzhen resident, was saddled with debts of about 750,000 yuan (115,725 U.S. dollars) after a failed business venture.

 

Liang submitted a personal bankruptcy reorganization plan in March to Shenzhen Intermediate People's Court, which approved his application on Monday.

 

The court put a stop to accruing interest on the day it accepted Liang's personal bankruptcy application. Since the applicant found a job after his failed start-up business and earned about 20,000 yuan a month, the court agreed that Liang would be subject to a restructuring process, and can renegotiate an installment repayment plan with his creditors, rather than directly going into bankruptcy liquidation.

 

According to the verdict, with interest and late fees waived, Liang has to repay all the principal to his creditors in three years.

 

During the period, apart from 7,700 yuan a month for the basic living expenses of his family of four, Liang has promised that his remaining income would be used to pay off the debt.

 

If Liang fails to follow through with the plan, creditors have the right to file for his liquidation in court, the ruling said.

 

The Shenzhen Special Economic Zone's regulations on personal bankruptcy provide for liquidation, restructuring or reconciliation for qualified individuals. The court shall select the appropriate type of insolvency proceeding in the light of the specific circumstances of the debtor and creditors.

 

In 2013, the court sent a research team to Hong Kong for studying the personal bankruptcy system and carrying out a discussion on the feasibility of personal bankruptcy legislation.

 

In August 2020, Shenzhen's regulations on personal bankruptcy were approved by local legislators. In November of the same year, the Supreme People's Court of China issued a document to support the pilot reform of the bankruptcy system in Shenzhen and allowed the city to introduce the system for natural persons on a trial basis.