Exemption of Unliquidated Debts in the Context of the Revision of the Bankruptcy Law in China

In China, the number of over-indebted debtors has been increasing, and the “enforcement difficulties” in judicial practice have also taken up a large amount of judicial resources. The personal bankruptcy system can provide an opportunity for honest individuals in serious debt distress to reorganize their debts and maintain social stability. China has not yet enacted its personal bankruptcy law, and since the formal implementation of the Regulations on Personal Bankruptcy of the Shenzhen Special Economic Zone in 2021, many courts across the country have begun to implement pilot personal bankruptcy systems. The unliquidated debts exemption rule, as the core of the personal bankruptcy system, enables honest but unfortunate debtors to obtain adequate protection, their remaining debts may be exempted and their economic regeneration would be promoted. In order to prevent the unliquidated debts exemption rule from being used by dishonest debtors to evade debts, corresponding restrictions shall be attached to the establishment of the rule, such as the debts that cannot be exempted, the circumstances under which the unliquidated debts shall not be exempted, and the setting of a period of investigation. How to balance the protection of the legitimate rights and interests of creditors and the human rights of debtors is crucial to the construction of the unliquidated debts exemption rule. The application of the rule of unliquidated debts exemption should be strictly regulated, so that the rule could truly play its value, otherwise the interests of creditors would be inevitably damaged.