The necessity of a personal bankruptcy system in China

By Wang Wei and Gao Menglu, Co-effort Law Firm

The basic law establishing China’s current bankruptcy system framework is the Enterprise Bankruptcy Law, adopted by the Standing Committee of the Tenth National People’s Congress on 27 August 2006. From its name and contents it can be seen that this law limits the scope of application of the bankruptcy system to enterprises with legal personality, and ignores natural persons.

王炜 WANG WEI 协力律师事务所高级合伙人 Senior Partner Co-effort Law Firm
Senior Partner
Co-effort Law Firm

By contrast, in many countries with bankruptcy legislation, “personal bankruptcy” usually constitutes an important part of the bankruptcy system. The term “personal bankruptcy” means a legal system under which an individual who is insolvent declares bankruptcy by way of the statutory procedure, distributes all of his or her property in an equitable manner to all of his or her creditors, and is exempted from liability for the portion that he or she is unable to pay back. Accordingly, it can be said that, by only implementing “enterprise legal person bankruptcy”, China finds itself in the minority around the world. To remedy the absence of a personal bankruptcy system and improve China’s bankruptcy system are imperative.


Simplification of social claim-debt relationships, which are conducive to maintaining a good economic order. In modern society, the relationships between economic entities are tightly interconnected, numerous and complex, and claims and debts are intertwined and interlinked. The unresolvability of one claim-debt relationship can make the thorough clearance of multiple claim-debt relationships linked to it impossible. Such “debt chains” can affect the stability of social order and the normal operation of the economic order. If debtors with no capacity to perform are continually given an out from the “debt chain” through a personal bankruptcy system, complex claim-debt relationships in society can be simplified and clarified, which is conducive to maintaining a good economic order.

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Wang Wei is a senior partner and Gao Menglu is a paralegal at Co-effort Law Firm



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