The government of Shenzhen, South China’s Guangdong Province, has released a draft regulation allowing individuals to declare themselves insolvent, the first on the Chinese mainland.
China currently only has a law on enterprise bankruptcy which lawmakers said was unfair to individuals who could not prevent corporate debts being transferred to them and their families.
The draft states that anyone who has paid social insurance in Shenzhen for three consecutive years and are unable to pay their debts may declare insolvency. After existing assets are distributed to creditors, the remaining debts will be discharged.
To prevent a false declaration, the regulation imposes restrictions on those who have declared insolvency, such as traveling business or first class, staying in hotels ranked above three stars, patronizing luxury entertainment venues, buying real estate and vehicles, sending children to expensive private schools, renting high-end offices, buying high-end financial products, and serving as high-ranking executives in commercial companies or financial organs.
As of the end of January, Shenzhen had over 1.2 million businesses run by self-employed individuals, the Xinhua News Agency reported. Experts said that the regulation will help honest debtors in difficulty to restart their careers.