I have a love/hate relationship with Russia and the former Soviet Union. Being a child of the eighties, that should come as no surprise for what seemed like forever in the early to mid 1980s, we were bombarded by dire predictions that it was only a matter of time before the Soviets got so fed up with the good old United States that it would start bombing our fair country into oblivion.
We had weekly bomb drills when all of us kids were collected and moved to the bomb shelter hidden deep in the schools basement. Of course, knowing everything we do now, said exercises were likely acts of futility. Hiding in the basement from a nuclear bomb would have been about as effective as the old duck and cover drills. Maybe the powers-that-be reasoned that it was something for all of us to do while we waited to get vaporized.
I guess when youre young and have an enemy that you dont know a whole lot about (except the fact that said enemy wants to blow you to bits) and all of the adults in your life seem to be scared of it, that enemy makes a pretty deep impression. So deep, that, as a young lad in college, I was but a few credits shy of a minor in Soviet Studies. I never finished the coursework for the degree because the Berlin Wall fell down, the Velvet Revolution occurred, Yeltsin climbed out of a tank, and my Soviet Studies minor became a Russian History minor. Bah.
But why so much Soviet Union, you might ask? It seems as though Russia is now beginning to experience one of the huge problems of the Western World and its economies namely that borrowers cant seem to repay their loans.
Believe it or not, loans are a new thing in Russia. Prior to the current day, no one had to obtain loans for anything. The State provided you with everything you needed. If you wanted a house, a car or a student loan, you had to fill out applications and wait for years and years and years until you got anywhere and, in the end, you didnt get any of those things unless you were a Communist Party hack, in which case you already had that stuff.
But then the government changed, and private lenders and banks swooped in to make the masses dreams come true in the form of cars, homes, boats, vacations, you name it. One would imagine that after living a lifetime of extreme poverty and overwhelming responsibility to the State, people took the utmost care in selecting their consumer goods and services and then repaying their loans.
According to the Russian Times, almost eleven percent of all borrowers are in default. So, the legislature is doing something that its never even contemplated before. It's passing the first ever bankruptcy legislation. This matter also has an interesting twist, which I will get to in a moment.
As mentioned previously in this column, around the world, declaring bankruptcy is not an inalienable right. Its not even an inalienable right here in the United States. But, in the U.S., filing for bankruptcy is not that difficult, and, as long as your filing is pretty straightforward, your debts will likely be discharged. In Ireland, if you remember, the court notifies everyone that youre in dire financial straits and you are not able to leave the country during the pendency of the bankruptcy and for its immediate aftermath.
In Russia, the proposed bankruptcy legislation would allow debtors to file for something that's the equivalent of a Chapter 13 bankruptcy procedure. This means that the debtor would be able to file, but would have to pay off all of its outstanding debts in full within four years. The only relief bankruptcy would afford is no more annoying calls from debt collectors.
A potential interesting twist to the Russian legislation is that, in accordance to the bankruptcy bill, the parliament is considering allowing creditors access to the debtors bank accounts. This would certainly streamline the collections process; you dont pay me back and I can then collect what Im owed directly from your financial institution.
This bill could be catastrophic to those debtors. Without any controls or limits, you could wake up one morning to find your bank account completely cleaned out and your financial life worthlessjust like my putative minor in Soviet Studies.
Christopher Markham writes a regular column for fredericknewspost.com.