You can file for Russian personal bankruptcy while a mortgage is active, but the only mortgaged home is not automatically protected against the secured bank. A separate court-approved settlement may preserve the home. If no settlement is reached and the home is sold, a special distribution regime has applied to an only mortgaged home since 3 April 2026.
Short answer
Continuing payments alone does not guarantee preservation. The debtor needs either a separate settlement approved under Article 213.10-1 of Federal Law No. 127-FZ or must prepare for sale under the bankruptcy rules. Both routes should be assessed before the bank and financial manager advance the sale process.
Why ordinary sole-home immunity is limited
Russian Civil Procedure Code Article 446 generally protects the only suitable home but allows foreclosure on mortgaged property in the statutory cases. Children’s registration, the absence of another home and actual residence matter to the special mechanisms, yet do not themselves extinguish the bank’s mortgage.
| Scenario | Home treatment | Main condition |
|---|---|---|
| Separate mortgage settlement | Not sold in the bankruptcy; mortgage continues | Secured lender’s agreement and court approval |
| No settlement | May be sold as mortgage collateral | Statutory auction and proceeds rules |
| Not the only suitable home | Special Articles 213.10-1 and 213.27-1 may not apply | Actual rights and suitability of other property |
How the separate mortgage settlement works
Article 213.10-1 allows the debtor and mortgage creditor to settle the debt secured by the family’s only suitable home. The arrangement does not govern relations with other creditors and does not end the bankruptcy itself.
- The parties agree a payment schedule, funding source and cure of any arrears.
- All mortgagees in the register must participate if there are subsequent mortgages.
- A third party may assume payment obligations.
- The arbitrazh court approves the settlement.
- After approval, the home and underlying land are not sold in the case, while the mortgage claim leaves the register.
The financial manager’s objection alone is not a ground to refuse approval, and unsecured creditors’ consent is not required. The bank is still not obliged to accept an economically unrealistic schedule.
Sources of ongoing mortgage payments
Protected current income
The debtor must show what lawfully remains available and whether it covers the schedule.
Third-party support
A participating relative or other person should prove income and accept enforceable duties.
Future income
Income after completion may support the arrangement where the statutory conditions are met.
If the only mortgaged home is sold
Preservation and sale costs are deducted first. Article 213.27-1 then distributes the remaining portion as follows:
- 80% goes to the mortgage creditor, capped by the secured claim;
- 10% is reserved for first- and second-priority claims if other assets are insufficient;
- 10%, capped by the debtor’s down payment and mortgage payments made, is excluded from the estate and transferred to the debtor;
- remaining funds then cover the unpaid mortgage claim, and any further remainder goes to the debtor.
The court may reduce the protected amount if it would fund clearly excessive replacement housing or if bad faith is established. The debtor is therefore not guaranteed exactly 10% in every case.
What happens to any mortgage shortfall
If sale proceeds do not satisfy the bank, the shortfall is dealt with in the bankruptcy. Discharge depends on Article 213.28, good faith and the case facts. Under an approved separate settlement, the mortgage debt and mortgage remain in force on the agreed terms and are not discharged with ordinary debts.
Spouses, co-borrowers and children
- one co-borrower’s bankruptcy does not release the other;
- joint ownership and joint family debts require separate analysis;
- a child’s registration does not extinguish the mortgage, though family housing interests matter;
- maternity capital and children’s ownership shares require document-specific review;
- a third party may join the settlement and fund payments.
Documents to prepare
- credit and mortgage agreements and the current schedule;
- a bank statement of principal, arrears and charges;
- a current land-register extract and information about other family homes;
- income evidence for the debtor and any proposed payer;
- family, children’s-share and maternity-capital documents;
- an estimate of first- and second-priority claims if a settlement is proposed.
Frequently asked questions
Can I file for bankruptcy if I have a mortgage?
Yes. A mortgage does not bar a personal bankruptcy filing. Before filing, however, the debtor should separately assess the secured home, the bank’s position, the source of future payments and whether a separate settlement is realistic.
Can I simply keep paying the bank outside bankruptcy?
Payments alone are insufficient. Without an approved legal mechanism, the lender retains its secured rights in the case.
Must the bank accept a separate settlement?
No. The proposal must be workable and address arrears, income and security. A court may assess an unreasonable refusal in context, but approval cannot be guaranteed.
Does the bankruptcy end after approval?
No. Other debts remain in the bankruptcy, while the mortgage claim is performed separately.
What if the settlement is breached?
The unpaid secured claim may return to the register, and the creditor may pursue foreclosure under the applicable rules.
Does the debtor always receive 10% of the sale price?
No. The amount is capped by the down payment and payments actually made and may be reduced by the court on statutory grounds.
Official sources
- Federal Law No. 127-FZ, Article 213.10-1
- Federal Law No. 127-FZ, Article 213.27-1
- Federal Law No. 127-FZ, Article 213.28
- Civil Procedure Code, Article 446
- Federal Law No. 62-FZ of 23 March 2026
- Supreme Court Review of Personal Bankruptcy Cases, approved on 18 June 2025
Related guidance
- Keeping a mortgaged home through a separate settlement
- Asset realisation in Russian personal bankruptcy
- Russian personal bankruptcy legal assistance
Need to assess the risk to your home?
At a paid initial consultation, we can review the mortgage, arrears, income, family rights and whether a separate settlement is realistic without guaranteeing preservation.
Book a paid initial consultation →A Mortgaged Sole Home Is Not Automatically Protected, but a Statutory Preservation Route Exists
| Scenario | Result | Key condition |
|---|---|---|
| Mortgage without settlement | Collateral may be sold | Bank claim in the case |
| Only home | Mortgage still matters | Article 213.10-1 test |
| Separate settlement | Home excluded from realization | Arbitrazh court approval |
| Third party pays | May join the settlement | Clear funding and duties |
| Payment default | Claim is restored | Enforcement risk |
Test the property
It must be the only suitable home of the debtor and co-resident family.
Obtain the bank position
Arrears, schedule and preservation terms are needed before drafting.
Model a sustainable payment
Protected income, future income or a participating third party may fund the settlement.
The Settlement Preserves the Mortgage but Does Not End the Rest of the Bankruptcy
After court approval, the home and associated land are excluded from realization, the mortgage continues and the secured claim leaves the creditor register for performance under agreed terms. Consent of other creditors and the financial manager is not required, but subsequent mortgagees must participate. If other property cannot cover first- and second-priority claims, the statute requires funds in a special account within its stated cap. Default restores enforcement risk, so a sustainable economic model matters more than a formal promise to keep the apartment.