A mortgaged home is generally not protected from enforcement merely because it is the debtor’s only residence. However, Article 213.10-1 of the Russian Bankruptcy Law permits a debtor and mortgage creditor to enter into a separate court-approved settlement. If approved, the home is excluded from sale while the mortgage and payment obligation remain in force.
Key point: this is not an automatic exemption. The bank must agree, the arbitrazh court must approve the settlement, and the debtor or a participating third party must have a credible source for continuing mortgage payments.
Why a sole mortgaged home may be sold
Article 446 of the Russian Civil Procedure Code protects a debtor’s only suitable residence but expressly excludes mortgaged property where foreclosure is permitted. Residence registration and family occupancy therefore do not by themselves remove the apartment from the bankruptcy estate.
Federal Law No. 298-FZ introduced Article 213.10-1, allowing the mortgage relationship to be separated from settlements with other creditors.
What is a separate mortgage settlement?
It is an agreement between the individual debtor and the creditor whose claim is secured by a mortgage over the debtor’s only suitable residence. It applies only to the secured obligation and does not bind other creditors. The financial administrator’s consent and approval by the general body of creditors are not required, but the arbitrazh court must approve the document.
Eligibility conditions
- the home or a share in it is mortgaged;
- it is the only residence suitable for the debtor and family members living together;
- the mortgage creditor agrees to the settlement;
- the statutory claims-filing period in the bankruptcy case has expired;
- all registered subsequent mortgage creditors participate where applicable;
- existing arrears and future payments can be addressed realistically;
- the court does not consider application of the housing immunity unjustified.
The rules apply to bankruptcy cases commenced after 8 September 2024 and to earlier cases where the home had not been sold by that date.
Who may make the mortgage payments?
A third party, such as a spouse or adult relative, may join the settlement and assume obligations. The mortgage claim may be paid by that person and/or by the debtor from income protected from enforcement or income received after the bankruptcy procedure ends, provided this does not obstruct an approved restructuring plan.
Legal consequences after court approval
- the home and related land are not included in assets to be sold in the personal bankruptcy;
- the mortgage and secured claim remain valid;
- the mortgage claim is removed from the register of creditor claims and paid under the settlement;
- the personal bankruptcy continues in relation to other creditors;
- any existing default must be cured under the timetable stated in the agreement.
Priority claims and the 10% limit
If the debtor’s other assets are insufficient to pay first- and second-priority claims, the court may approve the settlement only after funds are deposited into the debtor’s special bank account. The required amount is capped at ten percent of the appraised value of the mortgaged home.
This may create an additional funding need beyond the ongoing mortgage payments and should be assessed before negotiations begin.
Preparation steps
- Confirm that the property is the only suitable residence and remains unsold.
- Obtain the mortgage documents, current bank calculation, and register information.
- Calculate arrears, current payments, and the sustainable source of funds.
- Identify any subsequent mortgagees and priority claims.
- Negotiate the cure period, payment schedule, third-party participation, and default consequences.
- Prepare the settlement and supporting motion for approval by the arbitrazh court.
Documents commonly required
- the credit and mortgage agreements and current debt statement;
- an extract from the Unified State Register of Real Estate;
- evidence that the home is the only suitable residence;
- documents concerning family members living in the property;
- income evidence for the debtor or participating third party;
- an appraisal where priority-claim funding must be calculated;
- a schedule for curing arrears and continuing payments;
- consents of all participating mortgage creditors;
- the draft settlement and court motion.
Why the court may refuse approval
- the property is not the only suitable residence;
- the bank has not agreed;
- a required subsequent mortgage creditor is absent;
- priority claims have not been addressed;
- the payment plan is objectively unrealistic;
- the terms violate statutory requirements or participants’ rights;
- housing immunity would be unjustified in the particular circumstances.
Default risk: if the settlement is cancelled, terminated, or not performed, the unpaid secured claim may return to the register and the creditor may pursue foreclosure in the bankruptcy case or under mortgage law after the case ends.
FAQ
Can the debtor force the bank to agree?
No. The mechanism is based on agreement with the mortgage creditor. It does not create a unilateral right to preserve collateral.
Must other creditors consent?
Generally no, except other creditors holding registered mortgages over the same home. The financial administrator may object, but the objection alone does not require refusal.
Is the remaining mortgage discharged?
No. The mortgage and secured debt continue. The mechanism protects the home from sale in the procedure but does not write off the mortgage.
Does approval end the bankruptcy?
No. The case continues in relation to the debtor’s other creditors and assets.
Can the mechanism be used after the home is sold?
No. The stage of the case must be checked urgently, especially where an auction has already been scheduled.
Official sources
- Russian Bankruptcy Law, Article 213.10-1
- Federal Law No. 298-FZ of 8 August 2024
- Russian Civil Procedure Code, Article 446
- 2025 Supreme Court Review of Personal Bankruptcy Cases
Related guidance
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