Amending Legislation:
Passed Bill Link:
https://cityrp.org/threads/bankruptcy-and-debt-relief-act.4005/
Final Vote: 7-1-0
Ratified: November 4, 2026
Note: This is a duplicative law. It both amends another act, but also exists on its own because of its own contents.
Sponsor: Robi Safran-D'Azalea, MP
Bankruptcy and Debt Relief Act
Preamble: This Act provides a court process for bankruptcy, distribution of assets, personal debt relief, and execution of unpaid debts.
1. Short Title and Enactment
(a) This Act may be cited as the "Bankruptcy and Debt Relief Act".
(b) This Act takes effect immediately upon passage.
2. Definitions
(a) A debtor is a person or legal entity that owes a verified debt.
(b) A creditor is a person, legal entity, or government entity to whom a debt is owed.
(c) Government debt includes unpaid taxes, upkeep, and administrative fines owed to the government.
(d) A debtor is insolvent if verified liabilities exceed the fair market value of all assets, or a due debt remains unpaid for more than 14 days after written demand.
(e) Exempt property cannot be seized in bankruptcy or execution. It is limited to:
(i) $500 in personal liquid balance;
(ii) basic personal tools and food protected under the Essential Tools for Citizens Act; and
(iii) the debtor's tenancy in one rental property used as the debtor's primary residence.
(f) A claim is an existing right to payment, whether due, not yet due, disputed, or established by a judgment. An allowed claim is a claim established by the court under section 3(c).
(g) A secured claim is supported by a security interest enforceable under applicable law. A written description of collateral alone does not establish that interest. A plot lien created under the Plot Liens Act must be registered with the Ministry of Economic Affairs, or MEA, as that Act requires.
(h) A covered claim is a right to payment that existed when the bankruptcy petition was filed, including principal not yet due and disputed earlier claims. Debts newly incurred after filing and liability for later independent breaches are not covered. Later nonpayment of a covered obligation does not make it an independent later breach. Administration expenses follow section 3(d)(ii).
(i) The bankruptcy property pool consists of nonexempt property the debtor owned when filing, including omitted or concealed property and existing rights to receive property, plus its proceeds, replacements, and income. Earnings from the debtor's later personal work and gifts or inheritances first acquired after filing are excluded. Property received under a right existing at filing remains included.
3. Bankruptcy Procedure
(a) An insolvent debtor may petition MEA for bankruptcy before the debtor's legal death. The bankruptcy petition's filing date is the date and time MEA receives it. The petition must list all balances, bank accounts, company shares, plots, vehicles, chests, and other assets owned or controlled by the debtor. It must identify all known creditors, the amounts and basis of their claims, and any security. Disputed and unmatured claims must be identified.
(b) Within 48 hours after receiving the petition, MEA must file the petition and schedules in the District Court as a bankruptcy proceeding and apply in that proceeding for an Asset Preservation Order under section 18 of the Judiciary Act. The District Court hearing the proceeding is the bankruptcy court. It sets the order's scope and duration. The order may:
(i) prevent sale, gift, transfer, or new encumbrance of shares and plots in the bankruptcy property pool; and
(ii) stay collection, judgment execution, and foreclosure against the debtor or property in that pool without the bankruptcy court's permission.
(c) The court must establish covered claims before bankruptcy distribution:
(i) MEA must give direct notice of the proceeding and proposed discharge to known or reasonably identifiable creditors and publish notice for unknown creditors. The court must allow a reasonable opportunity to present claims and set the claim deadline. That deadline does not extend an otherwise applicable filing period.
(ii) A creditor may file a verified claim with the District Court stating the parties, facts, amount, grounds, security, and relief sought. Ordinary civil proof applies. The court must decide disputed claims before distributing assets on those claims. An earlier judgment is not required.
(iii) A creditor may file and litigate a claim while collection is stayed. A timely court filing identifying the agreement, breach, and monetary relief preserves the corresponding damages claim. Foreclosure is preserved only if the timely filing expressly seeks foreclosure of the identified registered lien. A money claim alone, the debtor's schedule, or a submission only to MEA does not preserve foreclosure.
(iv) A petition, demand, registration, or claim submission does not restart a limitation period or revive an expired claim. Collection or sale covered by a stay requires the bankruptcy court's permission.
(d) MEA must investigate insolvency and report its findings within the time set by the court, including any finding that the debtor is solvent. The court must decide eligibility. If the debtor is ineligible, the court must dismiss the proceeding. If eligible, the court must declare the debtor bankrupt and authorize liquidation of the bankruptcy property pool. Distribution must follow this order:
(i) Proceeds from a plot subject to valid registered liens must first pay necessary, court-approved plot-sale expenses, then the secured amounts in registration order. Only the surplus enters the remaining pool. Any shortfall is unsecured but retains any independent priority of the underlying claim.
(ii) The remaining pool must first pay reasonable, necessary bankruptcy administration expenses approved by the court. Those expenses must not consume funds reserved under subparagraph (i).
(iii) Government debts are paid next.
(iv) Depositors are paid next if the debtor is a financial institution.
(v) Other secured claims recognized by applicable law are paid next. The secured portion is the lesser of the enforceable secured amount and the collateral's net sale proceeds after necessary, court-approved sale expenses. Any shortfall is unsecured but retains any independent priority of the underlying claim.
(vi) Ordinary unsecured claims are paid last, proportionally to their allowed amounts. Each class in subparagraphs (iii) to (vi) must be paid in full before the next class receives payment. Claims within a class share proportionally unless an applicable law establishes an order within that class.
(e) The court must apply these claim-valuation rules:
(i) Allowed claims include proven principal, contract compensation, reasonable reliance losses, valid liquidated damages, lawful accrued interest, court-awarded fees, and valid punitive awards. An allowed punitive award ranks alongside ordinary unsecured claims.
(ii) Unsecured interest is counted through the petition date. Later unsecured interest may be paid only if every allowed claim can be paid in full.
(iii) Lawful interest on an obligation secured by a surviving registered plot lien continues against its collateral through payoff, within the registered amount or cap. Interest unsupported by collateral follows subparagraph (ii).
(iv) A bankruptcy sale of a pledged plot may pay off a current secured obligation at outstanding principal, lawful interest accrued through payoff, and valid agreed payoff charges, within the registered amount or cap. Unearned future interest is excluded. Valuation or payoff does not itself constitute a contractual breach or restart a filing period.
(v) Each recovery reduces the corresponding obligation before any remaining claim is paid. The same amount must not be paid twice. Any amount unsupported by enforceable security is unsecured but retains any independent priority of the underlying claim.
(f) The bankruptcy must remain open until every noncash asset in the bankruptcy property pool has been sold and the required distribution is complete. Liquid balances may be distributed directly. Failed sale efforts do not permit an asset to be abandoned, returned, written off, or treated as sold. After deciding claims and completing those steps, the court must enter an order discharging remaining personal liability on covered claims:
(i) Discharge covers unpaid money judgments and unpaid punitive awards. A creditor must not use a labor or property-transfer order to collect the same discharged monetary obligation. Discharge does not itself end an independent continuing contractual duty.
(ii) Discharge does not release a valid lien over a plot outside the bankruptcy property pool, including a plot transferred in an ordinary private sale or owned by someone other than the debtor. A later plot owner does not become personally liable merely by owning the plot.
(iii) A claim omitted without the notice required by paragraph (c)(i) survives discharge, subject to its otherwise applicable filing period.
(iv) A debtor receiving a discharge may not petition for bankruptcy again for three months.
(g) If the debtor legally dies during a pending bankruptcy, the proceeding continues under court supervision with the deceased player's estate representative participating. Property in the bankruptcy property pool must not be distributed again through estate administration. Any remainder passes to the deceased player's estate under the applicable death and inheritance laws. An heir does not personally owe a shortfall merely because the heir inherits.
(h) On dismissal or completion, the court must specify which preservation and stay terms end and which remain necessary to complete authorized distributions. Each retained term must have a stated purpose and duration.
4. Asset Seizure and Writs of Execution
(a) A creditor may petition the District Court for a writ of execution when an enforceable judgment remains unpaid for more than seven days or an otherwise enforceable debt remains in default for more than 14 days:
(i) The debt may arise from an oral or written agreement. The creditor must give notice of the debt and requested execution. For a debt not established by an enforceable judgment, the court must apply ordinary civil proof and allow the debtor to contest the debt, default, amount, and exemptions. For an existing judgment, the debtor may contest its present enforceability, amount outstanding, satisfaction, exemptions, and any applicable stay or discharge. Execution does not reopen adjudicated merits; appeal and other lawful procedures to challenge a judgment remain available.
(ii) A nonjudgment claim must be filed within its otherwise applicable filing period. The waiting periods in this paragraph do not extend that period or revive an expired claim.
(iii) Execution is limited to a due, proven obligation or an enforceable judgment and remains subject to any bankruptcy stay. A request for execution does not itself accelerate future installments.
(b) On a court's writ, the Ministry of Justice, or MOJ, may seize the debtor's nonexempt assets to satisfy the amount authorized by the court:
(i) MOJ may work with MEA and the relevant financial institution to garnish and transfer balances and bank funds.
(ii) Seized plots must be sold under paragraphs (d) to (f).
(iii) MOJ may seize company shares and nonexempt items stored on the debtor's plots for public auction.
(iv) Seizure in a bankruptcy proceeding is limited to property in the bankruptcy property pool.
(c) Outside bankruptcy, any surplus remaining after approved sale expenses, registered liens, and the authorized debt are paid must be returned to the debtor within seven days. In bankruptcy, surplus from property in the bankruptcy property pool remains in that pool for distribution under section 3(d). Proceeds from property owned by another person are governed by that owner's rights and the applicable lien law; the debtor's bankruptcy does not itself place that property in the pool.
(d) MEA must conduct a public plot sale and notify the debtor, owner, and registered lienholders.
(i) MEA sets routine auction arrangements under the court's sale order.
(ii) The court may impose sale conditions and must set the reserve price for every bankruptcy plot sale.
(iii) The auction must remain open for at least 48 hours.
(iv) The Ministry of Urban Development, or MUD, must implement title changes authorized by the court.
(e) The Plot Liens Act governs foreclosure notice, cure, sale terms, distribution, and lien clearance when it applies:
(i) A creditor seeking foreclosure must meet the Plot Liens Act's foreclosure requirements and filing deadline. Other execution sales must meet section 4(h) and (i) of that Act.
(ii) A bankruptcy sale may occur without a default but must pay each registered lien's secured payoff in full or obtain the holder's consent to clearance.
(iii) Necessary court-approved plot-sale expenses and registered liens are paid from the proceeds in registration order before distribution on other debts.
(iv) A court debt-execution or bankruptcy sale must clear every registered lien under the applicable clearance rules. If those rules cannot be satisfied, the plot must remain unsold for later lawful foreclosure. A bankruptcy remains open as section 3(f) requires.
(f) Sales under section 4 of the Plot Liens Act and all court-authorized bankruptcy plot sales are exempt from the base-price requirement in section 6(b)(i) of the Integrated Property Regulation Act. The court sets the reserve price for each exempt sale. Other government plot sales remain subject to that requirement.
5. Civil Collection of Government Debts Over $5,000
(a) MOJ may bring a civil claim in the District Court to recover total government debt exceeding $5,000 that remains unpaid for more than seven days.
(b) After notice and an opportunity to contest the claim, the court must grant a writ for an enforceable government debt meeting paragraph (a). The execution, exemption, and plot-sale rules in section 4 apply. Any applicable bankruptcy stay governs collection; section 3's distribution rules apply only to property governed by a bankruptcy proceeding.
(c) Willful refusal to comply with a State Garnishment Order or an Asset Preservation Order constitutes Violation of a Court Order under Section 7(c) of the New Criminal Code Act.
6. Amendments
(a) Add sections 9(h) and (i) to the New Criminal Code Act as follows:
(h) Bankruptcy Fraud
(i) Offense Type: Felony
(ii) Penalty: up to 25 minutes jail time; $2,500 minimum fine; $10,000 maximum fine; full restitution and immediate nullification of any bankruptcy discharge
(iii) A person or legal entity commits an offense if they:
(1) knowingly conceal, transfer, gift, or undervalue any balance, bank account, plot, share, or property during a bankruptcy or debt execution proceeding with the intent to shield it from seizure or defraud a creditor or the court; or
(2) knowingly submit a false asset schedule, false claim, or fabricated debt in a bankruptcy proceeding.
(i) Criminal Evasion of Government Debt
(i) Offense Type: Felony
(ii) Penalty: up to 20 minutes jail time; $1,000 fine; seizure of concealed assets
(iii) A person or legal entity commits an offense if they:
(1) while owing a Government Debt of more than $5,000, intentional transfer balances, plots, or assets to another person or shell company to prevent the Ministry of Justice from recovering the debt; or
(2) Transfers said assets in a manner that hampers the collection of the debt
(b) Replace section 6(b)(i) of the Integrated Property Regulation Act as follows:
(i) Any government run plot auctions or sales will use this price-per-block value as the base selling price.
(i) Sales under section 4 of the Plot Liens Act and court-authorized bankruptcy sales are exempt from this requirement. The court sets the reserve price for each exempt sale.
