The Shenzhen Intermediate People's Court in South China's Guangdong Province on Monday granted a personal application for bankruptcy protection, the first such case since relevant laws went into effect in March.
The application was filed by Liang Wenjin, a local entrepreneur in the Bluetooth earphone industry whose company went bankrupt due to unstable sales and the effect of the COVID-19 pandemic.
According to the application, Liang's assets were valued at about 40,000 yuan ($6,167) and his 20,000-yuan fixed monthly income can't cover his debts of 750,000 yuan immediately.
The court ruling on Monday means that Liang's has three years to repay the entire principal to his creditors with interest and late fees waived.
Liang said that he once received seven to eight phone calls from debt collectors a day. "Now my mental stress has been eased, and I have more energy to repay my debts," he said.
According to the Shenzhen Special Economic Zone's personal bankruptcy regulation issued in March part of Liang's income, except for about 7,700 yuan for his own and his wife's daily expenditures, will be used for repaying his debts.
The Shenzhen Intermediate People's Court stated that the personal bankruptcy law gives a chance to those who are honest but suffer misfortune.
"The approval has a significant meaning in China's personal bankruptcy protection field," Li Weimin, director of the Beijing Wei Bo Law Firm, told the Global Times on Monday.
"Before the regulation, individuals who might not be able to repay their debt would have been blacklisted in China's personal credit system," said Li, adding that the court ruling filled a gap in China's personal bankruptcy protection laws.
The protection regulation currently is only available for residents in Shenzhen, but officials have vowed to improve bankruptcy protections nationwide.
The Fourth Plenary Session of the 19th Central Committee of the Communist Party of China in 2019 stressed the need to improve the country's bankruptcy system.