The status of the creditor whose claims are secured by means of a pledge (hereinafter referred to as a “pledge creditor”) in the bankruptcy proceedings is often named as the privileged one. This status provides not only the “privileges” to such a creditor but also imposes a number of serious restrictions in comparison to the status of a regular bankruptcy creditor.

The “privileges” mean the guaranteed special rights provided to a pledge creditor by the Russian bankruptcy law, the most significant of which is the right to receive 70% of the proceeds from the disposition of the subject of a pledge. Besides, the aforesaid status doesn't allow replacing the assets of the debtor in terms of the liquidation procedure and entering into the settlement agreement if there is no expressed will of the pledge creditor. The pledge creditor is entitled to appropriate the pledged item in cases stipulated by the Russian bankruptcy law and to determine on the terms of the disposition of the pledged property.

The principal restriction imposed on along with the status of the pledge creditor is the inability to vote in course of making decisions at the meetings of the creditors during the liquidation procedure, except as otherwise provided by law.

Whereas, the political and legal grounds for establishment of such a prohibition seem to be rather disputable. The aforesaid prohibition on voting is the crucial restriction of the rights of the pledge creditor, which often leads to the actual infeasibility of the right of a pledge creditor to receive 70% of the proceeds from the disposition of the pledged item. Eventually, the creditor whose claims are secured by a pledge has to ask for their inclusion into the register in full or in part as the unsecured (allowing to vote) ones. If the claims of a creditor have already been included into the register as the ones secured by pledge, this creditor has to ask for termination of his status of a pledge creditor in relation to all of the claims or some part of them.

In its turn, the possibility to establish the claims of a creditor secured by a pledge as the unsecured ones presented a problem for the courts, which had been forming the contradictory judicial practice. In attempts to resolve such a discrepancy of the judicial practice the Supreme Commercial Court of the Russian Federation explained in one of its resolutions that if a creditor is not referring to the existence of the pledge relations in the process of establishing the claims and eventually the court establishes these claims as the ones not secured by pledge, the creditor is entitled to petition for admission of his status of a pledge creditor in the case. Whereas, such a petition may be satisfied by a court only if a creditor has filed a petition before the register is closed.

Another serious problem for the courts was an issue of admissibility of the termination of the status of the claims (or of the part of them) as the ones secured by pledge in case if they were already included into the register. The courts opposed the idea that a claim already established as the one secured by pledge could not be considered as the unsecured one in full or in part afterwards, including in virtue of assignment of a part of such a claim under the condition that assignment was not covering security.

In its turn, the Supreme Commercial Court of the Russian Federation pointed out in one of its rulings the possibility of conversion of a claim from the one secured by pledge into the unsecured one. Later this approach was confirmed by the Supreme Court of the Russian Federation, which found that the Russian bankruptcy law doesn’t forbid a pledge creditor to abandon its rights towards the pledge in full or in part.

The fact that the possibility of abandonment of the pledge rights by a pledge creditor is admitted by the courts and, in particular, by the Supreme Commercial Court of the Russian Federation and the Supreme Court of the Russian Federation, is the significant protection for such a creditor, as it is often more advantageous for a creditor to control the course of the bankruptcy proceedings by voting at the meetings of the creditors in prejudice of its pledge rights.