By day, Chen Wei wrote code for a logistics company in Shenzhen. By night, he delivered takeout on an electric scooter, weaving through humid backstreets after midnight to earn a few hundred extra yuan. Just three years earlier, the 38-year-old software engineer had taken a leap of faith, quitting a stable job to launch an education startup offering after-school robotics classes for children. He borrowed heavily to rent classrooms, hire staff, and buy equipment, betting on China’s booming middle class. Then the pandemic hit. Enrollment collapsed, landlords still demanded rent, and online competitors undercut prices.

By the summer of 2023, Chen owed more than 600,000 yuan (US$83,000) to banks, suppliers, and former employees. His monthly income barely covered rent and meals for his wife and two children. Yet under Shenzhen’s new personal bankruptcy pilot, he tried to negotiate a repayment plan anyway.

“I thought bankruptcy might finally give me a chance to breathe,” Chen recalled, leafing through court filings. He had proposed handing creditors 5,000 yuan a month for five years—more than half of his combined income from two jobs. Even then, the plan would repay less than half of what he owed.

At the creditor meeting, objections came quickly. Some lenders argued the repayment period was too long. Others questioned whether Chen’s side jobs were sustainable. One creditor reportedly said accepting such terms would “set the wrong precedent.” When the votes were counted, nearly all creditors rejected the plan.

By day, Chen Wei wrote code for a logistics company in Shenzhen. By night, he delivered takeout on an electric scooter, weaving through humid backstreets after midnight to earn a few hundred extra yuan. Just three years earlier, the 38-year-old software engineer had taken a leap of faith, quitting a stable job to launch an education startup offering after-school robotics classes for children. He borrowed heavily to rent classrooms, hire staff, and buy equipment, betting on China’s booming middle class. Then the pandemic hit. Enrollment collapsed, landlords still demanded rent, and online competitors undercut prices.

By the summer of 2023, Chen owed more than 600,000 yuan (US$83,000) to banks, suppliers, and former employees. His monthly income barely covered rent and meals for his wife and two children. Yet under Shenzhen’s new personal bankruptcy pilot, he tried to negotiate a repayment plan anyway.

“I thought bankruptcy might finally give me a chance to breathe,” Chen recalled, leafing through court filings. He had proposed handing creditors 5,000 yuan a month for five years—more than half of his combined income from two jobs. Even then, the plan would repay less than half of what he owed.

At the creditor meeting, objections came quickly. Some lenders argued the repayment period was too long. Others questioned whether Chen’s side jobs were sustainable. One creditor reportedly said accepting such terms would “set the wrong precedent.” When the votes were counted, nearly all creditors rejected the plan.

Shenzhen’s personal bankruptcy pilot, launched in 2021, was hailed as a historic experiment in a country where the prevailing view has long been: “欠债还钱，天经地义” (repaying your debts is only right and proper). Policymakers aimed to balance creditor rights with relief for overleveraged households. On paper, the system seemed progressive: residents unable to repay debts could apply, assets would be liquidated, and surplus income over three years could be used to discharge remaining debt.

In practice, acceptance rates told a different story. According to Shenzhen Personal Bankruptcy Case Information Website, from 2021 to 2022, more than 1,000 applications were filed; only 25 were accepted. By 2025, not a single individual had received full discharge. Courts largely limited the system to entrepreneurial debt, while applications for consumer liabilities, credit cards, mortgages, everyday expenses, were routinely rejected. An unspoken requirement emerged: demonstrate the ability to repay 100% of principal within five years. Many, like Chen, failed that test.

“The system appears open in theory but is highly exclusionary in practice,” said Wen Xiaobo, a restructuring lawyer in Shenzhen. “Those who cannot meet this threshold are often denied entry outright, even though the law does not explicitly demand full repayment.”

Shenzhen’s personal bankruptcy pilot, launched in 2021, was hailed as a historic experiment in a country where the prevailing view has long been: “欠债还钱，天经地义” (repaying your debts is only right and proper). Policymakers aimed to balance creditor rights with relief for overleveraged households. On paper, the system seemed progressive: residents unable to repay debts could apply, assets would be liquidated, and surplus income over three years could be used to discharge remaining debt.

In practice, acceptance rates told a different story. According to Shenzhen Personal Bankruptcy Case Information Website, from 2021 to 2022, more than 1,000 applications were filed; only 25 were accepted. By 2025, not a single individual had received full discharge. Courts largely limited the system to entrepreneurial debt, while applications for consumer liabilities, credit cards, mortgages, everyday expenses, were routinely rejected. An unspoken requirement emerged: demonstrate the ability to repay 100% of principal within five years. Many, like Chen, failed that test.

“The system appears open in theory but is highly exclusionary in practice,” said Wen Xiaobo, a restructuring lawyer in Shenzhen. “Those who cannot meet this threshold are often denied entry outright, even though the law does not explicitly demand full repayment.”

A striking divergence from international norms lies in the treatment of discharge. Globally, bankruptcy allows debtors to wipe debts without creditor consent. In Shenzhen, the liquidation-and-discharge track exists on paper but is rarely used. Courts prefer reorganization plans requiring creditor approval. According to Shenzhen Municipal Justice Bureau, of nearly 100 cases opened in the first two years, only one proceeded through liquidation.

“It is the borrower who should assess the risks before taking on debt,” explained Chris Li, solicitor at Linklaters in Hong Kong. “Too many still behave as if creditors can demand repayment under any circumstance, without limit.”

This approach transforms personal bankruptcy from a legal right into a negotiated process controlled by creditors. Debtors must propose repayment plans and secure creditor votes, a process many fail.

Chen’s experience exposes a system still learning to balance repayment discipline with rehabilitation. A Shenzhen district court judge, speaking on condition of anonymity, described the cultural and structural barriers:

“A personal bankruptcy system separates a person’s creditworthiness from their life. The biggest creditors in Mainland China, banks, have not developed the capacity to properly evaluate credit risk. They know how to chase debts relentlessly, but they cannot accurately gauge a borrower’s true credit value. Once credit and life are separated, it is the banks who are exposed.”

He illustrated with a mortgage example: a bank should logically repossess property in case of default. Instead, banks pursue the individual personally because they cannot reliably assess collateral. In effect, a borrower’s life becomes the true collateral.

Weeks later, the court dismissed Chen’s case. He left the courthouse carrying a backpack stuffed with legal papers and unpaid bills, still owing nearly everything he had before entering the bankruptcy process.

Shenzhen has made some procedural improvements: a Bankruptcy Administration Office, mandatory pre-filing counseling, and streamlined case handling. These steps increased acceptance rates slightly. Yet, as the anonymous judge noted, the system’s philosophy remains cautious:

“Courts appear to prioritize repayment discipline and social stability over debtor rehabilitation, imposing strict interpretations of ‘good faith’ and excluding those deemed responsible for their financial distress.”

For Cheni and others like him, China’s personal bankruptcy system remains a work in progress, a framework that exists in law but struggles in practice to separate debt from life, offering the promise of a second chance while keeping the weight of past obligations firmly in place.

A striking divergence from international norms lies in the treatment of discharge. Globally, bankruptcy allows debtors to wipe debts without creditor consent. In Shenzhen, the liquidation-and-discharge track exists on paper but is rarely used. Courts prefer reorganization plans requiring creditor approval. According to Shenzhen Municipal Justice Bureau, of nearly 100 cases opened in the first two years, only one proceeded through liquidation.

“It is the borrower who should assess the risks before taking on debt,” explained Chris Li, solicitor at Linklaters in Hong Kong. “Too many still behave as if creditors can demand repayment under any circumstance, without limit.”

This approach transforms personal bankruptcy from a legal right into a negotiated process controlled by creditors. Debtors must propose repayment plans and secure creditor votes, a process many fail.

Chen’s experience exposes a system still learning to balance repayment discipline with rehabilitation. A Shenzhen district court judge, speaking on condition of anonymity, described the cultural and structural barriers:

“A personal bankruptcy system separates a person’s creditworthiness from their life. The biggest creditors in Mainland China, banks, have not developed the capacity to properly evaluate credit risk. They know how to chase debts relentlessly, but they cannot accurately gauge a borrower’s true credit value. Once credit and life are separated, it is the banks who are exposed.”

He illustrated with a mortgage example: a bank should logically repossess property in case of default. Instead, banks pursue the individual personally because they cannot reliably assess collateral. In effect, a borrower’s life becomes the true collateral.

Weeks later, the court dismissed Chen’s case. He left the courthouse carrying a backpack stuffed with legal papers and unpaid bills, still owing nearly everything he had before entering the bankruptcy process.

Shenzhen has made some procedural improvements: a Bankruptcy Administration Office, mandatory pre-filing counseling, and streamlined case handling. These steps increased acceptance rates slightly. Yet, as the anonymous judge noted, the system’s philosophy remains cautious:

“Courts appear to prioritize repayment discipline and social stability over debtor rehabilitation, imposing strict interpretations of ‘good faith’ and excluding those deemed responsible for their financial distress.”

For Cheni and others like him, China’s personal bankruptcy system remains a work in progress, a framework that exists in law but struggles in practice to separate debt from life, offering the promise of a second chance while keeping the weight of past obligations firmly in place.