(Yicai Global) Oct. 10 -- In China's first personal bankruptcy case, a court ruled yesterday that the insolvent individual should repay 1.5 percent of their liability, the 21st Century Business Herald reported today.

The debtor, surnamed Cai, must pay CNY32,000 (USD4,500) over the next 18 months to settle debts totaling CNY2.14 million (USD300,911), the report said.

Until now China's bankruptcy system has only recognized corporate cases. Despite the growing availability of consumer credit, the country does not have a legal outlet for individuals who find themselves in financial trouble. In July, the National Development and Reform Commission along with 12 other government departments said they would take measures to gradually introduce a personal bankruptcy law.

The ruling by the Wenzhou Intermediate People's Court, together with a number of other personal debt cases, are the first of their kind.

Cai is the shareholder of a bankrupt company in Wenzhou and is liable for the firm's debt. He and his wife have a monthly income of CNY8,000 (USD1,125). Cai has high medical expenses and must also pay his children's university tuition fees. The family has been unable to make ends meet for a long time and cannot afford to pay off a large chunk of debt.

Cai's four creditors accepted the one-time liquidation plan, agreeing to leave him with enough income to cover basic living and medical expenses and to write off the rest owed. They also agreed that his personal credit rating could be restored three years after the settlement was completed.

But if the family's annual income exceeds CNY120,000 (USD16,873) within six years of paying off the agreed amount, Cai will use the extra income to settle the full amount. If the debtor is found to have any hidden assets, evade any other debt payments or in any way deliberately harms the creditors' assets over these six years, he will bear the full legal consequences and the creditors will pursue the original debt amount.