Consumer bankruptcy is one of the frequently chosen ways to obtain debt relief and cope with financial problems by individuals who do not run a business. An insolvent consumer has two paths to choose from to obtain debt relief. The first is consumer bankruptcy, the second is to conclude an arrangement at a meeting of creditors. Consumer bankruptcy proceedings may be conducted on the principles of general proceedings or on the principles provided for simplified proceedings. General proceedings are used when the debtor's assets are of significant size, when there is a significant number of creditors or when there are other justified expectations regarding an increased degree of complexity of the proceedings. Simplified proceedings, on the other hand, are characterized by the fact that they are shorter, cheaper and simpler than general proceedings and it is this procedure that I will describe in this article.
Simplified consumer bankruptcy consists of three stages:
- reporting receivables,
- liquidation of the bankruptcy estate independently by the trustee,
- actions aimed at debt relief.
However, for this to happen, consumer bankruptcy proceedings must be initiated by filing a motion to the court to declare consumer bankruptcy. Such a motion can be prepared and filed on an official form, both in paper and electronic form, via the "KRZ" - National Register of Debtors IT system. It is important to fill in all the required data in the form and attach the necessary documents to the motion, which will speed up the court's consideration of the case.
Contents:
Who can apply for consumer bankruptcy – who is the consumer?
An application for declaration of personal bankruptcy may be filed by:
- A person who is a consumer, i.e. a person who does not conduct business activity (or has ceased to conduct it) and has become insolvent, which means that it is unable to meet its monetary obligations.
How to prepare properly application for announcement consumer bankruptcy?
First of all, the court to which the application for the declaration of consumer bankruptcy is submitted should be designated accordingly.
Jurisdiction of the Court
Bankruptcy cases are heard by the court having jurisdiction over the debtor’s main centre of activity.
The centre of the debtor's main interests is the place where the debtor regularly manages its economic activities and which is recognisable as such to third parties.
In the case of a natural person conducting business or professional activity, it is presumed that the main centre of his or her main activities is the principal place of business or professional activity; in the case of any other natural person, the centre of his main interests is presumed to be his habitual residence.
Therefore, the debtor should file an application for declaring personal bankruptcy with the court having jurisdiction for his habitual place of residence, i.e. the place where the debtor currently resides and where his centre of vital interests is located.
An application for declaring personal bankruptcy should include:
- Debtor's personal data: name, surname, place of residence, address and PESEL number;
- Debtor's Tax Identification Number, if the debtor had such a number within the last 10 years prior to the date of submission of the application;
- Indication of the places where the debtor's assets are located;
- Justification for a bankruptcy petition – here the debtor should demonstrate why he is unable to repay his obligations and since when this situation has existed;
- List of assets – both immovable (e.g. apartment) and movable (e.g. car) property, together with an estimated valuation of individual components, as well as an indication of savings, bank accounts and any income;
- List of creditors – providing their addresses, the amount of the debt and the payment deadlines;
- List of disputed receivables – indication of the extent to which the debtor disputes the existence of the receivable;
- List of security interests on the debtor's assets - providing the dates of their establishment, in particular mortgages, pledges and registered pledges;
- Information on income earned and costs incurred for your own maintenance and that of persons supported by the debtor in the last 6 months prior to the date of submission of the application;
- Information about legal actions taken by the debtor in the last 12 months prior to the date of submission of the application, the subject of which were real estate, shares or stocks in companies, and in the case where the subject were movable property, receivables or other rights, the value of which exceeds PLN 10,000;
- Declaration of the truthfulness of the data contained in the application.
Court fee
A basic fee is charged for a motion to declare bankruptcy of a natural person who does not conduct business activity. According to Article 76a of the Act on Court Costs in Civil Cases, the fee is PLN 30 and is the minimum fee that the party is obliged to pay for a document subject to a fee, unless the Act provides otherwise.
An application without a fee has no legal effect.
Recognition of the bankruptcy petition and proceedings before trustee
The bankruptcy court examines and issues a decision on the declaration of bankruptcy. In the decision on the declaration of bankruptcy, the court, among other things, calls upon the bankrupt's creditors to report their receivables to the son via the "KRZ" computer system within 30 days of the declaration of bankruptcy and appoints a trustee. From that moment on, we are dealing with post-declaration bankruptcy proceedings, which are conducted with the participation of the trustee.
After declaring bankruptcy, the trustee takes a number of actions aimed at determining the financial situation of the bankrupt, liquidates the bankruptcy estate and takes actions aimed at reducing the bankrupt’s debts.
The trustee first applies to the head of the tax office competent for the bankrupt for information on the bankrupt's financial situation, obtains information from the National Court Register whether the bankrupt is a partner in commercial companies and whether he or she held the position of a member of a corporate body in commercial companies in the period of 10 years prior to the date of filing a bankruptcy petition and whether bankruptcy was declared in relation to these companies, and also applies to the court bailiff for a search for the bankrupt's assets.
Then, after the deadline for filing claims has passed and the financial situation of the bankrupt has been determined and the assets included in the bankruptcy estate have been liquidated, the trustee submits a draft creditor repayment plan to the court.
After receiving a draft creditor repayment plan from the trustee, the court shall issue a decision establishing a creditor repayment plan in which:
- lists the creditors participating in the repayment plan;
- distributes the bankruptcy estate funds among the creditors participating in the repayment plan if such funds have been collected in the proceedings;
- determines whether the bankrupt caused his or her insolvency or significantly increased its degree intentionally or as a result of gross negligence;
- specifies to what extent and for a period not longer than 36 months, the bankrupt will be obliged to repay its liabilities and what part of the bankrupt's liabilities incurred before the date of declaration of bankruptcy will be written off after the creditor repayment plan is executed.
The time in which the bankrupt must repay their creditors is set at no longer than 3 years. However, in exceptional situations, this period may be extended. This occurs when the bankrupt's conduct has led to insolvency or significantly increased its degree intentionally or through gross negligence.
In a situation where the bankrupt is unable to make any repayments under the creditor repayment plan, the court terminates the proceedings without establishing a repayment plan or establishes one, but the amounts burdening the bankrupt are small.
Costs of proceedings
In the event that the assets of the insolvent debtor are not sufficient to cover the costs of the proceedings or there are no liquid funds in the bankruptcy estate to cover them, these costs are temporarily covered by the State Treasury. In practice, this means that if the debtor filing for consumer bankruptcy is unable to cover the financial liabilities resulting from the conducted bankruptcy proceedings, due to the fact that he does not have assets that would be sufficient to cover such costs, they are temporarily covered by the State Treasury, and during the proceedings after the declaration of bankruptcy, i.e. before the bankruptcy estate trustee - they are reimbursed by him from funds obtained from the bankruptcy estate.
The costs of the proceedings temporarily covered by the State Treasury are included in the creditor repayment plan, unless the earning capacity of the bankrupt, the need to support the bankrupt and persons dependent on him, and their housing needs do not allow for the satisfaction of the costs of the proceedings temporarily covered by the State Treasury. Therefore, it may happen that the Court decides to waive the costs of the bankruptcy proceedings, however, this will happen exceptionally.
The procedure for declaring consumer bankruptcy is complex and requires precision in filling out the documents. For this reason, it is worth considering using the help of a lawyer specializing in bankruptcy cases. Professional help will facilitate the correct preparation of the application and representation in court, which can significantly increase the chances of a positive and quick conclusion of the proceedings.
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